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Mock test final Clcqktd
FOREIGN TRADE UNIVERSITY
MICROECONOMICS
FACULTY OF INTERNATIONAL ECONOMICS
FINAL TEST
DEPARTMENT OF MICROECONOMICS
Time allowed: 60 minutes
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PART 1: (6 points)
1. A rational person does not act unless
A. The action produces marginal costs that exceed marginal benefits.
The action produces marginal benefits that exceed marginal costs.
C. The action makes money for the person.
D. None of the above
2. Who guide most of the economic activity in the market economy?
Government
B. Sellers
C. Buyers
Both sellers and buyers
3. Suppose that demand function of good X is QDx = -2PX - 3PY + 5I + 7 then X and Y are
A. Substitutes
Complements
C. Independent
D. None of the above
4. (Continue question 3) We can conclude that X is
. Normal good
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B. Luxury good
C. Inferior good
D. None of the above
5. Suppose that demand function of good X is QDx = n.PX + m.PY + k. If X and Y are
complementary goods then
A. n.m = 0
. n.m > 0
C. n.m < 0
D. Not enough information to conclude
6. When both demand and supply curves shift rightward, equilibrium price will
A. Definitely increase
B. Definitely decrease
C. Remain unchange
Lack of information to conclude
7. If wages for iPhone workers increases and Samsung Galaxy price increases as well, the
effect on iPhone market is
. Price increases, quantity is ambiguous
B. Price decreases, quantity is ambiguous
C. Price is ambiguous, quantity increases
D. Price is ambiguous, quantity decreases
8. In the case of inferior goods
. An increase in income will cause their demand to fall.
B. An increase in income will cause their demand to increase.
C. An increase in the price of substitutes will cause the price of substitutes to increase.
D. Will be unaffected by changes in tastes.
9. If a legal price ceiling is established on a good above the existing equilibrium price, the
effect would be to
A. Raise the price of the good and lower the quantity purchased
. Have no effect on the price or quantity of the good
C. Lower the price of the good and lower the quantity purchased
D. Lower the price of the good and increase the quantity purchased
10. In which case does supply curve go through the origin?
A. Perfectly elastic supply
B. Perfectly inelastic supply
C. Relatively inelastic supply
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11. The larger the positive cross-price elasticity coefficient of demand between 2 products
X and Y, the
A. stronger their complementariness
stronger their competitiveness
C. smaller their complementariness
D. smaller their competitiveness
12. Which of the following indicates that two goods are complements?
A. A demand elasticity greater than one
B. A positive income elasticity
A negative cross-price elasticity
D. A positive cross-price elasticity
13. The demand for which of the following is likely to be the most price inelastic?
B. Vinamilk
C. TH True Milk
D. Ba Vi Milk
14. When government imposed an excise tax on producer, consumer will bear all the tax
burden if demand curve is
A. More elastic than supply curve
B. Less elastic than supply curve
erfectly inelastic
D. Perfectly elastic
15. If the Government levies a tax of $500 per car on sellers of cars and demand curve of
consumers is relatively elastic then the price received by sellers of cars would
. Decrease by less than $500
B. Decrease by exactly $500
C. Decrease by more than $500
D. Increase by an indeterminate amount
16. An individual decides to spend her income of 400$ on X and Y with PX = 10$/unit, PY
= 5$/unit. There is a promotion from the seller: buying 10 units of Y at its price, consumer
will get 10 units more free of charge. This is applied for every 10 units of Y bought by
consumers. In this case, budget line is
A. Linear and continuous
inear and discontinuous
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C. Non-linear and continuous
D. Non-linear and discontinuous
17. (Continue question 16) One of the budget line functions is
400 = 10X + 5Y with Y ≥ 20
B. 500 = 10X + 5Y with 50 ≤ Y < 70
C. 550 = 10X + 5Y with 90 ≤ Y < 110
D. None of the above
18. (Continue question 16) The maximum amount of good Y that consumer can buy is
A. 40
B. 60
80
D. None of the above
19. If an individual knows that marginal utility per dollar spent on good A is less than the
marginal utility per dollar spent on good B and her utility function is U = 2X + 3Y then
she should
A. Increase total utility by buying more of A and less of B
Increase total utility by buying more of B and less of A
C. Increase total utility by buying all of A and none of B
Increase total utility by buying all of B and none of A
20. When marginal product is greater than average product
A. Marginal product is increasing
B. Marginal product is decreasing
Average product is increasing
D. Both A and C are correct
21. Which of the following is true about the distances between variable cost and total cost
when graphed?
