Microeconomics Exam

Stu.No. 202139100011 Name: YASSINE SAMMA

Multiple Choice: Choose the best answer to each question.

Each question 1 point
1. Economies of scale occur when:

C. Long-run average total costs fall as output increases

2. The figure below depicts the demand, marginal revenue and marginal costs
curves of a profit maximizing monopolist, which of the following areas represents
the deadweight loss due to monopoly pricing?

C. Triangle bde

3. Diminishing marginal product causes the average variable cost curve to

a.Rise

4. An increase in market supply from left supply curve to the right supply curve is
most likely the result of:

d. All of the above

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5. A production possibility curve might be shifted outward by each of the following
EXCEPT:

d. Increase in educational levels of the general

population.

6. The Invisible Hand is mean:

b. A concept used by Adam Smith to describe the virtues

of free markets.

7. Economic profits for perfectly competitive firms:

c. Will attract new firms into the industry in the long

run.

8. If the quantity demanded of bananas increases by 10% when its price decreases
by 25%, then the price elasticity of banana demand (Ed) is:

C. 0.4

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9. The demand for a good will be more elastic the ( )

c. The longer the time period being considered.

10. An oligopoly market is ( )

A. Has a small number of rival firms, and each is large

relative to the market.

11. The imposition of an import tariff by a small nation is ( )

A. Increasing the relative price of the import commodity

for domestic consumers.

12. Lump-sum taxes is ( )

A. Have a zero marginal tax rate.

13. If the government imposes a tax on the production of cars, which of the
following will occur in the market for cars?

C. The supply curve will shift to the left.

14. If the production of a good results in a positive externality, the government

might be able to improve economic efficiency in this market by ( )

C. Promoting the export of the surplus output

15. An outward shift in the production possibilities curve of an economy can be

cause by an increase in ( )

B. The labor force

16. Which of the following are characteristics of a perfectly competitive industry?

B. ① and ② only

17. Which of the following is true when the production of a good results in negative
externalities?
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B. The private market will produce too little of the good

18. Producing a quantity larger than the equilibrium of supply and demand is
inefficient because the marginal buyer’s willingness to pay is( )

C. Positive but less than the marginal seller's cost

19. Route 66 is a toll road that is congested only during rush hour. During other
times of day, the use of the highway is not( ), so the efficient toll is ( ).

D. Rival in consumption; zero

20. A storm destroys several factories, reducing the stock of capital. What effect
does this event have on factor markets?

D. Wages fall and the rental price of capital rises

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 Essay(Each question should be no less than 1600words):
Each essay 40 points
1. Recent years, the U.S and China were debated with trade frictions, some people
supported the open trade with each other, but some people thought that free trade
destroyed some domestic industries and caused some workers lost their jobs. How
do you think about the welfare of international trade? Please describe your views
with the following statements:
(1) The welfare benefits transfers of international trade (10points )
(2) The prices and market of trade goods (10points )
(3) The technological innovation and transfer (10points )
(4) What’s the advantages and disadvantages of international trade? (10points )

International trade can bring welfare benefits to countries by allowing them to

specialize in the production of goods and services in which they have a
comparative advantage, and then trade those goods and services with other
countries. This specialization can lead to increased efficiency and lower production
costs, which can lead to lower prices for consumers and increased profits for
producers. In addition, international trade can also bring access to a wider variety
of goods and services, which can increase overall welfare by giving people more
options and choices.

One of the main ways that international trade can bring welfare benefits is
through the principle of comparative advantage. Comparative advantage refers to
the ability of a country to produce a good or service at a lower opportunity cost
than another country. For example, if country A is better at producing goods X and
Y, but country B is better at producing goods Y and Z, both countries can benefit
from trading with each other. Country A can specialize in the production of goods
X and Y, while country B can specialize in the production of goods Y and Z. This

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specialization can lead to increased efficiency and lower production costs, which
can lead to lower prices for consumers and increased profits for producers.

In addition to the benefits of specialization, international trade can also bring

access to a wider variety of goods and services. This can increase overall welfare
by giving people more options and choices. For example, if a country only
produces a limited range of goods, its citizens may have to pay higher prices for
those goods due to the lack of competition. However, if the country engages in
international trade and imports a wider range of goods, its citizens may have
access to lower prices due to the increased competition.

International trade can affect the prices of goods and services in various ways. For
example, if a country imports a good that is cheaper to produce abroad than it is
domestically, the price of that good may be lower in the importing country due to
the lower production costs. This can benefit consumers by giving them access to
lower prices, but it can also hurt domestic producers of the same good if they are
unable to compete with the lower prices of imported goods. On the other hand, if
a country exports a good that is in high demand abroad, the price of that good
may be higher in the exporting country due to the increased demand. This can
benefit domestic producers by giving them access to higher prices, but it can also
hurt consumers by making the good more expensive.

The prices of goods and services can also be affected by changes in exchange rates.
Exchange rates refer to the value of one currency in terms of another currency. If
the value of a country's currency increases relative to another country's currency,
it may become more expensive for the other country to import goods from the
first country. This can lead to a decrease in demand for the first country's exports,
which can lead to a decrease in the price of those exports. Conversely, if the value
of a country's currency decreases relative to another country's currency, it may
become cheaper for the other country to import goods from the first country,
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which can lead to an increase in demand for the first country's exports and an
increase in the price of those exports.

International trade can facilitate the transfer of technology and knowledge

between countries. For example, if a company in one country imports a product
from another country that uses a new, innovative manufacturing process, it can
learn about that process and potentially adopt it for its own production. This can
lead to increased efficiency and competitiveness for the importing company, as
well as potentially spurring technological development in the exporting country.

However, there are also potential downsides to technological transfer through

international trade. If a country imports a product that incorporates new
technology, it may not have the domestic expertise or infrastructure to fully utilize
or build upon that technology. This can lead to a reliance on imported technology,
which can be costly and potentially limit the domestic country's ability to innovate
and develop its own technologies.

Overall, There are both advantages and disadvantages to international trade.

Some of the potential advantages include:

Increased efficiency: International trade allows countries to specialize in the

production of certain goods or services, which can lead to increased efficiency and
lower production costs. This can ultimately result in lower prices for consumers
and increased competitiveness for companies.
Greater variety of goods and services: International trade allows countries to
access a wider range of goods and services that may not be produced
domestically. This can increase consumer choice and provide access to products
that may not have been available otherwise.
Economic growth: International trade can lead to increased economic growth by
providing new markets for domestic producers and increasing demand for
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domestic products.

However, there are also potential disadvantages to international trade, including:

Job displacement: International trade can lead to the displacement of domestic

workers as companies may choose to outsource production to countries with
lower labor costs. This can lead to job losses and economic insecurity for affected
workers.
Environmental degradation: International trade can lead to increased production
and transportation, which can have negative environmental impacts such as air
and water pollution.
Cultural homogenization: The increasing global integration brought about by
international trade can lead to the spread of certain cultural values and practices,
potentially leading to a loss of cultural diversity.