Micro Economics Theory Applications II Set 1

Master of Arts in Economics (MA Economics)

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This set of MicroEconomics, Theory and Applications 2 Multiple Choice Questions & Answers (MCQs) focuses on Micro Economics Theory Applications II Set 1

Q1 | A pure private good is
  • nonrival in consumption and subject to exclusion.
  • rival in consumption and subject to exclusion.
  • rival in consumption and not subject to exclusion.
  • all of the above
Answer: rival in consumption and subject to exclusion.
Q2 | The M RTS L,K between any two inputs be equal in the production of all commodities.3. The MRPTx,y be equal to the MRSx,y for any two goods.
  • condition 1&2 are satisfied
  • condition 1 &3 are satisfied
  • condition 2 &3 are satisfied
  • condition 1, 2 &3 are satisfied
Answer: condition 1, 2 &3 are satisfied
Q3 | Points outside the production possibility frontier are
  • producable.
  • endowment points.
  • consumer equilibrium points.
  • unattainable.
Answer: unattainable.
Q4 | Positive economics
  • does not depend on market interactions.
  • only looks at the best parts of the economy.
  • examines how the economy actually works (as opposed to how it should work).
  • is very subjective.
Answer: examines how the economy actually works (as opposed to how it should work).
Q5 | The Coase theorem has problems because
  • generally, bargaining costs are not zero.
  • individuals are not concerned with others.
  • markets always exist.
  • all of the above.
Answer: generally, bargaining costs are not zero.
Q6 | The marginal rate of substitution is
  • the slope of the pareto curve.
  • the slope of the contract curve.
  • the slope of the utility possibilities curve.
  • the slope of the indifference curve.
Answer: the slope of the indifference curve.
Q7 | The slope of the production possibilities curve is the
  • marginal rate of substitution.
  • contract curve.
  • marginal rate of transformation.
  • offer curve.
Answer: marginal rate of transformation.
Q8 | The First Fundamental Theorem of Welfare Economics requires
  • producers and consumers to be price takers.
  • that there be an efficient market for every commodity.
  • that the economy operate at some point on the utility possibility curve.
  • all of the above.
Answer: all of the above.
Q9 | Market failure can occur when
  • monopoly power exists in the market.
  • markets are missing.
  • consumers can influence prices.
  • all of the above.
Answer: all of the above.
Q10 | A public good is
  • a good that the public must pay for.
  • nonrival in consumption.
  • more costly than a private good.
  • paid for by the government.
Answer: nonrival in consumption.
Q11 | Movement from an inefficient allocation to an efficient allocation in the Edgeworth Box will
  • increase the utility of all individuals.
  • increase the utility of at least one individual, but may decrease the level of utility of another person.
  • increase the utility of one individual, but cannot decrease the utility of any individual.
  • decrease the utility of all individuals.
Answer: increase the utility of at least one individual, but may decrease the level of utility of another person.
Q12 | Points on the utility possibility frontier are
  • inefficient.
  • points of incomplete preferences.
  • not producible.
  • pareto efficient.
Answer: pareto efficient.
Q13 | Market mechanisms are unlikely to provide
  • prices.
  • nonrival goods efficiently.
  • supply and demand.
  • none of the above.
Answer: nonrival goods efficiently.
Q14 | Public goods can be
  • provided privately.
  • provided publicly.
  • subject to free rider problems.
  • all of the above.
Answer: all of the above.
Q15 | Externalities can be positive because
  • marginal damages do not last over time.
  • utility can be impacted positively as well as negatively.
  • there is no concept for marginal benefit.
  • positive externalities are subsidies.
Answer: utility can be impacted positively as well as negatively.
Q16 | A Pigouvian subsidy
  • cannot exist with externalities.
  • is the same thing as a pigouvian tax.
  • is measured in terms of pigouvian dollars.
  • moves production to the socially optimal level of output
Answer: moves production to the socially optimal level of output
Q17 | Which method can help in obtaining a welfare improvement if externalites exist?
  • pigouvian taxes
  • regulation
  • assigning property rights and permitting bargaining
  • all of the above
Answer: all of the above
Q18 | Marginal damages
  • must always be considered in social marginal costs.
  • must not be considered in social marginal costs.
  • must sometimes be considered in social marginal costs.
  • have nothing to do with social marginal costs.
Answer: must always be considered in social marginal costs.
Q19 | In a public goods context, it is difficult to measure impact on real income because
  • public goods are generally free to the public.
  • they make up a small percentage of total gdp.
  • it is hard to measure how people value the public good.
  • inflation decreases the value of the good.
Answer: it is hard to measure how people value the public good.
Q20 | According to the required reading from the 2003 Washington Post, a recent study by the U.S.Office of Management and Budget found that
  • the benefits of tough new clean-air regulations in the past decade were five to seven times greater than their costs
  • the most efficient way to control pollution is through pigouvian taxes
  • the 1990 clean air act has not affected the problem of acid rain
  • environmentalists are generally supportive of cost-benefit calculations in assessing
Answer: the benefits of tough new clean-air regulations in the past decade were five to seven times greater than their costs
Q21 | impossibility theorem was propounded by
  • hicks
  • arrow
  • kaldor
  • scitovsky
Answer: arrow
Q22 | According to a required reading from the 2003 Economist, the biggest problem facingIndonesia’s economy is
  • terrorism
  • an organic approach to public policy questions
  • inadequate rule of law
  • geographical (e) hobbits
Answer: inadequate rule of law
Q23 | According to a required reading by P.J. O’Rourke, which of the following statements isfalse?
  • in most of the world, food production has well outpaced the growth of population
  • democracy may be able to help prevent famines from occurring
  • in countries experiencing famine, security and order must be established before the famine can be contained
  • famines are mainly caused by natural disasters or pestilence
Answer: famines are mainly caused by natural disasters or pestilence
Q24 | According to a required reading by P.J. O’Rourke, which of the following statements isfalse?
  • the pesticide ddt may have done more good than harm in some countries before it was banned
  • despite their other problems, eastern european countries did a good job protecting the environment during the communist era
  • the costs of environmental regulation exceed their benefits
  • recycling is an economically inefficient way of reducing the human impact on the environment
Answer: despite their other problems, eastern european countries did a good job protecting the environment during the communist era
Q25 | The assigned Washington Post Op-Ed by Daniel Chirot can be interpreted as asserting that
  • inadequate education and lack of knowledge of history in the population is why saddam hussein’s government succeeded in ruling iraq for so long
  • the right way to think about saddam hussein’s government is basically as if he were the head of a mafia organization
  • saddam hussein’s government could be described as adhering to an organic philosophy
  • the biggest problem in iraq under saddam hussein was a lack of rule of law
Answer: saddam hussein’s government could be described as adhering to an organic philosophy
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