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Summary, Microeconomic Principles Midterm Exam 3 with Answers: A Comprehensive Review, Summaries of Microeconomics

A detailed midterm exam for microeconomic principles (econ 103), covering various key concepts such as labor productivity, relative prices, market structures, and financial intermediaries. the exam includes multiple-choice questions with answers, offering students a valuable opportunity to test their understanding and identify areas needing further review. the questions delve into core economic principles and their applications, making it a useful resource for students to assess their knowledge and prepare for future assessments.

Typology: Summaries

2024/2025

Uploaded on 04/24/2025

taylor-rapoza
taylor-rapoza 🇺🇸

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Microeconomics Principles Exam
Questions
Microeconomic Principles Exam Questions
Wage Discrepancies
The difference in average wages between Sri Lanka (12 cents/hour) and the
USA ($15/hour) is addressed. The provided options for explaining this
difference are: US multinational corporations exploiting workers,
government protection of workers in the USA, higher American labor
productivity, and employer greed in Sri Lanka.
Profit Maximization
The question of where a firm maximizes profits is posed. The options
include: total revenue equals total cost, marginal revenue equals total
revenue, average variable cost equals average revenue, and marginal cost
equals average fixed costs.
Relative Price
The question asks which statement is NOT true regarding relative price.
One option states that the price of a good is determined by all other
variables. Another option states that the prices of other goods affect the
relative price of the good.
Bank Profits
The question asks what are the bank's total profits if the quantity of
loanable funds is $2 million. The possible answers are $60,000, $40,000,
$2,200, and $20,000. It is also suggested that there might not be enough
information to answer the question.
Advertising
The question asks which statement about advertising is NOT true. The
options include: advertising lowers prices and is a form of competition,
advertising is a mechanism for expanding consumer choices.
Monopoly
The question addresses monopolies. It states that a single-price
monopolist's marginal revenue curve is above the demand curve because it
cannot sell additional output without lowering the price on previous output.
It also states that perfect price discriminating monopolists do not restrict
output but raise price as compared to the perfect price competition market.
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Microeconomics Principles Exam

Questions

Microeconomic Principles Exam Questions

Wage Discrepancies

The difference in average wages between Sri Lanka (12 cents/hour) and the USA ($15/hour) is addressed. The provided options for explaining this difference are: US multinational corporations exploiting workers, government protection of workers in the USA, higher American labor productivity, and employer greed in Sri Lanka.

Profit Maximization

The question of where a firm maximizes profits is posed. The options include: total revenue equals total cost, marginal revenue equals total revenue, average variable cost equals average revenue, and marginal cost equals average fixed costs.

Relative Price

The question asks which statement is NOT true regarding relative price. One option states that the price of a good is determined by all other variables. Another option states that the prices of other goods affect the relative price of the good.

Bank Profits

The question asks what are the bank's total profits if the quantity of loanable funds is $2 million. The possible answers are $60,000, $40,000, $2,200, and $20,000. It is also suggested that there might not be enough information to answer the question.

Advertising

The question asks which statement about advertising is NOT true. The options include: advertising lowers prices and is a form of competition, advertising is a mechanism for expanding consumer choices.

Monopoly

The question addresses monopolies. It states that a single-price monopolist's marginal revenue curve is above the demand curve because it cannot sell additional output without lowering the price on previous output. It also states that perfect price discriminating monopolists do not restrict output but raise price as compared to the perfect price competition market.

It also suggests that if a perfect price discriminating monopolist cannot prevent resale of its product it will likely become a single-price monopoly.

Transaction Costs

The question addresses transaction costs. It states that they reduce deadweight loss inefficiencies and lower transactions costs.

Exchange Rates

The question addresses exchange rates. It states that a decrease in inflation rates in America relative to Britain and a surplus of dollars in Britain relative to Pounds. The cost of goods in the USA is lowered relative to goods in Britain.

Cartels

The question asks which statement is NOT true concerning cartels in a free market. The options include: cartel members have an incentive to restrict output, cartel members must incur policing costs, cartel members face a prisoner's dilemma, cartel members cannot prevent new competition, and cartel members must prevent all methods of non-price competition.

Law of Supply

The question asks which of the following defines the Law of Supply. The options include: an inverse relationship between relative price and quantity demanded, a positive relationship between relative price and quantity demanded, a positive relationship between the relative cost of the good and its elasticity, and a positive relationship between the relative price of the good and the supply.

Standard Oil

The question addresses John D. Rockefeller's Standard Oil Company. It states that the company was broken up for behaving as a monopolist. It also states that Standard Oil had only a few competitors in 1911 and that Rockefeller was gaining market share from 1890-1911. It also suggests that the Standard Oil case proved that Rockefeller prevented the introduction of new technologies and new consumer products.

Industry Dynamics

The question describes marginal firms exiting industries X and Z and entering industry Y. It assumes all factors of production are specialized economic goods. The options for inference include: industry Y earns less than the general rate of return, industries X and Z do not earn accounting profits, factor prices in X and Z will rise relative to Y, and consumer good prices in Y have risen relative to X and Z.