Microeconomics practice exam with answers

A full practice exam covering market equilibrium, elasticities, surplus, tax incidence, price controls and monopoly. Answer online and get it checked at once, or print it with or without worked answers. New exams with different numbers come with a free account.

8 questions · 54 points · about 80 minutes

1. Question 1

   4 points

   Task

   A household's average monthly income rises from €3,500.00 to €3,675.00. Its demand for concert tickets changes from 400 to 440 units a year. Work out the income elasticity and classify the good.

   Percentage change in income in %

   %

   Percentage change in quantity in % (fall with a minus)

   %

   Income elasticity

   For this household the good is …

   inferiora normal good (necessity)a luxury good

   Numbers like 12.5 or 1,250; elasticities with their sign (−0.75); percentages as a number (12.5). Round to 2 decimal places.

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2. Question 2

   8 points

   Task

   A seller facing demand Q_d = 160 − 4p wants to maximise revenue (costs do not matter). Find the revenue-maximising price, the quantity, the maximum revenue and the price elasticity at this point.

   Revenue-maximising price in €

   €

   Quantity

   Maximum revenue in €

   €

   Price elasticity at this point

   Numbers like 12.5 or 1,250; elasticities with their sign (−0.75); percentages as a number (12.5). Round to 2 decimal places.

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3. Question 3

   6 points

   Task

   The reserve ratio is 10% and the public’s currency ratio (cash relative to deposits) is 10%. The central bank supplies a monetary base of € 180 bn. Find the simple money multiplier without cash holding, the multiplier with cash holding and the money supply M1.

   Simple multiplier 1/r

   Multiplier with currency ratio

   Money supply M1 in € bn

   Numbers like 12.5 or 1,250; elasticities with their sign (−0.75); percentages as a number (12.5). Round to 2 decimal places.

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4. Question 4

   8 points

   Task

   A firm has the cost function C(x) = 2,000 + 441x − 56x² + 2x³ (C in €). Find the shutdown point (minimum of average variable cost), the short-run shutdown price and marginal cost at that point. Should the firm produce in the short run at a market price of €58.00?

   Shutdown output x

   Short-run shutdown price in €

   €

   Marginal cost at that output in €

   €

   Produce at €58.00?

   yes, produceno, shut down

   Numbers like 12.5 or 1,250; elasticities with their sign (−0.75); percentages as a number (12.5). Round to 2 decimal places.

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5. Question 5

   8 points

   Task

   In a market: demand Q_d = 329 − 5p, supply Q_s = 131 + p (p in €). A tax of €18.00 per unit is introduced. Work out the new quantity, the tax revenue and the deadweight loss.

   New quantity

   Tax revenue in €

   €

   Deadweight loss in €

   €

   Who bears the larger part of the tax?

   consumersproducers

   Numbers like 12.5 or 1,250; elasticities with their sign (−0.75); percentages as a number (12.5). Round to 2 decimal places.

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6. Question 6

   6 points

   Task

   A closed economy has C = 100 + 0.9·(Y − T), I = 180, G = 50 and a lump-sum tax T = 20 (in € bn). Find equilibrium income and the tax multiplier. By how much does income change if the government raises both spending and taxes by € 20 bn?

   Equilibrium income Y* in € bn

   Tax multiplier

   Change in income ΔY in € bn

   Numbers like 12.5 or 1,250; elasticities with their sign (−0.75); percentages as a number (12.5). Round to 2 decimal places.

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7. Question 7

   8 points

   Task

   An economy has C = 90 + 0.9·(Y − T), T = 50, I = 445 − 20·i, G = 100; money demand L = 0.2·Y − 20·i, real money supply M/P = 700 (amounts in € bn, i in percentage points). Find income and the interest rate in IS-LM equilibrium. By how much do income and the interest rate rise if G rises by € 50 bn?

   Income Y* in € bn

   Interest rate i* in %

   %

   Rise in income ΔY in € bn

   Rise in the interest rate in percentage points

   Numbers like 12.5 or 1,250; elasticities with their sign (−0.75); percentages as a number (12.5). Round to 2 decimal places.

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8. Question 8

   6 points

   Task

   In a market: demand Q_d = 181 − 4p, supply Q_s = 1 + p (p in €). The government sets a price floor of €42.00. Work out the quantity demanded and supplied at this price, the surplus and the quantity actually traded.

   Quantity demanded

   Quantity supplied

   Surplus

   Quantity traded

   Numbers like 12.5 or 1,250; elasticities with their sign (−0.75); percentages as a number (12.5). Round to 2 decimal places.

   Check Hint

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