Question 1

The definition of an exogenous variable is:

Accepted Answer

A) a variable whose value is determined within the model under study. 
B) a variable whose value is determined outside the model under study. 
C) a variable whose value is determined through constrained optimization. 
D) a variable whose value is determined through comparative statics. 
A) a variable whose value is determined within the model under study. 
B) a variable whose value is determined outside the model under study. 
C) a variable whose value is determined through constrained optimization. 
D) a variable whose value is determined through comparative statics.

Question 2

Which of the following statements about positive analysis is correct?

Accepted Answer

A) Positive analysis prescribes the best solution to an economic problem. 
B) Positive analysis predicts how an economic system will change over time. 
C) While normative analysis can be wrong, since it is often based on someone's opinion, positive analysis is always accurate. 
D) Since positive analysis is based on a model, and not the real world, it is mostly irrelevant. 
A) Positive analysis prescribes the best solution to an economic problem. 
B) Positive analysis predicts how an economic system will change over time. 
C) While normative analysis can be wrong, since it is often based on someone's opinion, positive analysis is always accurate. 
D) Since positive analysis is based on a model, and not the real world, it is mostly irrelevant.

Question 3

Currently, 75,000 units of a good are traded on a market. The government imposes a limit of a maximum of 50,000 units that may be traded on the market. This will create excess demand.

Accepted Answer

A) True 
 B)False

Question 4

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. When a shift in demand or supply occurs, a comparative statics analysis compares the old and the new equilibrium points.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following represents an example of positive analysis?

Accepted Answer

A) How will the equilibrium price of corn be affected by a government subsidy? 
B) What is the best way to assist low-income families with affordable housing? 
C) Would taxes on emissions be the best way to reduce pollution? 
D) How can the government best design a tax cut? 
A) How will the equilibrium price of corn be affected by a government subsidy? 
B) What is the best way to assist low-income families with affordable housing? 
C) Would taxes on emissions be the best way to reduce pollution? 
D) How can the government best design a tax cut?

Question 6

An endogenous variable is:

Accepted Answer

A) a variable that an economic agent chooses. 
B) consumption, investment or government spending. 
C) a variable determined within the economic system being studied. 
D) a variable pertaining to the home country economy. 
A) a variable that an economic agent chooses. 
B) consumption, investment or government spending. 
C) a variable determined within the economic system being studied. 
D) a variable pertaining to the home country economy.

Question 7

Identify the truthfulness of the following statements: I. Marginal analysis can explain why you would always choose to eat Chinese food rather than pizza.
II. Marginal analysis can explain the incremental impact of an increase in total cost when one more unit of output is produced.

Accepted Answer

A) Both I and II are true 
B) Both I and II are false 
C) I is true; II is false 
D) I is false; II is true 
A) Both I and II are true 
B) Both I and II are false 
C) I is true; II is false 
D) I is false; II is true

Question 8

The three tools used repeatedly in microeconomic analysis are:

Accepted Answer

A) unconstrained optimization, comparative equilibrium, equilibrium statics. 
B) opportunity cost, scarce resources, shifting equilibrium. 
C) restricted analysis, constrained equilibrium, optimization. 
D) constrained optimization, equilibrium analysis, comparative statics. 
A) unconstrained optimization, comparative equilibrium, equilibrium statics. 
B) opportunity cost, scarce resources, shifting equilibrium. 
C) restricted analysis, constrained equilibrium, optimization. 
D) constrained optimization, equilibrium analysis, comparative statics.

Question 9

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. The equilibrium is represented as the intersection of supply and demand curves.

Accepted Answer

A) True 
 B)False

Question 10

Suppose that market demand for a good slopes downward and market supply slopes upward. Equilibrium price is now $10 and 500,000 units of the good are traded at this price. Suppose now that the cost at which each unit of the good is produced falls. What is the likely effect of this change on the market equilibrium?

Accepted Answer

A) Excess supply 
B) A fall in price 
C) A shift in demand to the right 
D) An increase in price 
A) Excess supply 
B) A fall in price 
C) A shift in demand to the right 
D) An increase in price

Question 11

An example of constrained optimization would be:

Accepted Answer

A) a firm trying to maximize its profits subject to its budget constraint. 
B) a ball coming to rest at the bottom of a cup. 
C) an analysis of how market prices change when supply conditions change. 
D) An analysis of the effect of facilitating internet trading on market price. 
A) a firm trying to maximize its profits subject to its budget constraint. 
B) a ball coming to rest at the bottom of a cup. 
C) an analysis of how market prices change when supply conditions change. 
D) An analysis of the effect of facilitating internet trading on market price.

Question 12

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. A change in price will cause a shift in the demand curve.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that we illustrate demand and supply with quantity on the horizontal axis and income on the vertical axis. Let demand be a function of price and income, Qd (P, I). Which of the following statements is true?

Accepted Answer

A) A change in income will cause a shift in the demand curve. 
B) A change in income level is represented by a movement along the demand curve. 
C) Income is treated as an exogenous variable in the graphical analysis. 
D) Price and income together must change in order to create a shift in the demand curve. 
A) A change in income will cause a shift in the demand curve. 
B) A change in income level is represented by a movement along the demand curve. 
C) Income is treated as an exogenous variable in the graphical analysis. 
D) Price and income together must change in order to create a shift in the demand curve.

Question 14

Suppose the equilibrium price in a market is $5, and the government imposes a $4.50 price floor on the market. This will:

Accepted Answer

A) create excess supply. 
B) create excess demand. 
C) shift the demand curve to the right. 
D) have no effect on the market. 
A) create excess supply. 
B) create excess demand. 
C) shift the demand curve to the right. 
D) have no effect on the market.

