Question 1

Suppose the market for electric scooters is initially in equilibrium. A new law increases the cost of lithium batteries, a key input. What will most likely happen to the equilibrium price and quantity of electric scooters?

Accepted Answer

Equilibrium price will increase and equilibrium quantity will decrease.

Question 2

Which of the following best describes the difference between a change in quantity demanded ($$Q_d) $$and a change in demand ($$D$$)?

Accepted Answer

A change in $$Q_d is $$caused by a change in price, while a change in $$D is $$caused by a change in non-price factors.

Question 3

A bakery faces the following costs: $$\100$ in fixed costs and $$\$$2$$ per loaf in variable costs. If the bakery sells 50 loaves at $$\4$ each, what is its economic profit?

Accepted Answer

$$\50$

Question 4

Which of the following is an example of a positive externality?

Accepted Answer

A homeowner plants a garden that beautifies the neighborhood.

Question 5

If a country can produce either 10 tons of wheat or 20 tons of corn with the same resources, what is the opportunity cost of producing 1 ton of wheat?

Accepted Answer

$$2$$ tons of corn

Question 6

Which of the following is NOT a characteristic of a monopoly?

Accepted Answer

The firm is a price taker.

Question 7

A competitive firm will shut down in the short run if:

Accepted Answer

Price is less than average variable cost.

Question 8

Which of the following goods is both non-excludable and non-rivalrous?

Accepted Answer

National defense

Question 9

Suppose Denmark has a lower opportunity cost of producing wind turbines than Germany. According to comparative advantage theory, which country should export wind turbines?

Accepted Answer

Denmark

Question 10

A market is in equilibrium at price $$P^*$$ and quantity $$Q^*. If a $$price ceiling is set below $$P^*$$, what will likely occur?

Accepted Answer

A shortage will develop.

Question 11

Which of the following best illustrates the tragedy of the commons?

Accepted Answer

Fishermen overharvest a shared lake, depleting the fish population.

Question 12

If the marginal cost ($$MC) of $$producing an additional unit is $$\10$ and the marginal revenue (MR$) is $$\$$8$$, what should a profit-maximizing monopoly do?

Accepted Answer

Decrease output.

Question 13

Which of the following is a pecuniary externality?

Accepted Answer

A new tech company increases demand for office space, raising rents for everyone.

Question 14

Which of the following is true about producer surplus?

Accepted Answer

It is the difference between the price received and the marginal cost for each unit sold.

Question 15

If a country opens to international trade and the world price is lower than the domestic equilibrium price, what will happen?

Accepted Answer

The country will become an importer.

Question 16

Which of the following is an example of price discrimination by a monopoly?

Accepted Answer

Charging different prices to students and non-students for the same movie ticket.

Question 17

A firm is deciding whether to stay in business or shut down in the short run. Which of the following is the correct rule?

Accepted Answer

Stay open if price covers average variable cost.

Question 18

Which of the following is NOT a government solution to externalities?

Accepted Answer

Ignoring the externality and letting the market self-correct.

Question 19

If two countries agree to trade at a rate of 1 car for 3 computers, and this rate is between their opportunity costs, what does this imply?

Accepted Answer

Both countries can benefit from trade.

Question 20

Which of the following best describes a common pool resource?

Accepted Answer

Non-excludable and rivalrous

Microeconomics Final Exam Study Guide: Markets, Sellers, Trade, Externalities, and Monopoly

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