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ECON 2000 Final Review Guide: Questions & Answers on Microeconomics, Exams of Nursing

Valdosta State University (VSU)Nursing

A comprehensive review guide for econ 2000, covering key concepts in microeconomics. It includes multiple-choice questions with answers, covering topics such as scarcity, market forces, demand and supply, elasticity, and government intervention. This guide is valuable for students preparing for their final exam, offering a structured approach to understanding and applying microeconomic principles.

Typology: Exams

2024/2025

Available from 02/12/2025

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ECON 2000 FINAL REVIEW GUIDE
QUESTIONS & ANSWERS
1) A modern economy like the U.S. economy is largely organized by:
a) Benevolent individuals pursuing the public interest
b) Individuals following their own self-interest, doing what seems best for themselves
c) Individuals forming cooperative enterprises and labor unions
d) Governments at all levels coordinating the activities of firms and citizens
e) The directions of international economic consortiums - ANSWERSB
2) Scarcity is likely to be
a) Unique to the 20th century
b) Eliminated with a better understanding of economics
c) A problem that will be solved with the proper use of available resources
d) A problem that will always exist
e) A result of work ethic - ANSWERSD
3) Most economists would agree that
a) The mix of market and command principles that exists in the U.S. is the best
b) The optimal mix of market and command systems remains constant over time
c) Most production and consumption decisions are more efficiently coordinated by
markets than through central planning
d) Command economics have been very successful in distributing income in socially
just ways
e) Government intervention in the economy is only justified in time of war - ANSWERSC
4) Positive statements
a) Are falsifiable in principle by appeal to factual evidence
b) Have no place in economics because economics deals only with value judgments
c) Have been verified by appeal to factual evidence
d) Are seldom employed in social sciences like economics
e) Form the basis of all normative arguments - ANSWERSC
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Download ECON 2000 Final Review Guide: Questions & Answers on Microeconomics and more Exams Nursing in PDF only on Docsity!

ECON 2000 FINAL REVIEW GUIDE

QUESTIONS & ANSWERS

  1. A modern economy like the U.S. economy is largely organized by: a) Benevolent individuals pursuing the public interest b) Individuals following their own self-interest, doing what seems best for themselves c) Individuals forming cooperative enterprises and labor unions d) Governments at all levels coordinating the activities of firms and citizens e) The directions of international economic consortiums - ANSWERSB
  2. Scarcity is likely to be a) Unique to the 20th century b) Eliminated with a better understanding of economics c) A problem that will be solved with the proper use of available resources d) A problem that will always exist e) A result of work ethic - ANSWERSD
  3. Most economists would agree that a) The mix of market and command principles that exists in the U.S. is the best b) The optimal mix of market and command systems remains constant over time c) Most production and consumption decisions are more efficiently coordinated by markets than through central planning d) Command economics have been very successful in distributing income in socially just ways e) Government intervention in the economy is only justified in time of war - ANSWERSC
  4. Positive statements a) Are falsifiable in principle by appeal to factual evidence b) Have no place in economics because economics deals only with value judgments c) Have been verified by appeal to factual evidence d) Are seldom employed in social sciences like economics e) Form the basis of all normative arguments - ANSWERSC
  1. Choose the statement that best describes how endogenous variables differ from exogenous variables a) An endogenous variable is explained outside the theory and influences an exogenous variable in a way determined by the theory b) An endogenous variable is explained within the theory, while an exogenous variable influences the endogenous variables but is determined outside the theory c) An endogenous variable is a function of the exogenous variable, and both are stock variables d) An endogenous variable is a flow, while an exogenous variable is a stock e) An exogenous variable is a function of the endogenous variable, and both are flow variables - ANSWERSB
  2. The "law of demand" hypothesizes that, other things being equal. a) The lower the price, the greater the demand b) Price and quantity demanded are positively related c) The higher the price, the lower the quantity demanded d) Price and demand vary inversely e) The higher the income, the higher the quantity demanded - ANSWERSD
  3. A normal good is a good a) That normal people like to consume b) For which demand varies directly with household income c) That everyone normally consumes d) For which demand does not vary with household income e) For which demand varies inversely with household income - ANSWERSD
  4. Good X has a substitute if there exists another good a) The demand for which varies inversely with changes in the price of X b) That is virtually the same c) That has the same price d) That is of equal value e) The demand for which varies directly with changes in the price of X - ANSWERSA
  5. Consider cars and gasoline. Other things being equal, when the price of cars decreases, the demand for gasoline is likely to a) Remain unchanged because cars and gasoline are produced independently of one another b) Increase because the two goods are complements c) Remain unchanged d) Decrease because the two goods are complements e) Remain unchanged because cars and gasoline are two distinct markets - ANSWERSB
  6. Suppose new medical research suggests that consuming 200 grams of tofu everyday will help to prevent heart disease. The dissemination of this research, other things being equal, is likely to have what impact on the market for tofu?
  1. Weekend train travel costs less than weekday train travel. If the supply of train service remains the same between weekdays and weekends, then the most likely explanation for this difference in price is that the weekend a) Supply curve is to the right of the weekday supply curve b) Demand curve is to the left of the weekday demand curve c) Demand curve is to the right of the weekday demand curve d) Demand curve is random e) Supply curve is to the left of the weekday supply curve - ANSWERSB
  2. Consider two demand curves and the same price change for both. If the resulting percentage change in quantity demanded is greater for one (D1) than the other (D2), we can conclude a) That D3 is more elastic than D1. b) That D1 is inelastic and D2 is elastic c) That D1 is elastic and D2 is inelastic d) That D1 is more elastic than D e) Nothing about their relative elasticities - ANSWERSD
  3. The price elasticity of demand for a product tends to be greater the a) More broadly the product is defined b) Lower its price c) More close substitutes for it there are d) Fewer close substitutes for it there are e) Shorter the time span being considered - ANSWERSC
  4. If demand is unit elastic at all prices, then the demand curve is a) A parabola b) Upward sloping c) A straight line d) Perfectly horizontal e) A rectangular hyperbola - ANSWERSC
  5. Which of the following illustrates elastic demand? a) A price elasticity of 0. b) A price elasticity of 1. c) A 5 percent increase in price causes a 10 percent decrease in quantity demanded d) A 5 percent increase in price causes a 2.5 percent decrease in quantity demanded e) A 10 percent increase in price causes a 10 percent reduction in quantity demanded - ANSWERSC
  6. Consumers will bear a larger burden of an excise tax if a) Both demand and supply are relatively elastic b) Demand is relatively elastic and supply is relatively inelastic c) The tax is collected by firms rather than remitted directly to the government by consumers d) Demand is relatively inelastic and supply is relatively elastic

