Deck 1: Microeconomics: a Working Methodology

Question 1

An economy's technology is:

A)the unchanging part of manufacturing processes.
B)its ways of using resources to produce goods.
C)a machine used to produce a particular product.
D)a process for discovering new goods and services.

Answer 1

its ways of using resources to produce goods.

Question 2

A preference ordering gives the:

A)order of admission to a social event.
B)description of an individual's desires.
C)number of fish an individual is allocated.
D)protocol rank of various government officials.

Answer 2

description of an individual's desires.

Question 3

When economists evaluate the effect of carbon taxes on the market for gasoline, this is known as:

A)normative economics.
B)the theory of self interest.
C)comparative statics.
D)general equilibrium analysis.

Answer 3

comparative statics.

Question 4

Microeconomics is concerned with:

A)distinguishing good from bad social policies.
B)the behaviour of invisible animals.
C)economic aggregates.
D)decisions by individuals and firms.

Question 5

Preferences are:

A)the amount of happiness one has.
B)what we use to rank goods.
C)a dollar measure of well being.
D)a mathematical function.

Question 6

The market supply curve is upward sloping which means that the quantity supplied when the price .

A)rises, rises
B)is unchanged, rises
C)falls, rises
D)is unchanged, falls

Question 7

Which of the following is an example of a technology?

A)An iPhone 4.
B)Principles of microeconomics.
C)A recipe for chocolate chip cookies.
D)Microsoft Windows.

Question 8

An individual supply curve tells us how many units:

A)firms will sell at various prices.
B)an individual will buy at various prices.
C)individuals will buy at various prices.
D)a firm will sell at various prices.

Question 9

A perfectly competitive market has all of the following characteristics except:

A)Each seller offers to sell a small part of the total quantity transacted.
B)Each buyer offers to buy a large part of the total quantity transacted.
C)There are many buyers.
D)There are many sellers.

Question 10

Normative economics includes all of the following except:

A)indicated ways of attaining a particular desirable social state.
B)explains how economies operate.
C)valuates and ranks several social states.
D)assesses the desirability of a particular policy.

Question 11

A pure market economy:

A)offers no role for the government.
B)consists only of supply and demand.
C)allows for the existence of rent control.
D)includes the institutions of private property.

Question 12

In a perfectly competitive market, each seller can choose:

A)price only.
B)quantity only.
C)both quantity and price.
D)neither quantity nor price.

Question 13

A pure market economy:

A)assumes all property is held in common.
B)is where all goods and services are directed to their most valuable use by price.
C)is where all firms own all resources.
D)allows for some government intervention.

Question 14

The market reaches the equilibrium because:

A)the government indicates the equilibrium price and quantity.
B)of luck.
C)the market forces will push prices up or down until quantity supplied equals quantity demanded.
D)entrepreneurs know their way around.

Question 15

An equilibrium is determined by all of the following except:

A)government directives to produce particular goods.
B)relationships among endogenous variables.
C)equality between the quantities demanded and supplied.
D)intersection of a demand curve and a supply curve.

Question 16

Economics is:

A)the study of how to make money on the stock market.
B)the study of consumer preferences.
C)a tough subject matter.
D)the study of the allocation of scarce resources to the production of alternative goods.

Question 17

Overcrowding frequently occurs when consumers:

A)share common property.
B)receive subsidies for goods they consume.
C)pay the full cost of resources they use.
D)prevent others from using resources.

Question 18

Market demand and supply curves tell:

A)the price at which a product will be bought or sold given the quantity bought or sold.
B)whether buyers and sellers are happy.
C)the size of government price supports in the market.
D)the quantity of a product that will be bought or sold given its price.

Question 19

Locational models suggest that customers are better off if:

A)they are near a store since their travel time, and therefore the cost of travel, are reduced.
B)there are many stores since price competition will lower the cost of goods.
C)they are far from a store since noise, congestion, and garbage are reduced.
D)stores are operated as communes since costs are reduced and profits are earned by the customers.

Question 20

When a resource like water, fish in the ocean, or grazing land is available to everyone, it is:

A)impersonal property.
B)private property.
C)common property.
D)personal property.

