Question 1

Suppose the government imposes a price ceiling on apartment rents that is below the equilibrium price. Which of the following is most likely to occur as a result?

Accepted Answer

A shortage of apartments, as quantity demanded exceeds quantity supplied.

Question 2

If a tax is imposed on sellers, which of the following best describes the effect on the market equilibrium?

Accepted Answer

The supply curve shifts leftward, increasing the equilibrium price and decreasing the equilibrium quantity.

Question 3

Which formula correctly calculates consumer surplus in a market?

Accepted Answer

$$CS = \sum_{i=1}^{n} (WTP_i - P)$$, where $$WTP_i is $$the willingness to pay of buyer $$i$$ and $$P is $$the market price.

Question 4

A negative externality, such as pollution from a factory, leads to which of the following outcomes in a free market?

Accepted Answer

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

Question 5

Which of the following policies is most effective in correcting a negative externality?

Accepted Answer

Imposing a Pigovian tax equal to the external cost per unit.

Question 6

The Coase Theorem suggests that private negotiation can lead to efficient outcomes if:

Accepted Answer

Property rights are well-defined and transaction costs are low.

Question 7

Which of the following is an example of the 'tragedy of the commons'?

Accepted Answer

Overfishing in international waters leading to depletion of fish stocks.

Question 8

Suppose a country can produce either 10 units of wheat or 20 units of corn with the same resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$$2$$ units of corn

Question 9

If a tariff is imposed on imported cars, which of the following is most likely to occur in the domestic market?

Accepted Answer

Domestic consumer surplus decreases, while domestic producer surplus increases.

Question 10

Which equation represents the law of diminishing marginal utility?

Accepted Answer

$$MU_{n+1} \u003c MU_n$$, where $$MU is $$marginal utility of the $$nth $$unit consumed.

Question 11

A celebrity endorsement for a product is an example of which economic concept?

Accepted Answer

Positive externality

Question 12

Which of the following best describes a public good?

Accepted Answer

A good that is non-excludable and non-rivalrous.

Question 13

If the marginal cost ($$MC) of $$producing a good is less than the marginal benefit ($$MB$$), what should a firm do to maximize efficiency?

Accepted Answer

Increase production until $$MC = MB$$

Question 14

Which formula correctly expresses average total cost ($$ATC$$)?

Accepted Answer

$$ATC = \frac{TC}{Q}$$, where $$TC is $$total cost and $$Q is $$quantity produced.

Question 15

A firm ignores sunk costs when making future decisions. This behavior is considered:

Accepted Answer

Rational, because sunk costs cannot be recovered.

Question 16

Suppose the government subsidizes solar panel production, which generates positive externalities. What is the expected effect on market equilibrium?

Accepted Answer

The equilibrium quantity increases toward the socially optimal level.

Question 17

Which of the following best describes the relationship between marginal cost ($$MC) $$and average total cost ($$ATC) $$when $$MC \u003c ATC$$?

Accepted Answer

$$ATC is $$decreasing.

Question 18

In the ultimatum game, if Player A offers Player B a very small share and Player B rejects the offer, what economic concept does this illustrate?

Accepted Answer

Fairness and behavioral economics.

Question 19

Which equation represents the law of equal marginal utilities per dollar spent for consumer equilibrium?

Accepted Answer

$$\frac{MU_A}{P_A} = \frac{MU_B}{P_B}$$, where $$MU is $$marginal utility and $$P is $$price for goods A and B.

Question 20

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

Accepted Answer

The value of a social media platform increases as more users join.

Microeconomics Study Notes: Welfare, Externalities, Public Goods, Comparative Advantage, Utility, and Production

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