Microeconomics

A1. Which of the following best describes the production function?

TP = f (Land, Labour, Capital, Enterprise).

A2. All of the following are determinants of supply except;

Income.

A3. If a company is producing 2 units of output and the fixed costs are €25 and the variable costs are €100, what is the average total cost of producing two units?

€62.50.

A4. The relationship between price and quantity demanded is said to be;

Negative or inverse.

A5. A change in the following will not result in a change in demand?

Change in the price of the good itself.

A6. Which of the following is not a determinant of Price Elasticity of Demand?

The level of supply in the market.

A7. If the percentage change in quantity demanded is proportionately greater than the percentage change in price, the product is said to be;

Elastic.

A8. The change in total output obtained from using an additional unit of a variable input, holding other inputs constant is;

Marginal Product.

A9. If an increase in output is proportionately smaller than the increase in inputs, this is best described as;

Decreasing returns to scale.

A10. A supply curve is directly affected by;

All of the above.

A11. If a price increase of Product A increases the quantity demanded of Product B, then Product B is a/an;

Substitute product.

A12. When the minimum wage is set above the equilibrium market wage;

There will be an excess supply of labour at the minimum wage.

A13. The quantity demanded of a good rises from 1000 to 1500 units, when the price falls from €1.50 to €1.00. The Price Elasticity of Demand for this product is approximately;

–1.5.

A14. Which of the following are characteristics of a Perfectly Competitive Industry?

Homogeneous products.

A15. A Price Ceiling is the;

Maximum price usually set by government that sellers must charge for a product.

A16. Which of the following statements is true for a normal good?

An increase in income will result in an increase in demand, ceteris paribus.

A17. In a centrally planned economy;

All resources are allocated by the government based on their decisions.

A18. A form of market structure characterized by few firms, each large enough to influence market price is;

Oligopoly.

A19. Which of the following statements about a firm, which is a price taker is false?

The demand for firm’s product will increase if price is increased above the market price.

A20. The concept of diminishing marginal utility is the idea that;

The satisfaction gained from each additional unit of a good will decrease.

A21. An increase in the numbers of skilled workers immigrating into Ireland will cause:

The PPF to shift outwards away from the origin.

A22. Which of the following would decrease the amount of an inferior good that consumers would like to purchase?

An increase in consumers’ incomes.

A23. At 8 units of output, average fixed cost is €10.00 and average variable cost is €80.00, then total cost at this output level is:

€720.

A24. The short run is a time period in which:

At least one factor of production is fixed.

A25. Which of the following is a characteristic of a Monopoly?

Barriers to entry and exit.

A26. The quantity demanded of Good A increases from 1000 to 1250 units when the price falls from €1.50 to €1.00 per unit. The Price Elasticity of Demand for this product is approximately:

–1.32.

A27. Which of the following equations represents a demand curve?

Q = 40 – 6P.

A28. If the price increase of Good A increases the demand of Good B, then Good A and B are:

Substitute Goods.

A29. Determine the equilibrium price and quantity in the market based on the following information. The demand curve is represented by Qd = 20 - 3P and the supply curve is represented by Qs = 15 + 2P.

Equilibrium price is €1 and equilibrium quantity is 17 units.

A30. Which of the following will cause a shift to the left of the supply curve for crackers?

An increase in the price of wheat.

A31. If an increase in output is proportionately smaller than the increase in inputs, which of the following best describes this?

Decreasing returns to scale.

A32. If the percentage change in the quantity demanded is proportionately more than the percentage change in price, which of the following represents this?

Elastic.

A33. There will be excess demand in the market when:

Both (b) and (c) are correct.

A34. Which of the following market structures could be described as a price maker?

Monopoly.

A35. A consumer spends €200 monthly on Product A when its price is €2 and continues to spend €200 monthly when its price increases to €2.50. Calculate the consumer’s price elasticity of demand.

–1.

A36. Which answer is most likely to represent the YED for Apple iPhones?

+4.6.

A37. Consumers buy 50 units of a product when the price is €1.50. When the price is reduced to €1, consumers buy 90 units. Based on this information, what strategy should the seller follow if they wish to increase revenue?

The good is elastic, and the seller should decrease price to increase revenue.

A38. Which of the following best describes the Production Function?

TP = f(Land, Labour, Capital, Enterprise).

A39. Marginal Revenue is equal to:

Change in total revenue divided by a change in quantity.

A40. A market structure with many firms selling identical products is best described as:

Perfect Competition.

A41. Which of the following would encourage an outward shift of the Production Possibility Frontier (PPF)?

(a) Outward emigration of entrepreneurs.
(b) A decrease in demand as the economy slips into recession.
(c) The level of capital investment falls.
(d) Inward migration of skilled workers.

