TECEP Test ECO-112-TE
MICROECONOMICS
Multiple-Choice
1. A rational decision maker does which of the following?
a. Takes an action only if the combined benefits of that action and previous actions
exceed the combined costs of that action and previous actions
b. Takes an action only if the marginal benefit of that action exceeds the marginal cost
of that action
c. Ignores marginal changes and focuses instead on "the big picture"
d. Ignores the likely effects of government policies when he or she makes choices
2. Economists generally believe that making assumptions is
a. a good idea, since doing so helps to simplify the complex world and make it easier
to understand
b. a good idea, since economic analysis without assumptions leads to complicated
results that the general public finds hard to understand
c. a bad idea, since doing so invariably leads to data-collection problems
d. a bad idea, since doing so leads to the omission of important ideas and variables
from economic models
3. Comparative advantage is based on
a. dollar price
b. labor cost
c. capitol cost
d. opportunity cost
4. In a market economy
a. demand determines supply and supply, in turn, determines prices
b. supply determines demand and demand, in turn, determines prices
c. supply and demand determine prices and prices, in turn, allocate the economy’s
scarce resources
d. the allocation of scarce resources determines prices and prices, in turn, determine
supply and demand
, 5. If demand is price inelastic, then
a. buyers do not respond much to a change in price
b. buyers respond substantially to a change in price, but the response is very slow
c. buyers do not respond much to advertising, fads, or general changes in tastes
d. the demand curve is very flat
6. According to the graph on the right, the equilibrium price in the market before the tax is
imposed is
a. $3.50
b. $5.00
c. $6.00
d. $8.00
7. Market failure is the inability of
a. some unregulated markets to allocate
resources efficiently
b. a market to establish an equilibrium price
c. buyers to place a value on the good
or service
d. buyers to interact harmoniously with sellers
in the market
8. Claudia would be willing to pay as much as $100 per week to have her house cleaned. John's
opportunity cost of cleaning Claudia’s house is $70 per week. Assume Claudia is required to
pay a tax of $40 when she hires someone to clean her house for a week. Which of the following
is correct?
a. Claudia will now clean her own house
b. John will continue to clean Claudia’s house, but his producer surplus will decline.
c. Claudia will continue to hire John to clean her house, but her consumer surplus
will decline.
d. Total economic welfare (consumer surplus plus producer surplus plus tax revenue)
will increase.
9. Within a country, the domestic price of a product will equal the world price if
a. trade restrictions are imposed on the product
b. the country chooses to import, but not export, the product
c. the country chooses to export, but not import, the product
d. the country allows free trade
MICROECONOMICS
Multiple-Choice
1. A rational decision maker does which of the following?
a. Takes an action only if the combined benefits of that action and previous actions
exceed the combined costs of that action and previous actions
b. Takes an action only if the marginal benefit of that action exceeds the marginal cost
of that action
c. Ignores marginal changes and focuses instead on "the big picture"
d. Ignores the likely effects of government policies when he or she makes choices
2. Economists generally believe that making assumptions is
a. a good idea, since doing so helps to simplify the complex world and make it easier
to understand
b. a good idea, since economic analysis without assumptions leads to complicated
results that the general public finds hard to understand
c. a bad idea, since doing so invariably leads to data-collection problems
d. a bad idea, since doing so leads to the omission of important ideas and variables
from economic models
3. Comparative advantage is based on
a. dollar price
b. labor cost
c. capitol cost
d. opportunity cost
4. In a market economy
a. demand determines supply and supply, in turn, determines prices
b. supply determines demand and demand, in turn, determines prices
c. supply and demand determine prices and prices, in turn, allocate the economy’s
scarce resources
d. the allocation of scarce resources determines prices and prices, in turn, determine
supply and demand
, 5. If demand is price inelastic, then
a. buyers do not respond much to a change in price
b. buyers respond substantially to a change in price, but the response is very slow
c. buyers do not respond much to advertising, fads, or general changes in tastes
d. the demand curve is very flat
6. According to the graph on the right, the equilibrium price in the market before the tax is
imposed is
a. $3.50
b. $5.00
c. $6.00
d. $8.00
7. Market failure is the inability of
a. some unregulated markets to allocate
resources efficiently
b. a market to establish an equilibrium price
c. buyers to place a value on the good
or service
d. buyers to interact harmoniously with sellers
in the market
8. Claudia would be willing to pay as much as $100 per week to have her house cleaned. John's
opportunity cost of cleaning Claudia’s house is $70 per week. Assume Claudia is required to
pay a tax of $40 when she hires someone to clean her house for a week. Which of the following
is correct?
a. Claudia will now clean her own house
b. John will continue to clean Claudia’s house, but his producer surplus will decline.
c. Claudia will continue to hire John to clean her house, but her consumer surplus
will decline.
d. Total economic welfare (consumer surplus plus producer surplus plus tax revenue)
will increase.
9. Within a country, the domestic price of a product will equal the world price if
a. trade restrictions are imposed on the product
b. the country chooses to import, but not export, the product
c. the country chooses to export, but not import, the product
d. the country allows free trade
