Question 1

Which of the following best describes the law of demand in microeconomics?

Accepted Answer

As the price of a good increases, the quantity demanded decreases, ceteris paribus.

Question 2

Suppose the market for electric cars is in equilibrium. If the government introduces a subsidy for electric car producers, what is the most likely immediate effect on the market equilibrium?

Accepted Answer

The supply curve will shift to the right, decreasing the equilibrium price.

Question 3

If the price elasticity of demand for a product is $$-2.5$$, what does this imply about consumer responsiveness?

Accepted Answer

Demand is elastic; consumers are highly responsive to price changes.

Question 4

A firm in a perfectly competitive market faces the following cost structure: $$TC = 100 + 5Q$$, where $$TC is $$total cost and $$Q is $$quantity. If the market price is $$8$$, what is the firm's profit-maximizing output?

Accepted Answer

$$Q = 33.33$$

Question 5

Which of the following is a characteristic of a monopoly market structure?

Accepted Answer

Barriers to entry are high

Question 6

If the cross-price elasticity of demand between two goods is positive, what does this indicate?

Accepted Answer

The goods are substitutes

Question 7

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

Accepted Answer

A shortage of apartments

Question 8

A firm’s marginal cost (MC) is given by $$MC = 2Q. If $$the market price is $$20 in $$perfect competition, what is the profit-maximizing output?

Accepted Answer

$$Q = 10$$

Question 9

Which of the following best explains why public goods are underprovided in a free market?

Accepted Answer

Because of the free-rider problem

Question 10

If a firm in monopolistic competition is earning economic profits in the short run, what is likely to happen in the long run?

Accepted Answer

New firms will enter, driving economic profits to zero

Question 11

Suppose the demand for a product is given by $$Q_d = 100 - 2P$$ and the supply is $$Q_s = 4P. $$What is the equilibrium price?

Accepted Answer

$$P = 20$$

Question 12

Which of the following is an example of an externality?

Accepted Answer

A factory polluting a river, affecting nearby residents

Question 13

If the government imposes a tax on sellers, what happens to the supply curve?

Accepted Answer

It shifts to the left

Question 14

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

Accepted Answer

The value of the next best alternative forgone

Question 15

A firm’s total revenue (TR) is given by $$TR = P 	imes Q. If $$the price is $$15$$ and the firm sells $$200$$ units, what is the total revenue?

Accepted Answer

$$TR = 3,000$$

Question 16

Which of the following is NOT a characteristic of perfect competition?

Accepted Answer

Barriers to entry

Question 17

Suppose the government wants to correct a negative externality caused by pollution. Which policy is most likely to achieve this goal?

Accepted Answer

Imposing a tax equal to the external cost

Question 18

If a consumer’s income increases and the demand for ramen noodles decreases, what type of good is ramen noodles?

Accepted Answer

Inferior good

Question 19

A firm’s average total cost (ATC) is minimized when:

Accepted Answer

Marginal cost (MC) equals average total cost (ATC)

Question 20

Which of the following best explains why oligopolies may collude?

Accepted Answer

To maximize joint profits by acting like a monopoly

ECON 1B03: Introductory Microeconomics – Syllabus and Study Guide

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