University of Economics HCM City (UEH)
Department of Economics
Microeconomics Mid-term Test –Fall 2019
Duration: 60 minutes – Reading materials allowed
Student’s name:
Instructor: NT Trieu
ID number:
Students answer by sticking X at the appropriate cell in the answer sheet below. Each carries 0.25 points.
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1. A production possibility frontier demonstrates the basic economic principle that
(a) economies are always efficient.
(b) assuming full employment, supply will always determine demand.
(c) assuming full employment, an economy is efficient only when the production of capital goods in a particular year is greater
than the production of consumption goods in that year.
(d) assuming full employment, to produce more of any one thing, the economy must produce less of at least one other good.
2. A movement from a point inside a production possibility curve to a point on the curve shows that
(a) the society has learned to produce more using existing resources.
(b) the society has discovered new resources.
(c) the society has begun to produce goods and services more efficiently.
(d) both b and c.
3. Firms stop producing CDs and start producing DVDs because people prefer DVDs
to CDs. This will
(a) improve efficiency.
(b) make the economy more stable.
(c) make the economy less stable. (d) make the distribution of outcome more equitable.
4. An economist estimates that a public park costs $25,000 a year to maintain and that the public park generates an additional
$30,000 a year in revenue for merchants near the park. From society’s point of view, the maintenance of this park is
(a) inefficient because the additional revenues generated by the park are so low.
(b) potentially efficient because the value of the gains exceeds the value of the losses.
(c) inefficient, because everyone in the community pays taxes to support the park, but only the merchants near the park benefit.
(d) potentially efficient because no one would be made worse off as a result of maintaining the park.
5. The idea of choice would not be needed if
(a) scarcity did not exist.
(b) no-one was poor.
(c) capital were eliminated.
(d) we are only analysing one person’s consumption.
6. The demand curve for a good slopes downward and to the right because when the price of the good falls
(a) consumers’ preferences change, so they buy more of the good.
(b) consumers substitute the lower-priced good for the now relatively more expensive goods.
(c) suppliers reduce their output.
(d) consumers do not care about the prices of related goods.
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University of Economics HCM City (UEH)
Department of Economics
Instructor: NT Trieu
7. If a firm is making no economic profit
(a) it is wasting its funds by investing on new plant and equipment.
(b) it is doing as well as it would do in any other industry.
(c) it will not be able to sell the company for as much as it paid for it.
(d) it should exit the industry and re-invest its assets elsewhere.
8. If the government implements a price ceiling
(a) all buyers of the product will benefit from the lower price. (b) some sellers will no longer sell as much of their product.
(c) some buyers will not be able to purchase the product at all. (d) all sellers of the product will benefit from the higher price.
9. The government decides to set a minimum price for vegetables. This policy
(a) will lead to a Pareto improvement if it is a perfect market.
(c) will increase the quantity of vegetables demanded, but will not change demand.
(b) is called a price ceiling.
(d) is called a price floor.
10. If both the supply and demand curves shift to the left, it can be concluded that there will be
(a) a decrease in the equilibrium price.
(b) an increase in the equilibrium price.
(c) a decrease in both the price and equilibrium quantity sold.
(d) a decrease in the equilibrium quantity sold.
11. We can expect the demand for a product to decrease if
(a) the number of buyers in the market increases.
(b) the price of the product rises.
(c) the price of a complementary good increases.
(d) the price of a substitute good increases.
12. Consider two tourist destinations, X and Y. These destinations are complements when
(a) an increase in the price of destination X will lead to an increase in demand for destination Y.
(b) a fall in the price of destination X will lead to an increase in demand for destination Y.
(c) an increase in the price of destination Y will have no effect on the demand for destination X.
(d) an increase in the price of destination X will have an effect on the price for destination Y.
13. A successful advertising program for a product will
(a) shift the demand curve for that product leftward.
(c) shift the demand curve for that product rightward.
(b) cause a movement down the demand curve for the product.
(d) have no effect on demand for the product.
14. Many economists believe that the unemployment rate for teenagers …………as the minimum wage ………..
(a) rises; rises.
(b) falls; rises.
(c) rises; falls.
(d) does not change; falls.
15. Individuals or countries trade with each other because they
(a) are concerned with increasing society’s welfare. (b) cannot consume all they can produce.
(c) expect a gain as a result of the trade.
(d) would prefer not to be self-sufficient.
16. Which of the following will change a nation’s comparative advantage?
(a) a technological advance in producing manufactured goods
(b) quotas on imports
(c) a change in consumers’ preferences for imported goods
(d) a doubling of all wages
17. Trade based on each country’s comparative advantage is
(a) economically efficient because both countries are better off than they were before they traded.
(b) economically inefficient because the country with the absolute advantage is made worse off.
(c) ineffective in improving efficiency, since one country’s gain will be offset by the other country’s loss.
(d) economically efficient only if each country also has the absolute advantage in producing their good.
18. If demand increases when supply is perfectly elastic, then
(a) consumer surplus will remain the same.
(b) consumer surplus will increase.
(c) it is not possible to predict the change in consumer surplus.
(d)consumer surplus will decrease with the increase in price.
19. Consumer surplus tends to be small when
(a) demand is elastic.
(b) supply is elastic.
(c) demand is inelastic.
(d) supply is inelastic.
20. Which of the following statements is correct?
(a) The price of a good reflects its value to the consumer.
(b) Consumer surplus can be high for a low-priced good and low for a high-priced good.
(c) The price of water is low relative to that of diamonds because the government provides water at affordable rates for
households as a public service.
