Question 1

Suppose the market demand for a product is given by $$Q_D = 100 - 2P$$ and the market supply is $$Q_S = 4P. $$What is the equilibrium price?

Accepted Answer

$$P = 25$$

Question 2

If a price ceiling is set below the equilibrium price, which of the following is most likely to occur?

Accepted Answer

A shortage will develop in the market.

Question 3

A firm in perfect competition faces the following cost structure: $$TC = 100 + 5Q + Q^2$. If the market price is P = 25$, what is the profit-maximizing output?

Accepted Answer

$$Q = 15$$

Question 4

Which of the following best describes consumer surplus?

Accepted Answer

The difference between the price consumers are willing to pay and the price they actually pay.

Question 5

If the government imposes a per-unit tax on sellers, what happens to the supply curve?

Accepted Answer

It shifts to the left by the amount of the tax.

Question 6

Suppose a country opens to trade and the world price is lower than the domestic equilibrium price. What will happen in the domestic market?

Accepted Answer

The country will import the good.

Question 7

A negative externality in production results in which of the following?

Accepted Answer

The market equilibrium quantity is greater than the socially optimal quantity.

Question 8

If a monopoly faces the demand curve $$P = 100 - Q$$ and has marginal cost $$MC = 20$$, what is the profit-maximizing quantity?

Accepted Answer

$$Q = 40$$

Question 9

Which of the following is true about deadweight loss (DWL) from a tariff?

Accepted Answer

DWL arises because tariffs reduce the quantity of mutually beneficial trades.

Question 10

If the marginal cost (MC) of producing a good is constant at $$MC = 10$$, and the market price is $$P = 15$$, what is the firm's producer surplus for selling 20 units?

Accepted Answer

$$200$$

Question 11

Which of the following best describes the effect of a positive externality in consumption?

Accepted Answer

The market equilibrium quantity is less than the socially optimal quantity.

Question 12

Suppose two people, Alice and Bob, have the following willingness to pay for a public good: Alice $$= 30$$, Bob $$= 20. $$What is the total willingness to pay when the public good is provided to both?

Accepted Answer

$$50$$

Question 13

If the marginal cost curve intersects the average total cost curve at $$Q = 10$$, what does this imply?

Accepted Answer

Average total cost is minimized at $$Q = 10.$$

Question 14

A firm faces the following total cost function: $$TC = 50 + 2Q + Q^2$. What is the marginal cost function?

Accepted Answer

$$MC = 2 + 2Q$$

Question 15

If a country imposes a tariff on imports, what is the likely effect on domestic consumer surplus?

Accepted Answer

It decreases.

Question 16

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Products are differentiated.

Question 17

Suppose the government wants to correct a negative externality. Which policy is most likely to achieve the socially optimal outcome?

Accepted Answer

Imposing a tax equal to the external cost.

Question 18

If the demand for a good is perfectly inelastic, what is the effect of a tax on the quantity demanded?

Accepted Answer

Quantity demanded remains unchanged.

Question 19

A monopolist maximizes profit where:

Accepted Answer

$$MR = MC$$

Question 20

Which of the following best explains why deadweight loss occurs under monopoly compared to perfect competition?

Accepted Answer

Monopolists restrict output below the socially optimal level.

Microeconomics Exam Study Guide: Key Topics and Concepts

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