e) Both demand and supply are relatively inelastic - ANSWERSD

  1. Suppose a market is in equilibrium at price P0, and then an excise tax of t dollars per unit of the good is imposed. At a price of (P0 + t) there will be excess _______ for the good unless the demand curve is _______. a) Supply; vertical b) Tax; unit elastic c) Demand; vertical d) Demand; horizontal e) Supply; horizontal - ANSWERSA
  2. Nancy's income has just risen from $950 per week to $1,050 per week. As a result, she decides to double the number of movies she attends each week. Nancy's demand for movies is a) Income elastic b) Price elastic c) Price inelastic d) Income inelastic e) Difficult to comprehend if she is rational - ANSWERSD
  3. If a product's income elasticity is -3.4, then we can conclude that a) The product has a rising income-consumption curve b) An increase in income will lead to an increase in demand for the product c) The product is certainly a necessity d) The product is a normal good e) A decrease in income will lead to an increase in demand for the product - ANSWERSE
  4. Government price controls are policies that attempt to maintain the a) Quantity sold at less than the quantity bought b) The price at some disequilibrium value c) Market price at equilibrium, d) Quantity bought at less than the quantity sold e) None of the above - ANSWERSB
  5. At any disequilibrium price, whether controlled or not, the quantity actually exchanged is determined by a) The greater of quantity demanded and quantity supplied b) Government decree c) The lesser of quantity demanded and quantity supplied d) The elasticity of demand e) The elasticity of supply - ANSWERSC
  6. In free and competitive markets, shortages are eliminated by a) Black markets b) Price decreases

a) The income effect in negative and reinforces the substitution effect b) The substitution effect outweighs the income effect c) The income effect is positive and exceeds the substitution effect d) The income effect just offsets the substitution effect e) The income effect is negative and outweighs the substitution effect - ANSWERSE

  1. Consumer surplus a) Is the sum of the marginal values to the consumer b) Is a measure of the gains that a consumer forgoes by buying this product rather than another c) Is the consumption of a commodity above and beyond the amount required by the consumer d) Is the total value that a consumer receives from the purchase of a particular good e) Is the difference between what the consumer is willing to pay for all the units consumed and what he or she actually paid - ANSWERSE
  2. Refer to figure 6-3. Suppose the market price p*. In this case, the consumer surplus is outlined by the area a) BCD b) ACDE c) ADE d) ABDF e) ACF - ANSWERSA
  3. Economic profits are less than accounting profits because the calculation of economic profit a) Includes the implicit charges for the use of capital owned by the firm and for income taxes b) Is stipulated in regulations set forth by the IRS c) Includes an explicit charge for risk taking d) Includes an amount for depreciation e) Includes the implicit charges for the use of capital owned by the firm and for risk taking - ANSWERSE
  4. If Michelle used $1,000 from her savings account, which was paying 6% interest annually, to invest in her brother's new sporting-goods store, the opportunity cost of her investment on an annual basis would be a) $ b) The dividend paid to her by her brother c) Her share of the store's profits d) $1, e) $1,060 - ANSWERSA
  5. Which of the following statements about the relationship between marginal product and average product is correct? a) When marginal product is falling, average product is falling

b) Average product equals marginal product when marginal product is at its maximum c) Average product equals marginal product at marginal product's lowest point d) When marginal product exceeds average product, average product must be rising e) When average product exceeds marginal product, marginal product must be rising - ANSWERSD