Question 15

Suppose a consumer's level of satisfaction is given by AB2 and he/she has a total of $10 to spend on goods A and B. If the price of A is $1 and the price of B is $2, and assuming you can only purchase whole units (not fractional)of A and B, how many units of A and B should he/she purchase?

Accepted Answer

A) 2 units of A and 4 units of B. 
B) 4 units of A and 3 units of B. 
C) 6 units of A and 2 units of B. 
D) 0 units of A and 5 units of B. 
A) 2 units of A and 4 units of B. 
B) 4 units of A and 3 units of B. 
C) 6 units of A and 2 units of B. 
D) 0 units of A and 5 units of B.

Question 16

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Let demand be a function of price and income, Qd (P, I). A change in income level is represented by a movement along the demand curve.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is the best example of a consumer's objective function?

Accepted Answer

A) profits 
B) consumption 
C) satisfaction 
D) budget constraint 
A) profits 
B) consumption 
C) satisfaction 
D) budget constraint

Question 18

Suppose that we illustrate demand and supply with quantity on the horizontal axis and income on the vertical axis. Let demand be a function of price and income, Qd (P, I). Income is treated as an exogenous variable in the graphical analysis.

Accepted Answer

A) True 
 B)False

Question 19

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. The equilibrium is represented as the intersection of supply and demand curves.

Accepted Answer

A) True 
 B)False

Question 20

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Which of the following statements is false?

Accepted Answer

A) Changes in exogenous variables are represented by shifts in the demand and/or supply curves. 
B) Changes in endogenous variables are represented by movements along the supply and/or demand curves. 
C) Price and quantity are the exogenous variables in this representation. 
D) The equilibrium is represented as the intersection of supply and demand curves. 
A) Changes in exogenous variables are represented by shifts in the demand and/or supply curves. 
B) Changes in endogenous variables are represented by movements along the supply and/or demand curves. 
C) Price and quantity are the exogenous variables in this representation. 
D) The equilibrium is represented as the intersection of supply and demand curves.

The definition of an exogenous variable is:

Which of the following statements about positive analysis is correct?

Currently, 75,000 units of a good are traded on a market. The government imposes a limit of a maximum of 50,000 units that may be traded on the market. This will create excess demand.

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. When a shift in demand or supply occurs, a comparative statics analysis compares the old and the new equilibrium points.

Which of the following represents an example of positive analysis?

An endogenous variable is:

Identify the truthfulness of the following statements: I. Marginal analysis can explain why you would always choose to eat Chinese food rather than pizza. II. Marginal analysis can explain the incremental impact of an increase in total cost when one more unit of output is produced.

The three tools used repeatedly in microeconomic analysis are:

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. The equilibrium is represented as the intersection of supply and demand curves.

An example of constrained optimization would be:

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. A change in price will cause a shift in the demand curve.

Suppose that we illustrate demand and supply with quantity on the horizontal axis and income on the vertical axis. Let demand be a function of price and income, Qd (P, I). Which of the following statements is true?

Suppose the equilibrium price in a market is $5, and the government imposes a $4.50 price floor on the market. This will:

Suppose a consumer's level of satisfaction is given by AB2 and he/she has a total of $10 to spend on goods A and B. If the price of A is $1 and the price of B is $2, and assuming you can only purchase whole units (not fractional)of A and B, how many units of A and B should he/she purchase?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Let demand be a function of price and income, Qd (P, I). A change in income level is represented by a movement along the demand curve.

Which of the following is the best example of a consumer's objective function?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and income on the vertical axis. Let demand be a function of price and income, Qd (P, I). Income is treated as an exogenous variable in the graphical analysis.

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. The equilibrium is represented as the intersection of supply and demand curves.

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Which of the following statements is false?

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Exam 1: Analyzing Economic Problems

The definition of an exogenous variable is:

Which of the following statements about positive analysis is correct?

Currently, 75,000 units of a good are traded on a market. The government imposes a limit of a maximum of 50,000 units that may be traded on the market. This will create excess demand.

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. When a shift in demand or supply occurs, a comparative statics analysis compares the old and the new equilibrium points.

Which of the following represents an example of positive analysis?

An endogenous variable is:

Identify the truthfulness of the following statements: I. Marginal analysis can explain why you would always choose to eat Chinese food rather than pizza. II. Marginal analysis can explain the incremental impact of an increase in total cost when one more unit of output is produced.

The three tools used repeatedly in microeconomic analysis are:

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. The equilibrium is represented as the intersection of supply and demand curves.

An example of constrained optimization would be:

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. A change in price will cause a shift in the demand curve.

Suppose that we illustrate demand and supply with quantity on the horizontal axis and income on the vertical axis. Let demand be a function of price and income, Qd (P, I). Which of the following statements is true?

Suppose the equilibrium price in a market is $5, and the government imposes a $4.50 price floor on the market. This will:

Suppose a consumer's level of satisfaction is given by AB2 and he/she has a total of $10 to spend on goods A and B. If the price of A is $1 and the price of B is $2, and assuming you can only purchase whole units (not fractional)of A and B, how many units of A and B should he/she purchase?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Let demand be a function of price and income, Qd (P, I). A change in income level is represented by a movement along the demand curve.

Which of the following is the best example of a consumer's objective function?

Suppose that we illustrate demand and supply with quantity on the horizontal axis and income on the vertical axis. Let demand be a function of price and income, Qd (P, I). Income is treated as an exogenous variable in the graphical analysis.

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. The equilibrium is represented as the intersection of supply and demand curves.

Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Which of the following statements is false?

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters