Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative foregone when making a decision.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn with its available resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$$2$$ units of corn

Question 3

If the demand for electric cars increases due to a government subsidy, which of the following will most likely occur in the market for electric cars?

Accepted Answer

The demand curve shifts to the right.

Question 4

A firm is deciding whether to produce one more unit of output. The marginal cost of producing this unit is $$\10$, and the marginal benefit is $$\$$12. $$According to the marginal decision rule, what should the firm do?

Accepted Answer

Produce the additional unit because marginal benefit exceeds marginal cost.

Question 5

Which of the following is NOT a determinant of market supply?

Accepted Answer

Consumer income

Question 6

Suppose the government imposes a price ceiling below the equilibrium price in the market for apartments. What is the most likely outcome?

Accepted Answer

A shortage of apartments

Question 7

If the price elasticity of demand for a product is $$-2$$, what does this imply?

Accepted Answer

A 1% increase in price leads to a 2% decrease in quantity demanded.

Question 8

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

Accepted Answer

Vaccination against infectious diseases

Question 9

A perfectly competitive firm faces a market price of $$\20$ per unit. Its marginal cost is given by MC = 4 + 2Q$. What is the profit-maximizing output level?

Accepted Answer

$$Q = 8$$

Question 10

Which of the following best explains why monopolies can earn long-run economic profits?

Accepted Answer

They face no competition due to barriers to entry.

Question 11

Suppose a firm in monopolistic competition is earning zero economic profit in the long run. Which of the following is true?

Accepted Answer

Price equals average total cost.

Question 12

Which of the following is a public good?

Accepted Answer

National defense

Question 13

If a firm experiences economies of scale, what happens to its average total cost as output increases?

Accepted Answer

Average total cost decreases.

Question 14

Which of the following best describes the Nash equilibrium in the context of an oligopoly?

Accepted Answer

Each firm chooses its best strategy given the strategies chosen by other firms.

Question 15

Suppose the government imposes a tax on the production of gasoline. Which of the following is a likely result?

Accepted Answer

The equilibrium price increases and equilibrium quantity decreases.

Question 16

A consumer maximizes utility when the marginal utility per dollar spent is equal for all goods. If the marginal utility of good $$X is$$ $$MU_X = 10$$ and its price is $$P_X = 2$$, and the marginal utility of good $$Y is$$ $$MU_Y = 15$$ and its price is $$P_Y = 5$$, should the consumer buy more of $$X or$$ $$Y$$?

Accepted Answer

Buy more of $$X$$ because $$\frac{MU_X}{P_X} \u003e \frac{MU_Y}{P_Y}$$

Question 17

Which of the following would cause a leftward shift in the supply curve for smartphones?

Accepted Answer

An increase in the wage rate for assembly workers

Question 18

If a good is both non-excludable and non-rivalrous, what type of good is it?

Accepted Answer

Public good

Question 19

Suppose the cross-price elasticity of demand between tea and coffee is $$0.8. $$What does this imply?

Accepted Answer

Tea and coffee are substitutes.

Question 20

A firm’s total cost function is $$TC = 100 + 5Q + Q^2$. What is the marginal cost when Q = 3$?

Accepted Answer

$$MC = 5 + 2Q = 5 + 2 	imes 3 = 11$$

Principles of Microeconomics: Course Syllabus and Structure

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