  1. If increasing quantities of a variable factor are applied to a given quantity of fixed factors, then the law of diminishing returns tells us that a) The average product will eventually decrease, but only if total product is held constant b) The marginal product and the average product of the variable factor will eventually decrease c) Total product will eventually begin to fall d) The marginal product will eventually decrease with constant average product e) The average product will eventually decrease with constant marginal product - ANSWERSC
  2. In the short run, total fixed costs a) Decrease as output increases b) Increase and then decrease as output increases c) Decrease and then increase as output increases d) Are equal to total variable costs e) Do not vary with output - ANSWERSE
  3. Short-run cost curves are eventually upward-sloping because of the effects of a) The increasing price of variable inputs b) Decreasing total product c) Increasing fixed costs d) Increasing marginal productivity of the variable inputs e) Diminishing marginal product - ANSWERSE
  4. N/A - ANSWERSN/A
  5. A firm in a perfectly competitive market a) Competes actively with other sellers in the industry b) Is dependent upon the behavior of its competitors c) Is limited in the amount of product it can sell without affecting the price d) Is aware of its competitors' costs e) has no power to influence the market price - ANSWERSE
  6. In order to decide the appropriate output to produce, the manager of a perfectly competitive firm needs to know a) the industry or market supple b) the industry or market demand c) what other firms in the industry are producing d) its competitors' market strategies
  1. Marginal revenue is less than price for a single-price monopolist because the a) Firm must lower its price for all units if it wants to sell more of the product b) Monopolist charges a price highest than the unit production cost c) Monopolist must worry about how its price setting will lead to entry by other firms d) Monopolist has achieved economies of scale e) Firm's output decisions do not affect the selling price - ANSWERSA
  2. Refer to Figure 10-1. The price elasticity of demand at q1 is a) Zero b) Greater than 1 c) Less than 1 d) Equal to 1 e) Not determinable from the diagram - ANSWERSB
  3. Refer to figure 10-1. If marginal costs were zero, the profit-maximizing output for a single-price monopolist would be a) 0 b) Q c) Q d) Q e) Q4 - ANSWERSE
  4. One of the reasons cartels are considered unstable is that a) Individual members of the cartel have incentive to violate the cartel agreement b) It is inefficient to manage individual firms collectively c) Consumers seek out substitutes to the cartel product d) Member firms reduce their investment, thereby becoming uncompetitive over time e) There are wide fluctuations in price as cartel members vary their output - ANSWERSA
  5. Refer to Figure 10-3. In order to maximize its profits, a perfect-price-discriminating monopolist produces the quantity a) Q b) Q c) Q d) Q e) Q4 - ANSWERSC
  6. Refer to figure 10-3. If monopolist is practicing discrimination and is maximizing its products, the consumer surplus is represented by the area a) P5P2e b) P5P3c c) P5P4a d) P5P0c e) Zer0—there is no consumer surplus in this case - ANSWERSE
  1. If there are economic profits in a monopolistically competitive industry, they will generally be competed away through the a) Increasing advertising budgets of existing firms b) Introduction of brand-name products by existing firms c) Exit of existing firms d) Entry of new firms e) Manipulation of the demand curve - ANSWERSD
  2. Suppose that a monopolistically competitive firm decides to raise its price. The theory of monopolistic competition predicts that a) Increasing the price has no effect on profits b) This firm would lose some, but not all of its customers c) A large loss of customers as the demand facing the firm is quite inelastic d) This firm would increase its profits e) This firm would lose all of its customers - ANSWERSA
  3. Refer to Figure 11-2. In the long-run, a monopolistically competitive firm will a) Produce Qc at price Pc b) Produce QL at price Pc c) Produce the output where AC is at its minimum d) Produce Qc at price PL e) Produce QL at price PL - ANSWERSE
  4. Refer to figure 11-2. A monopolistically competitive firm is allocatively inefficient because in the long-run equilibrium a) Price is greater than MC at QL b) MC is greater than price c) LRAC is not at its minimum d) Price is greater than LRAC at QL e) None of the above—the long-run equilibrium is allocatively efficient - ANSWERSA