PRINCIPLES OF MICROECONOMICS TEST 1 QUESTIONS
AND ANSWERS
/. **1. Approx. what percentage of the world's economies experiences scarcity?
a.)100%
b.) 75%
c.) 25%
d.) 50% - Answer-✅A
/.2. Henry decides to spend two hours playing golf rather than working at his job which
pays $8 per hour. Henry's tradeoff is
a.) the $16 he could have had earned working for 2 hours
b.) nothing, because he enjoys playing golf more than working
c.) the increase in skill he obtains from playing golf for those two hours
d.) nothing, because he spent $16 for green fees to play golf - Answer-✅A
/.3. An example of market power is
a.) a shoe store in Kentucky
b.) the last gas station in New Mexico for 100 miles
c.) a wheat farmer in Kansas
d.) a fast food restaurant in a college town - Answer-✅B
/.**4. The "invisible hand" directs economic activity through
a.) prices
b.) govt. regulations
c.) advertising
d.) central planning - Answer-✅A
/.5. The forces that make market economies work are
a.) demand and supply
b.) the Constitution and Bill of Rights
c.) the Senate and House of Representatives
d.) price and quantity - Answer-✅A
/.6. According to the law of demand price and quantity
a.) supplied are positivley related
b.) supplied are inversely related
c.) demanded are positively related
d.) demanded are inversely related - Answer-✅D
, /.7, Picture - Answer-✅
/.8. The sum of all individual demand curves for a product is called
a.) total demand
b.) market demand
c.) summation demand
d.) consumption demand - Answer-✅B
/.9. A very hot summer in Atlanta will cause the demand for lemonade to
a.) shift to the right
b.) shift to the left
c.) remain stable but we would move up the curve
d.) remain stable but we would move down the curve - Answer-✅A
/.10. Picture - Answer-✅
/.11. Picture - Answer-✅
/.12.-13. Picture - Answer-✅
/.**14. Suppose that demand decreases AND supply decreases. What would you
expect to occur in the market for the good?
a.) Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous
b.) equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous
c.) Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous
d.) Both equilbrium price & quantity would increase - Answer-✅C
/.15. Picture - Answer-✅
/.16. Demand is said to be elastic if
a.) demand shifts substantially when the price of the good changes
b.) the price of good responds substantially to changes in demand
c.) buyers dont respond much to changes in the price of goods
d.) quantity demanded responds substantially to changes in price of the good - Answer-
✅D
/.17. Demand for a good would tend to be more inelastic if
a.) more the good is considered a luxury good
b.) more narrowly defined the market is
c.) fewer the available substitutes
d.) long the time period considered - Answer-✅C
AND ANSWERS
/. **1. Approx. what percentage of the world's economies experiences scarcity?
a.)100%
b.) 75%
c.) 25%
d.) 50% - Answer-✅A
/.2. Henry decides to spend two hours playing golf rather than working at his job which
pays $8 per hour. Henry's tradeoff is
a.) the $16 he could have had earned working for 2 hours
b.) nothing, because he enjoys playing golf more than working
c.) the increase in skill he obtains from playing golf for those two hours
d.) nothing, because he spent $16 for green fees to play golf - Answer-✅A
/.3. An example of market power is
a.) a shoe store in Kentucky
b.) the last gas station in New Mexico for 100 miles
c.) a wheat farmer in Kansas
d.) a fast food restaurant in a college town - Answer-✅B
/.**4. The "invisible hand" directs economic activity through
a.) prices
b.) govt. regulations
c.) advertising
d.) central planning - Answer-✅A
/.5. The forces that make market economies work are
a.) demand and supply
b.) the Constitution and Bill of Rights
c.) the Senate and House of Representatives
d.) price and quantity - Answer-✅A
/.6. According to the law of demand price and quantity
a.) supplied are positivley related
b.) supplied are inversely related
c.) demanded are positively related
d.) demanded are inversely related - Answer-✅D
, /.7, Picture - Answer-✅
/.8. The sum of all individual demand curves for a product is called
a.) total demand
b.) market demand
c.) summation demand
d.) consumption demand - Answer-✅B
/.9. A very hot summer in Atlanta will cause the demand for lemonade to
a.) shift to the right
b.) shift to the left
c.) remain stable but we would move up the curve
d.) remain stable but we would move down the curve - Answer-✅A
/.10. Picture - Answer-✅
/.11. Picture - Answer-✅
/.12.-13. Picture - Answer-✅
/.**14. Suppose that demand decreases AND supply decreases. What would you
expect to occur in the market for the good?
a.) Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous
b.) equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous
c.) Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous
d.) Both equilbrium price & quantity would increase - Answer-✅C
/.15. Picture - Answer-✅
/.16. Demand is said to be elastic if
a.) demand shifts substantially when the price of the good changes
b.) the price of good responds substantially to changes in demand
c.) buyers dont respond much to changes in the price of goods
d.) quantity demanded responds substantially to changes in price of the good - Answer-
✅D
/.17. Demand for a good would tend to be more inelastic if
a.) more the good is considered a luxury good
b.) more narrowly defined the market is
c.) fewer the available substitutes
d.) long the time period considered - Answer-✅C
