COLEGIO DE DAGUPAN

PRELIM EXAMINATION
MICROECONOMIC THEORY

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Name: _____________________________
Course and Year: _____________________

SET B
I. (PRINCIPLES) Matching Type. Match Column A to Column B, and Column B to C.
____1. Principle 1

A. Incentive

a. Anything that alters persons decision/behavior

____2. Principle 2

B. Inflation

b. An economy that is decentralized

____3. Principle 3

C. Guns. Vs. Butter

c. Small incremental adjustments

____4. Principle 4

D. Philips curve d. Ineffecient allocation of resuorces

____5. Principle 5

E. Productivity e. It shows the short-run tradeoff bet. Inflation and unemployment.

____6. Principle 6

F. Market economy

f. Increase in the overall level prices

____7. Principle 7

G. Market failure

g. Trade-off between military services and food

H. Specialization

h. Development of skills in what one does best

I. Marginal changes

i. Whatever given up to get something

J. Opportunity cost

j. Amount of goods & services produced per hour

C. Who is to receive the output of the system?

II.

Choose the letter of the correct

answer.

D. What goods and services should be

produced by government?

1. In a market economy, entrepreneurs are most

concerned with:
A. maximizing utility or satisfaction from limited
incomes.
B. increasing the wages and salaries of

4. Which best describes the "invisible hand"

concept?
A. Sufficiently detailed central direction of an
economy will maximize the public's best

workers.

interests.

C. maximizing profits or minimizing losses.

D. the selfish pursuit of money.

B. The market system works best when

resources are highly substitutable.
C. The problem of scarcity can best be

2. Economic efficiency would be a primary concern

in response to which of the basic economic

overcome in a system of mixed capitalism.

D. The desires of producers and resource

questions about a competitive market economy?

suppliers to further their own self-interest will

A. What goods and services will be produced?

automatically promote the social interest.

B. How will the goods and services be

produced?
C. How much of these goods and services
should be produced?
D. Who will get the goods and services?

3. Which is not one of the four basic economic

5. The phenomenon of scarcity stems from the fact

that
A. Most economies production methods are
not very good.
B. In most economies, wealthy people
consume disproportionate quantities of
goods and services.

questions?

C. Governments restrict production of too many

goods and services.

A. How will goods and services be produced?

D. Resources are limited

B. What goods and services and what

E. People are greedy

quantities should be produced?

F.

6. The opportunity cost of going to college is

A. The total spent on food, clothing, books,
transportation, tuition, lodging, and other
expenses
B. The value of the best opportunity a student
gives up to attend college.
C. Zero for students who are fortunate enough
to have all of their college expenses paid by
someone else.
D. Zero, since a college education will allow a
student to earn a larger income after
graduation.
E. None of the above
7. The opportunity cost of an item is
A. What you give up to get that item.
B. The dollar value of the item.
C. Usually less than the dollar value of the
item.
D. The number of hours needed to earn money
to buy the item
E. None of the above
8. In a market economy, economic activity is
guided by
A. The government.
B. Corporations
C. Central planners
D. The president
E. Self-interest and prices.

C. unlimited resources to satisfy unlimited

economic wants.
D. unlimited resources to satisfy limited
economic wants.
12. What is the economic meaning of the expression
that "there is no such thing as a free lunch"?
A. It refers to "free-riders," who do not pay for
the cost of a product, but who receive the
benefit from it.
B. It means that economic freedom is limited by
the amount of income available to the
consumer.
C. It means that there is an opportunity cost
when resources are used to provide "free"
products.
D. It indicates that products only have value
because people are willing to pay for them.
13. Which is an illustration of a microeconomic
question?
A. What is the current national rate of
unemployment?

9. Which of the following is not among the reasons

why we need the government?
A. The government provides social welfare
services for the poor and the need
B. The government provides public goods and
services
C. The government regulates markets when
there is a market failure
D. The government provides free food for
everyone
E. The government imposes laws and controls
to protect competitiveness of the industry
10. The primary focus of the study of economics is
with:
A. expanding the production of goods and
services.
B. equalizing the distribution of consumer
income and wealth.
C. making the most efficient use of scarce
productive resources.
D. reallocating resources from consumption to
production in the economy.

B. Is the economy experiencing a decline in the

rate of inflation?
C. Will a new type of television set increase the
number of buyers?
D. Is the production of goods and services in
the economy greater this year than last
year?
14. Which question is an illustration of a
microeconomic question?
A. Is the quantity of wine purchased in one
year dependent upon the price of wine?
B. Does government spending influence the
total level of employment in the economy?
C. Is the purchasing power of the dollar higher
or lower today than it was in 2000?
D. Is capitalism superior to socialism?
15. The macroeconomist would most likely study:
A. the effects of changing beer prices on the
market for pretzels.
B. the effects of an increased income tax on a

11. The basic economic problem is essentially one

of deciding how to make the best use of:
A. limited resources to satisfy limited economic
wants.
B. limited resources to satisfy unlimited
economic wants.

typical household's purchase of goods.

C. the effects of a reduction in income tax rates
on the nation's total output.
D. how consumers in Dagupan City respond to
a reduction in gasoline prices.

prepared by:

vadelacruz

It is not the creation of wealth that is wrong, but the love of money
for its own sake.-Margaret Thatcher