PRINCIPLES OF MICROECONOMICS TEST BANK
Professors, please email if you would like the answer key to the following
questions or if you have any additional suggestions.
Table of Contents
Supply, Demand, and Equilibrium
Elasticity and Its Applications
Taxes and Subsidies
The Price System
Price Ceilings and Price Floors
Trade
Externalities
Costs and Profit Maximization Under Competition
Competition and the Invisible Hand
Monopoly
Price Discrimination
Labor Markets
Public Goods and the Tragedy of the Commons
Asymmetric Information
Consumer Choice
Bonus Topics
1
,Supply, Demand, and Equilibrium
Video name: The Demand Curve
1. When the price of a good increases the quantity demanded ____.
a. decreases
b. increases
c. stays the same
2. When will people search harder for substitutes for oil?
a. when the price of oil is low
b. when the price of oil is high
c. people are not incentivized to search for substitutes for oil
Video name: The Supply Curve
1. Along a supply curve, if the price of oil falls, what will happen to the quantity of oil supplied?
a. it will decrease
b. it will increase
c. it will not change
2. If the price of cars falls, are carmakers likely to make ___________.
a. more cars
b. fewer cars
c. the same amount of cars
2
,Video name: The Equilibrium Price
1. If the price in a market is above the equilibrium price, this creates ___________.
a. a shortage
b. a surplus
c. neither a shortage nor a surplus
2. When the price is above the equilibrium price, greed (in other words, self-interest) tends to
_________.
a. push the price down
b. push the price up
c. have no effect on price
3. Jon is on eBay, bidding for a first edition of the influential Frank Miller graphic novel Batman:
The Dark Knight Returns. In this market, who is Jon competing with?
a. The seller of the graphic novel
b. The other bidders
c. eBay’s stakeholders
4. Now, Jon is in Japan, trying to get a job as a full-time translator; he wants to translate English
TV shows into Japanese and vice versa. He notices that the wage for translators is very low.
Who is the “competition” that is pushing the wage down?
a. Businesses who hire translators
b. Other translators
3
, c. Prospective clients
Video name: A Deeper Look at the Demand Curve
1. Your roommate just bought an iPod for $200. She would have been willing to pay $500 for a
machine that could store and replay that much music. How much consumer surplus does your
roommate enjoy from the iPod?
a. $200
b. $300
c. $500
The economist Bryan Caplan recently found a pair of $10 arch supports that saved him from the
pain of major foot surgery. As he stated on his blog (econlog.econlib.org), he would have been
willing to pay $100,000 to fix his foot problem, but instead he only paid a few dollars.
2. How much consumer surplus did Bryan enjoy from this purchase?
a. $10
b. $10,000
c. $99,990
3. If the sales tax was 5 percent on this product, how much revenue did the government raise
when Bryan bought his arch supports?
a. 50 cents
b. $5
c. $50
4
Professors, please email if you would like the answer key to the following
questions or if you have any additional suggestions.
Table of Contents
Supply, Demand, and Equilibrium
Elasticity and Its Applications
Taxes and Subsidies
The Price System
Price Ceilings and Price Floors
Trade
Externalities
Costs and Profit Maximization Under Competition
Competition and the Invisible Hand
Monopoly
Price Discrimination
Labor Markets
Public Goods and the Tragedy of the Commons
Asymmetric Information
Consumer Choice
Bonus Topics
1
,Supply, Demand, and Equilibrium
Video name: The Demand Curve
1. When the price of a good increases the quantity demanded ____.
a. decreases
b. increases
c. stays the same
2. When will people search harder for substitutes for oil?
a. when the price of oil is low
b. when the price of oil is high
c. people are not incentivized to search for substitutes for oil
Video name: The Supply Curve
1. Along a supply curve, if the price of oil falls, what will happen to the quantity of oil supplied?
a. it will decrease
b. it will increase
c. it will not change
2. If the price of cars falls, are carmakers likely to make ___________.
a. more cars
b. fewer cars
c. the same amount of cars
2
,Video name: The Equilibrium Price
1. If the price in a market is above the equilibrium price, this creates ___________.
a. a shortage
b. a surplus
c. neither a shortage nor a surplus
2. When the price is above the equilibrium price, greed (in other words, self-interest) tends to
_________.
a. push the price down
b. push the price up
c. have no effect on price
3. Jon is on eBay, bidding for a first edition of the influential Frank Miller graphic novel Batman:
The Dark Knight Returns. In this market, who is Jon competing with?
a. The seller of the graphic novel
b. The other bidders
c. eBay’s stakeholders
4. Now, Jon is in Japan, trying to get a job as a full-time translator; he wants to translate English
TV shows into Japanese and vice versa. He notices that the wage for translators is very low.
Who is the “competition” that is pushing the wage down?
a. Businesses who hire translators
b. Other translators
3
, c. Prospective clients
Video name: A Deeper Look at the Demand Curve
1. Your roommate just bought an iPod for $200. She would have been willing to pay $500 for a
machine that could store and replay that much music. How much consumer surplus does your
roommate enjoy from the iPod?
a. $200
b. $300
c. $500
The economist Bryan Caplan recently found a pair of $10 arch supports that saved him from the
pain of major foot surgery. As he stated on his blog (econlog.econlib.org), he would have been
willing to pay $100,000 to fix his foot problem, but instead he only paid a few dollars.
2. How much consumer surplus did Bryan enjoy from this purchase?
a. $10
b. $10,000
c. $99,990
3. If the sales tax was 5 percent on this product, how much revenue did the government raise
when Bryan bought his arch supports?
a. 50 cents
b. $5
c. $50
4