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University of Economics HCM City (UEH)
Department of Economics
Instructor: NT Trieu
(d) The water-diamond paradox shows the limitations of economic theory.
21. The benefit to a producer of selling a good at the equilibrium price is called
(a) producer surplus.
(b) consumer surplus. (c) welfare economies.
(d) efficiency gain.
22. Producer surplus tends to be large when
(a) supply is elastic.
(b) demand is elastic.
(c) supply is inelastic.
23. When a market is in equilibrium,
(a) quantity demanded will equal quantity supplied.
(c) sellers will continue to expand production to increase revenues.
(d) demand is inelastic.
(b) a shortage will be present.
(d) a surplus will be present.
24. If a drought destroyed half of the U.S. garlic crop at a time when the health benefits of garlic were being well publicized,
economists would expect that in the market for garlic
(a) quantity exchanged would rise but the change in price is uncertain without further information.
(b) price would rise but the change in quantity exchanged is uncertain without further information.
(c) both price and quantity exchanged would rise.
(d) price would rise and quantity exchanged would fall.
25. The discovery of new gold in South America will __________ the price of gold and _________the quantity of gold traded.
(a) raise; raise
(b) lower; raise
(c) raise; lower
(d) lower; lower
26. Higher wages in the U.S. auto industry would __________ the prices of autos and __________ the quantity exchanged.
(a) lower; lower (b) lower; raise
(c) raise; lower
(d) raise; raise
27. If price elasticity of demand is 2.0, this implies that consumers would
(a) buy twice as much of the good if price falls by 10 percent.
(b) require a 2 percent cut in price to raise quantity demanded of the good by 1 percent.
(c) buy 2 percent more of the good in response to a 1 percent cut in price.
(d) require at least a $2 increase in price before showing any response to the price increase.
28. If the price elasticity of demand within the price range from $1 to $1.25 for carrots is 0.79 and for radishes is 1.6, then
within that price range
(a) carrots are more price elastic than radishes.
(b) radishes are more price elastic than carrots.
(c) carrots and radishes must be substitute goods.
(d) carrots and radishes must be complements.
29. A 5 percent tax is levied on products A and B, both of which have the same demand elasticity. Unit sales of A are nearly
the same after the tax, while unit sales of B fall dramatically. Which of the following can we conclude?
(a) Producers of A bear a greater share (relative to consumers) of their market’s tax burden than the producers of B.
(b) Product B has a smaller elasticity of supply than product A.
(c) Tax revenue is greater from product A.
(d) Tax revenue is greater from product B.
30. Government-created price floors are typically imposed to
(a) help consumers. b) help producers. c) raise tax revenue.
d) shift the supply curve to the right.
31. The slope of the production possibilities frontier is determined by
(a) the opportunity cost of producing one more unit of the good on the horizontal axis.
(b) the market prices of the goods that the economy can produce.
(c) the distribution of incomes in the economy.
(d) whether production is performed using efficient or inefficient methods.
32. The production possibilities frontier is a downward-sloping straight line when the
(a) opportunity cost of producing each good depends on the amount produced.
(b) technology of production is constant.
(c) opportunity cost of producing each good is independent of the amount of the good produced.
(d) economy is industrialized.
33. In voluntary exchange between two countries, if one country gains then
(a) the other must lose, unless the exchange generates external costs.
(b) the other country must lose under any circumstances.
(c) the other country must lose an equal amount.
(d) there is no reason to expect that the other country must lose.
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University of Economics HCM City (UEH)
Department of Economics
Instructor: NT Trieu
34. International trade tends to occur whenever
(a) labor is cheaper in one country than in another.
(b) one of the trading nations is self sufficient and producing surplus goods.
(c) one nation can profit from trade at the expense of the other.
(d) both nations can benefit from trade.
35. If Japan can produce each unit of steel using fewer resources than Canada does,
(a) Canada has an absolute advantage in steel production.
(b) Japan has an absolute advantage in steel production.
(c) Japan has a comparative advantage in steel production.
(d) Canada has a comparative advantage in steel production.
36. If the opportunity cost of a television set equals 20 cameras in China, but 10 cameras in Japan, then we know
(a) China has a comparative advantage in producing cameras.
(b) Japan has a comparative advantage in producing TV sets.
(c) market exchange of 1 TV set for 15 cameras would produce not only mutually beneficial trade, but would also split the
gains from trade equally between the two countries.
(d) All of the above are correct.
37. When customers are free to buy at the lowest prices, they will
(a) purchase goods from the country that has a comparative advantage in producing it.
(b) purchase only goods produced in their own country.
(c) purchase only goods produced in their own local area.
(d) prefer to purchase only well-made, foreign-produced goods.
38. With international trade
(a) producers and consumers in both countries must gain; otherwise, there would be no trade.
(b) producers in both countries must gain.
(c) consumers in both countries must gain.
(d) consumer surplus in the country that imports the good rises.
39. The United States is the world’s leading grain producing nation. Exporting U.S. grain causes the
(a) domestic consumption of grain to rise because of the added foreign demand.
(b) price of grain in the domestic market to fall because foreigners are now taking some of the domestic demand.
(c) price of grain to domestic consumers to rise because of the added foreign demand.
(d) U.S. standard of living to improve but reduces the standard of living of foreigners.
40.If the United States imports shoes in a free-trade situation, we can infer that
(a) the domestic production of shoes in a no-trade situation is lower than if there is free trade.
(b) domestic consumption of shoes is higher in a no-trade situation than if there is free trade.
(c) the domestic price of shoes in a no-trade situation is higher than the free-trade world price.
(d) the domestic price of shoes in a no-trade situation is lower than the free-trade world price.
The End. Good luck!
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