Question 1

Given the cost formulas $$TC = FC + VC$$, $$ATC = \frac{TC}{Q}$$, $$AFC = \frac{FC}{Q}$$, $$AVC = \frac{VC}{Q}$$, and $$MC = \frac{\Delta TC}{\Delta Q}$$, if a firm has $$FC = 100$$, $$VC = 200$$ when $$Q = 10$$, what is the value of $$ATC$$?

Accepted Answer

$$ATC = \frac{100 + 200}{10} = 30$$

Question 2

Refer to the short-run cost curves graph. At what output does the Marginal Cost (MC) curve intersect the Average Total Cost (ATC) curve?

Accepted Answer

At the minimum point of the ATC curve

Question 3

In the 'Market for Milk' graph, what is the equilibrium price and quantity?

Accepted Answer

Where the supply and demand curves intersect

Question 4

For a perfectly competitive firm, which of the following is true about the demand curve it faces?

Accepted Answer

It is perfectly elastic at the market price

Question 5

Using the cost table provided, at what quantity does the firm maximize profit if $$MR = 10$$?

Accepted Answer

At $$Q = 500$$, where $$MC = MR$$

Question 6

Refer to the monopoly graph (Figure 15-10). Which area represents the consumer surplus resulting from the profit-maximizing price charged by this monopolist?

Accepted Answer

A + B

Question 7

If a merger increases the Herfindahl-Hirschman Index (HHI) from 1480 to 1964, what is the change in HHI, and what does this imply for antitrust review?

Accepted Answer

Change is 484; the merger is likely to be challenged

Question 8

In the context of market structures, which scenario best describes an oligopoly?

Accepted Answer

A few firms dominate the market and are interdependent in their pricing decisions

Question 9

If the price elasticity of demand for a product is $$|E_d| = 0.8$$, what does this imply?

Accepted Answer

Demand is inelastic

Question 10

Suppose the cross-price elasticity of demand between beef and pork is positive. What does this indicate?

Accepted Answer

Beef and pork are substitutes

Question 11

If a government imposes a tax on a firm equal to the external cost of pollution, what is this tax called?

Accepted Answer

A Pigovian tax

Question 12

Which of the following is an example of a nonexcludable good?

Accepted Answer

A public library

Question 13

If the market price is set below equilibrium, what is the likely result?

Accepted Answer

A shortage

Question 14

Brett buys a new cell phone for $$100 and receives consumer surplus of 80. $$How much does Brett value his cell phone?

Accepted Answer

$180

Question 15

Which of the following could cause the equilibrium price and quantity of ground beef to increase?

Accepted Answer

Nice weather and fewer lockdowns increase outdoor cookouts

Question 16

If the demand for cell phone service is inelastic, then:

Accepted Answer

The percentage change in quantity demanded is less than the percentage change in price (in absolute value)

Question 17

Trade between countries is based on which economic principle?

Accepted Answer

Comparative advantage

Question 18

When Sophie, a French citizen, purchases a Dell computer in Paris that was produced in Texas, the purchase is:

Accepted Answer

A U.S. export and a French import

Question 19

Which of the following best describes a positive externality?

Accepted Answer

People who are not directly involved in producing or paying for a good or service benefit from it

Microeconomics: Cost Curves, Market Structures, and Competitive Markets – Study Guide with Visuals

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