Microeconomics Final Exam

question

Difference between correlation and causation

answer

Correlation implies a mutual relationship between to things, whereas causation occurs when one thing directly affects the other

question

Likely to exhibit negative correlation

answer

The relationship between level of professional training and unemployment

question

Data show that in 2012, the college enrollment in Caketown increased. In the same year, the sale of hotdogs in Caketown also increased. The relationship between college enrollment and the sale of hotdogs exhibits:

answer

Positive correlation

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An omitted variable is a variable that

answer

Has been left out, and if included, would explain why the variables considered in a study are correlated

question

On a graph, you observe that variable Y increases when variable X increases. What can you conclude for sure?

answer

The graph shows that the variables are correlated

question

To conduct a randomized experiment, researchers usually classify the participants into a

answer

Treatment group and a control group

question

An example of a natural experiment

answer

A research on the effect of air pollution on lung disorders by observing the health conditions of people who stay close to industrial areas and those who stay away from industries

question

Which of the following statements is true?

answer

Correlation arises when there is causation and can also arise even when there is no causation

question

Which of the following pairs of variables are likely to be positive correlated?

answer

Income and consumption

question

Occurs when the direction of cause and effect is mixed up in a study

answer

Reverse causality

question

Which of the following is NOT an assumption regarding people's preferences in the theory of consumer behavior?

answer

All the answers are basic assumptions about consumer preferences

question

The assumption on transitive preferences implies that indifference curves must:

answer

Not cross one another

question

A consumer prefers market basket A to market basket B, and prefers market basket B to market basket C. Therefore, A is preferred to C. The assumption that leads to this conclusion is:

answer

Transitivity

question

A curve that represents all combinations of market baskets that provide the same level of utility to a consumer is called:

answer

An indifference curve

question

The slope of an indifference curve is:

answer

Called the marginal rate of substitution

question

If Anna's MRS of chocolates for candy is 2 (chocolate is on the horizontal axis), Anna would willingly give up

answer

2, but no more than 2, units of candy for an additional unit of chocolate

question

An increase in income, holding prices constant, can be represented as:

answer

A parallel outward shift in the budget line

question

Assume that food is measured on the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will:

answer

Become flatter

question

Marginal utility measures:

answer

The additional satisfaction from consuming one more unit of a good

question

If Px=Py, then when the consumer maximizes utility,

answer

MU(x) must equal MU(y)

question

The change in the price of one good has no effect on the quantity demanded of another good. These goods are:

answer

None of the answers is correct

question

The curve in the diagram below is called

answer

The price-consumption curve

question

If the Engel curve has a positive slope

answer

The good on the horizontal axis is normal

question

The substitution effect of a price change for product X is the change in consumption of X associated with a change in

answer

The price of X, with the utility held constant

question

Which of the following is true concerning the income effect of a decrease in price?

answer

It will lead to an increase in consumption only for a normal good.

question

Assume that beer is a normal good. If the price of beer rises, then the substitution effect results in the person buying __________ of the good and the income effect results in the person buying __________ of the good.

answer

Less, less

question

The bandwagon effect corresponds best to which of the following?

answer

Positive network externality

question

A person with a diminishing marginal utility of income

answer

Will be risk averse

question

An individual with a constant marginal utility of income will be

answer

Risk neutral

question

One reason individuals are willing to pay for information in uncertain situations is that

answer

Can reduce uncertainty

question

Which of the following inputs are variable in the long run?

answer

All of the answers are correct

question

According to the law of diminishing returns:

answer

The marginal product of an input will eventually decline

question

An isoquant

answer

Is a curve that shows all the combinations of inputs that yield the same total output

question

The marginal rate of technical substitution (MRTS) is equal to the:

answer

Ratio of the marginal products of the inputs

question

Which of the following statements is true regarding the differences between economic and accounting costs?

answer

Accounting costs include only explicit costs

question

In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive, but can be resold, and are therefore an example of

answer

A fixed cost

question

Fixed costs are fixed with respect to change in

answer

Output

question

Which of the following costs always declines as output increases?

answer

Average fixed cost

question

Carolyn knows average total cost and average variable cost for a given level of output. Which of the following costs can she not determine given this information?

answer

Carolyn can determine all of the above costs given the information provided

question

When an isocost line is just tangent to an isoquant, we know that

answer

Output is being produced at minimum cost

question

A price taker is:

answer

A perfectly competitive firms

question

Which of following is an example of a homogeneous product?

answer

Copper

question

Revenue is equal to:

answer

Price times quantity

question

A firm maximizes profit by operating at the level of output where:

answer

Marginal revenue equals marginal cost

question

The demand curve facing a perfectly competitive firm is:

answer

Perfectly horizontal

question

Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as:

answer

P=MC

question

Producer surplus is measured as the:

answer

Area above the supply curve up to the market price

question

Refer to the figure below, when the price is E and the quantity is Q*, consumer surplus is the area:

answer

EFC

question

The burden of a tax per unit of output will fall heavily on consumers when demand is relatively __________ and supply is relatively __________.

