Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

4 INTRODUCTION [CHAP. 1
3. The meaning of the word “economic” is most closely associated with the word (a) free, (b) scarce, (c) unlimited, or
(d) unrestricted.
Ans. (b) Economic factors and goods are those factors and goods which are scarce or limited in supply and thus
command a price.
4. In a free-enterprise economy, the problems of what, how, and for whom are solved by (a) a planning committee,
(b) the elected representatives of the people, (c) the price mechanism, or (d) none of the above.
Ans. (c) See Example 2.
5. Microeconomic theory studies how a free-enterprise economy determines (a) the price of goods, (b) the price of
services, (c) the price of economic resources, or (d) all of the above.
Ans. (d) Because microeconomic theory is primarily concerned with the determination of all prices in a free-enterprise
economy, it is often referred to as price theory.
6. A market (a) necessarily refers to a meeting place between buyers and sellers, (b) does not necessarily refer to a
meeting place between buyers and sellers, (c) extends over the entire nation, or (d) extends over a city.
Ans. (b) Because of modern communications, buyers and sellers need not come face to face with one another
to buy and sell. The market for some commodities extends over a city or a section therein; the market for other
commodities may extend over the entire nation or even the world.
7. A function refers to (a) the demand for a commodity, (b) the supply of a commodity, (c) the demand and supply of a
commodity, service, or resource, or (d) the relationship between one dependent variable and one or more independent
variables.
Ans. (d) See Section 1.4. Demand functions and supply functions are examples of functions, but the term “function”
is a completely general term and refers to the relationship between any dependent variable and its corresponding
independent variable(s).
8. The market equilibrium for a commodity is determined by (a) the market demand for the commodity, (b) the market
supply of the commodity, (c) the balancing of the forces of demand and supply for the commodity, or (d) any of
the above.
Ans. (c) See Section 1.4 and Example 5.
9. Which of the following is incorrect?
(a) Microeconomics is concerned primarily with the problem of what, how, and for whom to produce.
(b) Microeconomics is concerned primarily with the economic behavior of individual decision-making units when
at equilibrium.
(c) Microeconomics is concerned primarily with the time path and process by which one equilibrium position
evolves into another.
(d ) Microeconomics is concerned primarily with comparative statics rather than dynamics.
Ans.
(c) Choice c is the definition of dynamics. Dynamic microeconomics is still in its infancy.
10. Which of the following statements is most closely associated with general equilibrium analysis?
(a)
(b)
(c)
Everything depends on everything else.
Ceteris paribus.
The equilibrium price of a good or service depends on the balancing of the forces of demand and supply for
that good or service.
(d ) The equilibrium price of a factor depends on the balancing of the forces of demand and supply for that
factor.