Multiple Choice

General
1) Adam smith is considered to be the founder of what branch of economics?
a) Microeconomics
b) Behavioral Economics
c) Labor Economics
d) Macroeconomics
Answer: A
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p5
2) The title Father of Macroeconomics is attributed to which economist?
a) John Neville Keynes
b) David Ricardo
c) John Maynard Keynes
d) Adam Smith
Answer: C
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p5
3) The major 19th century British economist who proposed the Theory of
Comparative Advantage:
Answer: David Ricardo

Micro
1) When the price of a good increases, the demand for its complement good
________
a) Increases
b) Decreases
c) Stays the same
d) Cant say
Answer: B
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p92
2) When the price of a good increases, the demand for its substitute good ________
a) Increases
b) Decreases
c) Stays the same
d) Cant say
Answer: A
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p92
3) The slope of an indifference curve is called the ________
a) Marginal rate of Substitution
b) Marginal rate of Technical Substitution
c) Marginal rate of Transformation
d) Marginal rate of Consumption
Answer: A
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p101
4) An
a)
b)
c)
d)

activity which can be considered as a positive externality is _______

A steel mill polluting a river
A loud open rock concert situated in a quiet neighbourhood
Technological research yielding innovative products and methods
Smokers in a public waiting shed
Answer: C
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p36

5) A public good is a good which is:

I. Rival
III. Excludable
II. Non-rival
IV. Non-excludable
a)
b)
c)
d)

I only
III only
I and III only
II and IV only
Answer: D
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p37

6) The slope of the demand curve is usually:

a) Upward Sloping

b) Downward Sloping
c) Horizontal
d) Vertical
Answer: B
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p47
7) The Slope of the supply curve is usually:
a) Upward Sloping
b) Downward Sloping
c) Horizontal
d) Vertical
Answer: A
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p37
8) The measure of how much the quantity demanded of a good changes when its
price changes is called the ________.
a) Cross price elasticity of demand
b) Own price elasticity of demand
c) Income Elasticity of demand
d) None of the above
Answer: B
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p65
9) When a 1 percent change in price calls forth less than a 1 percent change in
quantity demanded the good is said to have __________ demand.
a) Unit-elastic
b) Price-elastic
c) Price-inelastic
d) None of the above
Answer: C
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p66
10)
When no one can be made better off without having to make someone else
worse off, it is said that there is ________.
a) Equilibrium
b) Utopia
c) Perfect Market
d) Pareto Efficiency
Answer: D
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p160
11)
a)
b)
c)
d)

The cost incurred from altering inputs is:

Average cost
Fixed cost
Total cost
Variable cost

Answer: D
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p127
12)
a)
b)
c)
d)

Which among the four is not considered an axiom of consumer preference?

Transitive
Reflexive
Additive
Complete
Answer: C
Source: Intermediate Microeconomics by Hal Varian 8 th ed, p35

13)
The optimal consumption position is where the indifference curve is _______
the budget line.
a) Tangent
b) Intersecting
c) Perpendicular
d) Lying on
Answer: A
Source: Intermediate Microeconomics by Hal Varian 8 th ed, p74
14)
When demand for a good goes up by a greater proportion to income, we say
that it is a:
a) Luxury Good
b) Necessary Good
c) Inferior Good
d) Normal Good
Answer: A
Source: Intermediate Microeconomics by Hal Varian 8 th ed, p101

Quantit
yQ

0
1
2
3
4
5
6
15)
a)
b)
c)
d)

Fixed
Costs
FC

15
15
15
15
15
15
15

Variable
Costs
VC

0
10
19
27
(q18)
44
61

Total
Costs
TC

15
25
34
42
(q17)
59
76

Margina
l Cost
MC

Averag
e Cost
AC

Averag
e Fixed
Cost
AFC

10
9
8
7
10
(q15)

25
17
(q16)
12.25
11.8
12.67

15
7.5
5
3.75
3
(q20)

The marginal cost for the 6th unit of output is ______

10
13
15
17
Answer: D

16)
a)
b)
c)
d)

The average cost for the 3rd unit of output is ______

12
13.5
14
12.8
Answer: C

17)
a)
b)
c)
d)

The total cost for the 4th unit of output is ______

49
52
47
50
Answer: A

18)
a)
b)
c)
d)

The variable cost for the 4th unit of output is ______

36
34
31
33
Answer: B

19)
a)
b)
c)
d)

The average variable cost for the 2nd unit of output is ______
8.5
8
10
9.5

Averag
e
Variable
Cost
AVC
10
(q19)
9
8.5
8.8
10.17

Answer: D
20)
a)
b)
c)
d)

The average fixed cost for the 6th unit of output is _______
3
2
2.5
3.5
Answer: C

Identification
Microeconomics
1) There exists a definite relationship between the market price of a good and the
quantity demanded of that good. What is this relationship called?
Answer: Demand Schedule/Curve
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p46
2) The market state in which quantity demanded is equal to quantity supplied is
called the ________.
Answer: Market Equilibrium
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p54
3) What is the satisfaction gained by consuming a particular good or service?
Answer: Utility
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p84
4) A single seller with complete control over an entire industry is called a ________
Answer: Monopolist/Monopoly
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p171
5) A persons maximum willingness to pay can also be called his ________.
Answer: Reservation Price
Source: Intermediate Microeconomics by Hal Varian 8 th ed, p4
6) This is a type of good which has a negative income elasticity.
Answer: Inferior Good
Source: Intermediate Microeconomics by Hal Varian 8 th ed, p285
7) There exists such a good that as its price decreases quantity demanded of the
good also decreases. What is this good called?
Answer: Giffen Good
Source: Intermediate Microeconomics by Hal Varian 8 th ed, p105
8) The lost value to consumers and producers which are not captured by the levied
tax is the ____________.
Answer: deadweight loss/ excess burden
Source: Intermediate Microeconomics by Hal Varian 8 th ed, p306
9) A _________ is a person who receives the benefit of a good but does not pay for it.
Answer: Free-rider
Source: Economics Principles by Gregory Mankiw, p248

10)

This cost of an item is what we have to give up in order to acquire that item.
Answer: Opportunity Cost
Source: Economics Principles by Gregory Mankiw, p24

True or False
Microeconomics
1) Suppose that a spell of bad weather raises the price of wheat, a key ingredient of
bread. This shifts the supply curve of bread to the right.
Answer: False
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p55
2) If supply is inelastic relative to demand then most of the burden of tax will be
carried by the consumers.
Answer: False
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p77
3) With every additional unit of a particular good you consume, your marginal
utility from each additional unit of the good decreases.
Answer: True
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p85
4) Addictive Substances, such as illegal drugs, are price-elastic.
Answer: False
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p77
5) Consumer surplus measures the extra value that consumers receive above what
they pay for a commodity
Answer: True
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p97
6) A perfectly discriminating monopolist achieves an outcome that is Pareto
inefficient.
Answer: False
Source: Economics by Paul A. Samuelson and William Nordhaus 19 th ed, p160
7) Without government intervention, positive externalities leads the market to
produce less than the socially optimal amount of a particular good.
Answer: True
Source: Economics Principles by Gregory Mankiw, p228
8) All kinds of taxes are distortionary and move the allocation of resources away
from the socially optimum.
Answer: False
Source: Economics Principles by Gregory Mankiw, p231

9) Trade can make everyone better off.

Answer: True
Source: Economics Principles by Gregory Mankiw, p26
10)
A producer with an absolute advantage over another producer will gain
nothing from trading.
Answer: False
Source: Economics Principles by Gregory Mankiw, p75