Question 21

A perfectly competitive market has all of the following characteristics except:

A)There are few buyers.
B)There are many sellers.
C)Each buyer offers to buy a small part of the total quantity transacted.
D)Each seller offers to sell a small part of the total quantity transacted.

Question 22

In economics, a resource endowment is:

A)the things people have inherited.
B)the resources available to an economy.
C)a reward for efficient production.
D)the things people are entitled to.

Question 23

A market is characterized by the demand and supply curves: X_D = 40 - 4p and X_S = 2 + p, respectively. Under a buy- and- store program with a support price of $9, the government will end up buying:

A)11 units.
B)0 units.
C)2 units.
D)5 units.

Question 24

The clustering model implies that several gas stations sometimes locate at the same intersection:

A)because land is expensive in cities.
B)in order to make buying gas more convenient.
C)because profit maximization dictates this spatial arrangement.
D)due to high demand for gasoline.

Question 25

The preferences of individuals are key to economic analysis because:

A)self- interest is not relevant for the understanding of how firms operate.
B)motivation is important in explaining economic choices.
C)self- interest is not relevant for understanding how consumers act in the marketplace.
D)economics is taking a subjective view of the world.

Question 26

Pareto optimality is equivalent to:

A)a certain economic outcome.
B)an utopian economic outcome.
C)what Wilfredo Pareto deemed as optimal.
D)economic efficiency.

Question 27

The link between the assumption and the predictions of an economic model is:

A)obtained using the rules of logic.
B)a function of the user's experience with economic theory.
C)a function of the author's beliefs.
D)revised in the light of new empirical evidence.

Question 28

Suppose that you found a trade that made you better off but no one else would be made worse off. From this information, we can tell that::

A)the new social state is not Pareto optimal
B)the new social state is Pareto optimal
C)the previous social state was not Pareto optimal
D)the previous social state was Pareto optimal

Question 29

The building blocks of the economy are the following except:

A)resource endowments.
B)international trade.
C)preferences of individuals.
D)technology.

Question 30

The Cost- Benefit criterion assumes all of the following except:

A)The distribution of costs and benefits is irrelevant.
B)Positive net social benefits indicate better social states.
C)"A dollar is a dollar."
D)Gains and losses from changes in social state are equal.

Question 31

Assumptions characterising an economic model need to be:

A)numerous.
B)implicit.
C)realistic.
D)simple.

Question 32

In economics, institutions:

A)conduct research in medicine and engineering.
B)slow the rate of change in society.
C)control and direct private behaviour.
D)provide grants to artists and writers.

Question 33

Which of the following statements is true when a common property problem exists?

A)resources are used too intensely.
B)governments don't know who to tax.
C)there is no incentive to utilize the resources.
D)the resources must be used for the common good.

Question 34

An individual demand curve tells us how many units:

A)a firm will sell at various prices.
B)firms will sell at various prices.
C)an individual will buy at various prices.
D)individuals will buy at various prices.

Question 35

If a is 1/4 and b is 5/6 in Hotelling's Main Street model, the second firm's market segment is:

A)1/2
B)13/24
C)11/24
D)5/6

Question 36

Oil extraction arrangements need to deal with common property issues:

A)due to heavy regulation in the natural resource industries.
B)due to the highly sensitive nature of oil reserves after the 9/11 events.
C)as a result of the rule of capture.
D)because oil belongs to the entire people.

Question 37

The only way to eliminate all competition from social life would be through:

A)eliminating all scarcity.
B)abolishing money.
C)eliminating all selfishness.
D)giving government the power to control everything.

Question 38

The Cost- Benefit criterion selects a social state by finding whether:

A)the number of gainers is larger than the number of losers.
B)society can pay compensation to losers.
C)the gains to winners are greater than the losses to losers.
D)gainers and losers are indifferent between alternatives.

Question 39

Economic theory assumes that people want:

A)to advance their own interests.
B)material goods primarily.
C)more of everything.
D)money in preference to all other goods.

