Q: A monopolist faces the following demand schedule: at $$Q = 10$$, $$P = 20$$; at $$Q = 11$$, $$P = 19. $$What is the marginal revenue when increasing output from $$10 to$$ $$11$$ units?

$$MR = (19 \times 11) - (20 \times 10) = 209 - 200 = 9$$

Question 1

Suppose a country can produce only two goods: cars and computers. If the production possibility frontier (PPF) is bowed outward, what does this indicate about opportunity costs?

Accepted Answer

Opportunity cost increases as more of one good is produced.

Question 2

A bakery faces the following costs: Total Fixed Cost (TFC) = $$100$$, Total Variable Cost (TVC) = $$200$$, and it produces $$50$$ loaves of bread. What is the Average Total Cost (ATC)?

$$ATC = \frac{TC}{Q}$$

Accepted Answer

$$ATC = \frac{100 + 200}{50} = 6$$

Question 3

If the price elasticity of demand for a product is $$-2.5$$, what will happen to total revenue if the firm increases its price?

Accepted Answer

Total revenue will decrease.

Question 4

A government sets a price ceiling below the equilibrium price for rental apartments. Which of the following is the most likely outcome?

Accepted Answer

A shortage of apartments.

Question 5

Which of the following best describes the shutdown point for a perfectly competitive firm in the short run?

Accepted Answer

Where price equals average variable cost.

Question 6

If a consumer is maximizing utility by purchasing two goods, $$X$$ and $$Y$$, which of the following must be true?

$$\frac{MU_X}{P_X} = \frac{MU_Y}{P_Y}$$

Accepted Answer

The marginal utility per dollar spent is equal for both goods.

Question 7

A monopolist faces the following demand schedule: at $$Q = 10$$, $$P = 20$$; at $$Q = 11$$, $$P = 19. $$What is the marginal revenue when increasing output from $$10 to$$ $$11$$ units?

Accepted Answer

$$MR = (19 	imes 11) - (20 	imes 10) = 209 - 200 = 9$$

Question 8

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

Accepted Answer

Products are differentiated.

Question 9

If the cross-price elasticity of demand between two goods is $$-0.8$$, what does this imply?

Accepted Answer

The goods are complements.

Question 10

Suppose the government imposes a minimum wage above the equilibrium wage in the labor market. What is the most likely result?

Accepted Answer

A surplus of labor (unemployment).

Question 11

A firm’s total product (TP) increases at a decreasing rate as more workers are hired. Which law does this illustrate?

Accepted Answer

Law of diminishing returns.

Question 12

If a good is a normal good, what is the sign of its income elasticity of demand?

Accepted Answer

Positive.

Question 13

Which of the following statements about deadweight loss is correct?

Accepted Answer

Deadweight loss represents lost gains from trade due to market distortions.

Question 14

If the marginal cost (MC) of producing an additional unit is less than the marginal revenue (MR), what should a profit-maximizing firm do?

Accepted Answer

Increase output.

Question 15

Which of the following best describes the effect of perfect price discrimination by a monopolist?

Accepted Answer

Deadweight loss is eliminated.

Question 16

If a firm experiences economies of scale, what happens to its long-run average cost (LRAC) as output increases?

Accepted Answer

LRAC decreases.

Question 17

In the prisoner’s dilemma, what is a dominant strategy?

Accepted Answer

A strategy that is best for a player, regardless of what the other player does.

Question 18

Which of the following shifts the production possibility frontier (PPF) outward?

Accepted Answer

An improvement in technology.

Question 19

If the market for smartphones experiences both an increase in demand and an increase in supply, what will definitely happen to the equilibrium quantity?

Accepted Answer

Equilibrium quantity will increase.

Question 20

A consumer’s budget line shifts outward in parallel. What does this indicate?

Accepted Answer

The consumer’s income has increased, with prices unchanged.

Comprehensive Study Guide: Microeconomics Core Concepts and Exam Preparation

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