Basic Microeconomics Midterm Exam

A company operating its plant and equipment at full capacity or at its full Production Possibilities Frontier or Curve is

• wasting its productive resources

• efficiently using its available resources and technology

• employing all its employees in production

• operating outside the PPF/PPC

If a shortage exists, it indicates that the existing price is

• the equilibrium price

• below the equilibrium price

• above the equilibrium price

• None of the above

When market is in equilibrium:

• Quantity supplied equals quantity demanded at the current price.

• Market price may be pushed up, but it would not decline.

• Market price may tend to decline, but it would not rise.

• The supply and demand curves are the same.

If the cost of producing a good decreases the

• supply curve will shift to the right

• supply curve will shift to the left

• demand curve will shift to the right

• any of these may happen

A shift in the producer’s supply curve means

• a change in the entire supply curve

• a change in the quantity supplied

• both a and b

• neither a nor b

Good X is a ________ when increase in income leads to an increase in the consumption of X.

• inferior good

• normal good

• substitute good

• complement good

This restricts consumer behavior by forcing the consumer to select a bundle of goods that is affordable.

• Budget

• Budget line

• Budget constraints

• None of the above

Defines the combination of goods X and Y that exactly exhaust the consumer income.

• Budget

• Budget line

• Budget constraints

• None of the above

The price of chicken rises slightly, and the quantity of chicken purchased increases, which of the following is the best Explanation for this situation?

• The price of pork rose

• Income rose and chicken are normal goods

• Consumer seem to be seeking more variety in the meat they ear

• All of the above

The Law of Diminishing Returns is due to

• Resource limitations

• Increasing resources

• Changing resource mix

• Changing resources efficiency