Question 40

Institutions are considered important for economic analysis:

A)institutionalism is an important field in economics.
B)because they govern the interaction of economic actors.
C)laws and regulations explain all economic choices.
D)government is paramount in a market economy.

Question 41

The market demand curve is downward sloping, which means that the quantity demanded
When the price .

A)is unchanged, falls
B)rises, falls
C)falls, falls
D)rises, rises

Question 42

When US President Barack Obama gave his Nobel prize money away, he was:

A)being altruistic.
B)forced to by domestic political pressure.
C)making a mistake.
D)acting in his own self interest.

Question 43

Locational models predict all of the following except:

A)distance measurements use a common scale.
B)television programs share common themes.
C)social organizations are similar to each other.
D)firms in an industry locate near each other.

Question 44

Building an economic model requires:

A)deriving a conclusion or prediction.
B)realistic assumptions.
C)richness comparable to that of the real world.
D)the use of politically correct assumptions.

Question 45

Assumptions are chosen primarily because they are:

A)realistic.
B)convenient.
C)simplifications.
D)abstract.

Question 46

The circular flow of economic activity reflects the:

A)conduct of commercial activities.
B)interactions among firms and individuals.
C)tedium of ordinary activities.
D)flow of funds among banks and government agencies.

Question 47

Locational models cannot be used to explain:

A)the existence of mini- malls.
B)the nature of programing of new radio stations.
C)perfectly competitive markets.
D)the positions political parties assume along the political spectrum.

Question 48

In economics, self interest is a:

A)positive assumption.
B)normative assumption.
C)measure of value.
D)measure of greed.

Question 49

Competition is:

A)the consequence of "more is better."
B)utterly harmless.
C)inherently bad.
D)independent of scarcity.

Question 50

A market demand curve tells us how many units:

A)firms will sell at various prices.
B)individuals will buy at various prices.
C)a firm will sell at various prices.
D)an individual will buy at various prices.

Question 51

Positive economics is an approach that:

A)requires the economists to be as subjective as possible.
B)makes research feel positive about the future
C)requires the economist to be as objective as possible.
D)is concerned with value judgments.

Question 52

Constructing an economic model requires all of the following except:

A)explicit assumptions.
B)empirical tests of deductions.
C)predictions deduced from assumptions.
D)comparison with other economic models.

Question 53

Institutions are all of the following except:

A)informal rules that are not government sanctioned.
B)the rules of the game governing economic exchanges.
C)your local phone company.
D)laws governing ownership, antitrust, minimum wage, etc.

Question 54

Institutions exclude:

A)ministry of industry.
B)social customs.
C)the common law.
D)religious orders.

Question 55

Cost- benefit analysis:

A)makes sure that the government can compensate all the losers.
B)stresses the importance of the distribution of benefits across economic agents.
C)makes sure there are more winners than losers.
D)a project is undertaken if the net social benefit is positive.

Question 56

The statement "I will either pass or fail this exam" is an example of:

A)the trials of a student's life.
B)a useful and interesting remark.
C)a refutable proposition.
D)a proposition that cannot be wrong.

Question 57

Which of the following would be considered part of a resource endowment?

A)technological knowledge
B)land
C)general knowledge
D)a grade 12 diploma

Question 58

In a pure market economy, the role of the government is to:

A)define and enforce private property rights.
B)ensure that income is equitably distributed.
C)regulate the markets where goods and services are exchanged.
D)reallocate resources to create Pareto improvements.

Question 59

The price support program instituted by the government:

A)does not change the competitive equilibrium.
B)will lead to a price below the competitive equilibrium.
C)will result in a quantity supplied smaller than the equilibrium quantity.
D)will result in a quantity supplied larger than the equilibrium quantity.

Question 60

When a consumer's own actions cannot attain a more preferred situation, she faces a(n):

A)unfair system.
B)equilibrium.
C)coercive arrangement.
D)unconstitutional rule.

Question 61

The Pareto criterion selects a social state by finding:

A)the profit stores would earn in each social state.
B)the welfare budget required to support indigent people in each social state.
C)whether at least one person is better off than in other social states.
D)the number of people who would vote for each social state.