. As output increases the difference between them gets smaller
B. Is equal to average fixed cost at all levels of output
C. Is constant at all levels of output
Both A and B are correct
22. Consumers do not have a strong preference for the output of one seller over that of
another in a perfectly competitive market because
. there a large number of firms in the market.
. the firms sell a standardized product.
C. there are no barriers to entry.
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D. an individual firm has control over price.
23. Christopher cannot control the price at which he sells his corn. Christopher sells his
corn in
a perfectly competitive market.
B. a monopoly market.
C. a monopolistically competitive market.
D. an oligopoly market.
24. Marginal revenue is equal to price for a perfectly competitive firm because
total revenue increases by the price of the good when an additional unit is sold.
B. total revenue increases by less than the price of the good when an additional unit is sold.
C. firms need to lower price to increase the quantity sold.
D. firms can increase price and still increase the quantity sold.
25. Kevin's Golf-a-Rama sells golf balls in a perfectly competitive market. At its current
level of golf ball, Kevin has marginal costs equal to $1, and AVC is rising. If the market
price of golf balls is $2, Kevin should
A. decrease the level of golf ball production.
B. continue producing the current level of production.
. increase the production of golf balls.
D. shut down and produce no golf balls.
26. Farmer Brown sells her wheat in a perfectly competitive market. Suppose the current
market price of wheat is $2.50 per bushel. If farmer Brown charges $2.51 for her wheat
A. farmer Brown will sell slightly less wheat than her neighbors, but will still make a
substantial profit.
B. farmer Brown will have to plant more acres of wheat to maximize her profit.
farmer Brown will sell no bushels of wheat.
D. farmer Brown will increase her total revenue
27. A market in which competition and entry are restricted by the granting of a public
franchise, government license, patent, or copyright is a
A. Perfect competition.
nopoly.
C. Monopolistic competition.
D. Oligopoly.
28.
ut where
A. demand is unitary elastic.
. demand is inelastic.
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C. demand is elastic.
D. demand has a zero elasticity.
29. For a single-price monopolist, average revenue
B. is less than marginal cost.
C. exceeds marginal cost.
D. equals average total cost.
30. Compared to a perfectly competitive industry, a single-price monopolist
A. restricts its output and charges a lower price.
B. expands its output and charges a higher price.
C. expands its output and charges a lower price.
restricts its output and charges a higher price.
PART 2: CALCULATING EXERCISES (4 points)
Exercise 1: Consider the market for good X with the following supply and demand conditions:
P = 140 – 0,1Q and P = 20 + 0,2Q (P: $/unit; Q: million units)
a) Determine the market outcome. Calculate consumer surplus and producer surplus at the
market equilibrium.
b) If the Government imposes a price ceiling of 90$/unit and then import to supply the shortage
amount, determine the market price and quantity. Calculate consumer surplus in this case.
c) If the Government desires the same outcome as (b), should the Government impose tax or
subsidize for producers? Determine the size of per unit tax or subsidy in this case. Calculate the
incidence of subsidy or tax for consumers and producers.
Exercise 2: A perfectly competitive firm has average variable cost function as follow: AVC =
4Q + 6 (P: $, Q: kg). At the market price is 46$, this firm incurs a loss of 300$.
a) Determine the break-even point and the shut-down point of this firm.
b) Derive this firm short-run supply function.
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