1. Microeconomics
Nermeen Abdullah
Assistant Lecturer of Economics

2. 1)MCQ
1) In every economic system, choices must be made because resources
are ________ and our wants are________.
A) Unlimited; limited
B) Limited; unlimited
C) Unlimited; unlimited
D) Limited; limited
2)Inputs, or factors of production, include
a. labor.
b. machinery.
c. natural resources.
d. all of the above.

3. 3) In broad terms the difference between microeconomics and
macroeconomics is that:
A) They use different sets of tools and ideas.
B) Microeconomics studies decisions of individual people and firms and
macroeconomics studies the entire national economy.
C) Macroeconomics studies the effects of government regulation and taxes on the price
of individual goods and services whereas microeconomics does not.
D) Microeconomics studies the effects of government taxes on the national
unemployment rate.
4) In part, microeconomics is concerned with
A) How a business firm decides upon the amount it produces and the price it sets.
B) Changes in the economy's total output of goods and services over long periods of
time.
C) Factors that explain changes in the unemployment rate over time.
D) The Federal Reserves' policy decisions.

4. 5) Which of the following issues is related to microeconomics?
a) the impact of oil prices on car production
b) the impact of money on inflation
c) the impact of technology on economic growth
d) the impact of the deficit on saving
6) The production possibilities curve illustrates the basic principle that
a. an economy's capacity to produce increases in proportion to its population.
b. if all resources of an economy are in use, more of one good can be produced
only if less of another is produced.
c. an economy will automatically seek that output at which all of its resources
are employed.
d. no opportunity cost exists in production.

5. 7) For a given production possibilities frontier, which points are
attainable?
a. points inside the frontier
b. points outside the frontier
c. points on or outside the frontier
d. points on the frontier only
e. points on or inside the frontier
8) A production possibilities curve always slopes downward to the right
because resources
a. are not scarce.
b. have no opportunity cost.
c. are freely available.
d. are limited.
e. are not related to outputs.

6. 9) How are the slope of a production possibilities frontier and the
opportunity cost of the goods related?
a. The slope is a graphical representation of the cost of expanding production of both
goods.
b. The slope is a graphical measure of the growth rate of the economy.
c. The slope is a graphical representation of the cost of decreasing unemployment.
d. The slope is a graphical representation of the rate of trade-off between the goods.
e. The slope is a graphical representation of the cost of economic growth in the
economy.
10) Which of the following is likely to affect the position and shape of
society's production possibilities frontier?
a. volume of physical resources
b. level of labor skills
c. level of technology
d. amount of factories on hand
e. All of the above are correct.

7. 11) The notion of opportunity cost can be represented graphically by
the
a. area inside the production possibilities frontier.
b. slope of the production possibilities frontier.
c. vertical distance from the horizontal axis to the production possibilities
frontier.
d. horizontal distance from the vertical axis to the production possibilities
frontier.
e. sum of the horizontal and vertical distances to the production possibilities
frontier.

8. Show graphically
1. a PPF for an economy, with the axes labeled ‘consumer goods’ and
producer goods’. Indicate the region that is attainable and the
region that is not. Explain the shape of the curve-what assumptions
did you make in drawing it?
2. A PPF assuming increasing opportunity cost.
• Plot a point (m) to show inefficient use of resources.
• Plot a point (n) to show scarcity.
• What do the points on the PPF represent? (Mid-term 2005).
3. The effect of economic growth on the PPF. (2013)

9. Answers
1) Concave to the origin because of increasing opportunity cost
Assumtions are:
• Resources are fully and efficiently used
• Technology is constant
• Using given resources only 2 goods can be produced
• Fixed/limited Resources
• Given time period
2) Plot a point inside the curve
Plot a point outside the curve
Effeciency
3) Shift the curve to the right