A42. Price controls are:

(a) Government regulations which limit the ability of the market to determine price.
(b) Legal restrictions on how high or low a market price may go.
(c) Another way of describing equilibrium.
(d) Both (a) and (b) are correct.

A43. If the Marginal utility of a glass of milk that Tom drinks is 15 utils, then which of the following is most likely to be true?

(a) Tom will drink 15 glasses of milk.
(b) The marginal utility of the second glass of milk that Tom drinks will be less than 15 utils.
(c) The marginal utility of the second glass of milk that Tom drinks will be greater than 15 utils.
(d) None of the above.

A44. A company knows that the demand for its product is elastic. To increase its total revenue, it should:

(a) Decrease its price.
(b) Aggressively increase its price to attract more customers.
(c) Leave the price unchanged, as a price change will not affect its total revenue.
(d) Do none of the above.

A45. Which one of the following statements is true in a perfectly competitive market?

(a) The output of the firms is not homogeneous.
(b) The number of firms in the industry is difficult to increase.
(c) Each firm in the industry is a significant supplier relative to total supply.
(d) The number of firms supplying the industry is large.

A46. The equilibrium market price for gym bags is €25. How will the market be affected if the government introduces a price control which is €5 above the equilibrium price?

(a) The price control will have no effect on the market.
(b) The new price for gym bags will be €30 and there will be excess demand at this price.
(c) The new price for gym bags will be €30 and there will be excess supply at this price.
(d) The market mechanism will ensure that the market returns to equilibrium.

A47. If the percentage change in the quantity demanded of a good divided by a percentage change in income is negative, which of the following must be true?

(a) This product is a normal good.
(b) This product is a necessity.
(c) This product is price elastic.
(d) This product is an inferior good.

A48. A supply curve:

(a) Can have either an upward or downward slope depending on whether individuals or firms are considered.
(b) Is always upwards sloping because as price increases, more is supplied.
(c) Slopes downwards because firms can sell more products when prices fall.
(d) Slopes downwards because as greater quantities are produced, average cost of production will fall.

A49. A firm’s total costs for one unit of output is €150 and €205 for two units of output. Its fixed costs are €100. The Marginal Cost (MC) of the second unit of output is:

(a) €50.
(b) €55.
(c) €100.
(d) €105.

A50. If the value of Price Elasticity of Demand (PED) for a good equals -0.9, then the demand for that good is:

(a) Inelastic.
(b) Infinitely price elastic.
(c) Elastic.
(d) The above information is insufficient to make a judgement.

A51. The economic problem is the study of:

(a) The appropriate distribution of wealth.
(b) How an economy decides how best to allocate its scarce resources.
(c) Supply and demand decisions.
(d) The market mechanism.

A52. The price of phone chargers increased from €15 to €20. What effect did this have on the demand curve for phone chargers?

(a) A movement along the demand curve resulting in a higher price and a higher quantity demanded.
(b) A shift in the demand curve to the left.
(c) A movement along the demand curve resulting in a higher price and a lower quantity demanded.
(d) A shift in the demand curve to the right.

A53. In monopolistic competition, the products sold can be described as:

(a) Heterogeneous.
(b) Complementary.
(c) Standardised.
(d) None of the above.

A54. If the Income Elasticity of Demand (YED) for a good is positive, then the good is:

(a) A normal good.
(b) An income-neutral good.
(c) An inferior good.
(d) None of the above.

A55. Which of the following factors is likely to cause a good’s supply curve to shift to the right?

(a) An increase in the price of the inputs being used to produce the good.
(b) A fall in the selling price of the good.
(c) An improvement in the technology used to produce the good.
(d) All of the above.

A56. The Law of Demand states that an increase in the price of a good:

(a) Increases the supply of that good.
(b) Decreases the quantity demanded for that good.
(c) Increases the quantity supplied of that good along its supply curve.
(d) None of the above.

A57. The price of protein bars fell by 2% and quantity demanded increases by 3%. This means that the Price Elasticity of Demand (PED) for protein bars is:

(a) Elastic.
(b) Inelastic.
(c) Perfectly elastic.
(d) Perfectly inelastic.

A58. A decrease in supply accompanied by an increase in demand, other things being equal, will cause:

(a) Price to increase, with effect on quantity uncertain.
(b) Both price and quantity to decrease.
(c) Both price and quantity to increase.
(d) Quantity to decrease and the effect on price uncertain.

A59. A demand curve illustrates:

(a) The interaction of equilibrium price and equilibrium quantity.
(b) How consumer behaviour changes in response to advertising.
(c) The relationship between the price of a good and the amount of that good that consumers are willing and able to buy.
(d) The amount of a good that is supplied at every price.

A60. A perfectly competitive firm is a price taker. This means that:

(a) The firm cannot individually influence the market price.
(b) The firm faces a perfectly elastic demand.
(c) The firm can only charge the same price as all other firms.
(d) All of the above.