Question 62

Suppose that an increase in the global demand for corn has pushed the equilibrium price of corn above the government's support price. Which of the following would be true?

A)price would stay at the support price and government would not buy any corn.
B)quantity supplied would equal quantity demanded.
C)quantity supplied would be greater than quantity demanded and the government would buy more corn.
D)quantity supplied would be less than quantity demanded and the government would have to sell corn.

Question 63

The circular flow diagram:

A)focuses on the flow of knowledge.
B)abstracts from the complexity of the real life economies.
C)does not include the resource markets and goods markets.
D)is not concerned with the interaction of individuals and firms in the economy.

Question 64

Suppose that a market for books is segmented at 1/2, has 100 customers who buy one book, charges
$7 per book, and pays $5 per book. What is the profit earned in the market?

A)200
B)500
C)700
D)100

Question 65

Common property problems occur so frequently because:

A)Canadians are concerned with the social implications of economic activity.
B)property systems are highly interdependent.
C)people are greedy.
D)oil extraction and fisheries play a prominent role in the Canadian economy.

Question 66

Economic models are tested:

A)with real world evidence.
B)to find conclusive answers.
C)under carefully controlled conditions.
D)in repeated experiments.

Question 67

The following examples can be categorized as common property problems except:

A)Grandpa Joe's backyard.
B)non- toll highways.
C)the student lounge.
D)open ocean fisheries.

Question 68

Suppose that you plan to enter a book market with one existing store located at 2/3. Where can you locate to maximize profit?

A)on the 0 (left)side of the existing store
B)at a nearby mall
C)on the 1 (right)side of the existing store
D)at 1/2

Question 69

Comparative institutional analysis is concerned with the:

A)development of institutions over time.
B)forces causing changes in institutions.
C)differences between institutions across countries.
D)effect of different institutions on the state of society.

Question 70

The economic model's validity is determined:

A)by convincing a great deal of economists of its correctness.
B)by testing it using real life evidence.
C)by testing it using experiments involving undergraduate economics students.
D)by making sure they have a flawless logic.

Question 71

A social state is:

A)membership in the Social Register.
B)a society whose government follows socialist precepts.
C)a specific allocation of goods to individuals.
D)a society which chooses to have many social events.

Question 72

Comparative statics analysis evaluates the effect of:

A)exogenous variables on each other.
B)exogenous variables on endogenous variables.
C)endogenous variables on each other.
D)endogenous variables on exogenous variables.

Question 73

Climate change related to carbon dioxide emissions is an example of:

A)the greed that is inherent in the market system.
B)the unitization of common property.
C)the common property problem
D)a problem that cannot be explained by economics.

Question 74

The statement "the government should do something about the ballooning budget deficit" is:

A)a positive one.
B)a normative one.
C)an irrefutable one.
D)a remark that states the obvious.

Question 75

A perfectly competitive market has all of the following characteristics except:

A)There are many buyers.
B)There are many sellers.
C)Each buyer offers to buy a small part of the total quantity transacted.
D)Each seller offers to sell a large part of the total quantity transacted.

Question 76

In a perfectly competitive market, each buyer can choose:

A)price only.
B)quantity only.
C)both quantity and price.
D)neither quantity nor price.

Question 77

When society moves from one social state to another, any gains are received, and any losses are paid, by:

A)voluntary compensation of losers by gainers.
B)the individuals involved.
C)a windfall profit tax on those who gain.
D)a transfer tax to compensate losers.

Question 78

A perfectly competitive market has all of the following characteristics except:

A)Each buyer offers to buy a small part of the total quantity transacted.
B)There are few sellers.
C)There are many buyers.
D)Each seller offers to sell a small part of the total quantity transacted.

Question 79

Suppose that two book stores are located at a = 1/4 and b = 5/8. What is the point of market segmentation according to Harold Hotelling's model?

A)1/3
B)7/16
C)9/16
D)1/2

Question 80

Comparative statics is the method of analysing:

A)the effect on a market equilibrium caused by a change in the model.
B)the difference between normative and positive questions.
C)the variables that cause market demand to change.
D)the determinants of individual preferences.