Q: A monopolist faces the following demand curve: $$P = 50 - Q. If $$the monopolist can perfectly price discriminate (first-degree), what is the formula for profit?

$$\pi = \text{Total Willingness to Pay} - \text{Total Cost}$$

Q: If the area under the demand curve and above the market price for the first 10 units is a triangle with base 10 and height 5, what is the consumer surplus?

$$CS = \frac{1}{2} \times 10 \times 5 = 25$$

Question 1

Suppose the demand for coffee is given by $$Q_d = 100 - 2P$$ and the supply is $$Q_s = 20 + 3P. $$What is the equilibrium price in this market?

Accepted Answer

$$P = 16$$

Question 2

Which of the following best describes a public good?

Accepted Answer

It is both non-rival and non-excludable.

Question 3

A market is experiencing a surplus. Which of the following must be true?

Accepted Answer

$$Q_s \u003e Q_d$$ and price is above equilibrium.

Question 4

A monopolist faces the following demand curve: $$P = 50 - Q. If $$the monopolist can perfectly price discriminate (first-degree), what is the formula for profit?

Accepted Answer

$$\pi = 	ext{Total Willingness to Pay} - 	ext{Total Cost}$$

Question 5

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

Accepted Answer

Products are differentiated.

Question 6

Suppose a firm has total revenue $$TR = 200$$, total cost $$TC = 150$$, and produces 10 units. What is the firm's profit?

Accepted Answer

$$\pi = 50$$

Question 7

If the opportunity cost of producing 1 car in Country A is 2 computers, and in Country B it is 4 computers, which country has a comparative advantage in producing cars?

Accepted Answer

Country A

Question 8

A negative externality exists when:

Accepted Answer

The marginal social cost exceeds the marginal private cost.

Question 9

A country imposes a tariff of $$\2$ per unit on an imported good. If 500 units are imported, what is the tariff revenue?

Accepted Answer

$$\1$$,000$

Question 10

Which of the following is an argument commonly used against free trade?

Accepted Answer

Protecting infant industries

Question 11

Suppose the supply curve for a good is $$Q_s = 10 + 2P$$ and the demand curve is $$Q_d = 50 - P. $$What is the equilibrium quantity?

Accepted Answer

$$Q = 34$$

Question 12

Producer surplus in a market is best described as:

Accepted Answer

The area above the supply curve and below the market price.

Question 13

If a good is rival but non-excludable, it is best classified as:

Accepted Answer

A common resource

Question 14

A monopolist practicing third-degree price discrimination will:

Accepted Answer

Charge different prices to different groups based on their elasticities.

Question 15

If the marginal cost of producing a good is $$10$$ and the marginal external cost is $$5$$, what is the marginal social cost?

Accepted Answer

$$MSC = 15$$

Question 16

Which of the following is true about the deadweight loss from monopoly?

Accepted Answer

It represents the loss in total surplus due to output being less than the socially optimal level.

Question 17

If a country can produce 100 units of good X or 200 units of good Y with the same resources, what is the opportunity cost of producing one unit of good X?

Accepted Answer

2 units of good Y

Question 18

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

Accepted Answer

A new technology increases demand for skilled labor, raising wages for all skilled workers.

Question 19

If the area under the demand curve and above the market price for the first 10 units is a triangle with base 10 and height 5, what is the consumer surplus?

Accepted Answer

$$CS = \frac{1}{2} 	imes 10 	imes 5 = 25$$

Question 20

Which of the following is a solution to the tragedy of the commons?

Accepted Answer

Assigning property rights to the resource

Principles of Microeconomics: Final Exam Study Guide

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