Question 1

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

Accepted Answer

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

Question 2

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 price elasticity of demand for a product is $$-1.5$$, what will happen to total revenue if the firm increases its price?

Accepted Answer

Total revenue will decrease because demand is elastic.

Question 4

Which of the following best describes the Coase Theorem?

Accepted Answer

Private negotiations can lead to efficient outcomes if property rights are well defined and transaction costs are low.

Question 5

A monopolist faces the following demand and marginal revenue curves: $$P = 100 - 2Q$$ and $$MR = 100 - 4Q. If $$marginal cost is constant at $$MC = 20$$, what is the profit-maximizing quantity?

Accepted Answer

$$Q = 10$$

Question 6

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

Accepted Answer

Significant barriers to entry

Question 7

Suppose the government imposes a per-unit tax on a good. If the supply of the good is perfectly inelastic, who bears the entire burden of the tax?

Accepted Answer

Sellers

Question 8

Which of the following goods is both nonrival and nonexcludable?

Accepted Answer

National defense

Question 9

If a firm in a perfectly competitive market is producing where $$P \u003c AVC$$, what should the firm do in the short run?

Accepted Answer

Shut down production immediately.

Question 10

Which of the following scenarios best illustrates the law of diminishing marginal returns?

Accepted Answer

A restaurant hires more cooks, but each additional cook adds less to total output than the previous one.

Question 11

If both the demand and supply curves for a good shift to the right, but the increase in supply is greater than the increase in demand, what happens to equilibrium price and quantity?

Accepted Answer

Price falls, quantity rises

Question 12

Which of the following statements about comparative advantage is correct?

Accepted Answer

A country should specialize in producing goods for which it has the lowest opportunity cost.

Question 13

A firm faces the following cost curves: marginal cost (MC), average total cost (ATC), and average variable cost (AVC). At what point does the MC curve intersect the ATC and AVC curves?

Accepted Answer

At their minimum points

Question 14

Which of the following best explains why monopolies are considered inefficient?

Accepted Answer

They restrict output and charge a price above marginal cost, creating deadweight loss.

Question 15

If the price elasticity of demand for insulin is $$-0.2$$, what does this imply about the demand for insulin?

Accepted Answer

Demand is inelastic; consumers are not very responsive to price changes.

Question 16

Which of the following is an example of a common resource?

Accepted Answer

A public pasture used by local farmers

Question 17

In the long run, firms in monopolistic competition earn zero economic profit because:

Accepted Answer

Entry of new firms eliminates profits.

Question 18

Which of the following best describes the effect of a tariff on imported goods?

Accepted Answer

It raises the price of the imported good and reduces the quantity imported.

Question 19

Suppose a firm can produce 100 units of output with 10 workers, but when it hires an 11th worker, total output increases to 108 units. What is the marginal product of the 11th worker?

Accepted Answer

8 units

Question 20

Which of the following is a dominant strategy in game theory?

Accepted Answer

A strategy that yields the highest payoff regardless of the other player's actions.

Comprehensive Microeconomics Final Exam Study Guide

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