answer

Inelastic, elastic

1 of 49

question

Difference between correlation and causation

answer

Correlation implies a mutual relationship between to things, whereas causation occurs when one thing directly affects the other

question

Likely to exhibit negative correlation

answer

The relationship between level of professional training and unemployment

question

answer

Positive correlation

question

An omitted variable is a variable that

answer

Has been left out, and if included, would explain why the variables considered in a study are correlated

question

On a graph, you observe that variable Y increases when variable X increases. What can you conclude for sure?

answer

The graph shows that the variables are correlated

question

To conduct a randomized experiment, researchers usually classify the participants into a

answer

Treatment group and a control group

question

An example of a natural experiment

answer

A research on the effect of air pollution on lung disorders by observing the health conditions of people who stay close to industrial areas and those who stay away from industries

question

Which of the following statements is true?

answer

Correlation arises when there is causation and can also arise even when there is no causation

question

Which of the following pairs of variables are likely to be positive correlated?

answer

Income and consumption

question

Occurs when the direction of cause and effect is mixed up in a study

answer

Reverse causality

question

Which of the following is NOT an assumption regarding people's preferences in the theory of consumer behavior?

answer

All the answers are basic assumptions about consumer preferences

question

The assumption on transitive preferences implies that indifference curves must:

answer

Not cross one another

question

A consumer prefers market basket A to market basket B, and prefers market basket B to market basket C. Therefore, A is preferred to C. The assumption that leads to this conclusion is:

answer

Transitivity

question

A curve that represents all combinations of market baskets that provide the same level of utility to a consumer is called:

answer

An indifference curve

question

The slope of an indifference curve is:

answer

Called the marginal rate of substitution

question

If Anna's MRS of chocolates for candy is 2 (chocolate is on the horizontal axis), Anna would willingly give up

answer

2, but no more than 2, units of candy for an additional unit of chocolate

question

An increase in income, holding prices constant, can be represented as:

answer

A parallel outward shift in the budget line

question

Assume that food is measured on the horizontal axis and clothing on the vertical axis. If the price of food falls relative to that of clothing, the budget line will:

answer

Become flatter

question

Marginal utility measures:

answer

The additional satisfaction from consuming one more unit of a good

question

If Px=Py, then when the consumer maximizes utility,

answer

MU(x) must equal MU(y)

question

The change in the price of one good has no effect on the quantity demanded of another good. These goods are:

answer

None of the answers is correct

question

The curve in the diagram below is called

answer

The price-consumption curve

question

If the Engel curve has a positive slope

answer

The good on the horizontal axis is normal

question

The substitution effect of a price change for product X is the change in consumption of X associated with a change in

answer

The price of X, with the utility held constant

question

Which of the following is true concerning the income effect of a decrease in price?

answer

It will lead to an increase in consumption only for a normal good.

question

answer

Less, less

question

The bandwagon effect corresponds best to which of the following?

answer

Positive network externality

question

A person with a diminishing marginal utility of income

answer

Will be risk averse

question

An individual with a constant marginal utility of income will be

answer

Risk neutral

question

One reason individuals are willing to pay for information in uncertain situations is that

answer

Can reduce uncertainty

question

Which of the following inputs are variable in the long run?

answer

All of the answers are correct

question

According to the law of diminishing returns:

answer

The marginal product of an input will eventually decline

question

An isoquant

answer

Is a curve that shows all the combinations of inputs that yield the same total output

question

The marginal rate of technical substitution (MRTS) is equal to the:

answer

Ratio of the marginal products of the inputs

question

Which of the following statements is true regarding the differences between economic and accounting costs?

answer

Accounting costs include only explicit costs

question

In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive, but can be resold, and are therefore an example of

answer

A fixed cost

question

Fixed costs are fixed with respect to change in

answer

Output

question

Which of the following costs always declines as output increases?

answer

Average fixed cost

question

Carolyn knows average total cost and average variable cost for a given level of output. Which of the following costs can she not determine given this information?

answer

Carolyn can determine all of the above costs given the information provided

question

When an isocost line is just tangent to an isoquant, we know that

answer

Output is being produced at minimum cost

question

A price taker is:

answer

A perfectly competitive firms

question

Which of following is an example of a homogeneous product?

answer

Copper

question

Revenue is equal to:

answer

Price times quantity

question

A firm maximizes profit by operating at the level of output where:

answer

Marginal revenue equals marginal cost

question

The demand curve facing a perfectly competitive firm is:

answer

Perfectly horizontal

question

Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as:

answer

P=MC

question

Producer surplus is measured as the:

answer

Area above the supply curve up to the market price

question

Refer to the figure below, when the price is E and the quantity is Q*, consumer surplus is the area:

answer

EFC

question

The burden of a tax per unit of output will fall heavily on consumers when demand is relatively __________ and supply is relatively __________.

answer

Inelastic, elastic

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Microeconomics Final Exam

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