Question 1

Suppose the price of coffee increases. According to the law of demand, what will most likely happen to the quantity demanded of coffee, ceteris paribus?

Accepted Answer

The quantity demanded will decrease.

Question 2

A market is in equilibrium when:

Accepted Answer

The quantity supplied equals the quantity demanded.

Question 3

Which of the following best describes a public good?

Accepted Answer

A good that is non-rival and non-excludable.

Question 4

If a market experiences a surplus, what is likely to happen to the price and quantity in the market?

Accepted Answer

Price will fall and quantity supplied will decrease.

Question 5

Which of the following is a key characteristic of a perfectly competitive market?

Accepted Answer

There are many buyers and sellers, and no single firm can influence the market price.

Question 6

A monopolist faces the following demand curve: $$Q = 100 - 2P. If $$the monopolist sets the price at $$P = 30$$, what is the quantity demanded?

Accepted Answer

$$Q = 60$$

Question 7

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

Accepted Answer

A factory emitting pollution that affects nearby residents.

Question 8

Suppose a country can produce either 10 units of wheat or 20 units of corn with the same resources. What is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

2 units of corn

Question 9

Producer surplus is best defined as:

Accepted Answer

The difference between what producers are paid and the minimum amount they are willing to accept.

Question 10

A tariff imposed on imported steel will most likely:

Accepted Answer

Increase domestic producer surplus and decrease total welfare.

Question 11

Which of the following is NOT a barrier to entry that can lead to monopoly?

Accepted Answer

Perfect information among buyers and sellers.

Question 12

If the total cost (TC) of producing 5 units is $$TC = 50$$ and the total cost of producing 6 units is $$TC = 60$$, what is the marginal cost (MC) of the 6th unit?

Accepted Answer

$$MC = 10$$

Question 13

Which of the following arguments is commonly used against free trade?

Accepted Answer

It can harm domestic industries and lead to job losses.

Question 14

A club good is characterized by:

Accepted Answer

Non-rivalry and excludability.

Question 15

Suppose the market for apples is described by the following equations: Demand: $$Q_D = 100 - 2P$$, Supply: $$Q_S = 4P. $$What is the equilibrium price?

Accepted Answer

$$P = 25$$

Question 16

Which of the following is an example of price discrimination by a monopolist?

Accepted Answer

Charging different prices to different groups based on their willingness to pay.

Question 17

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

Accepted Answer

A common resource.

Question 18

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

Accepted Answer

A rise in housing prices due to increased demand in a city.

Question 19

In the context of trade, absolute advantage means:

Accepted Answer

A country can produce more of a good with the same resources than another country.

Question 20

Suppose a perfectly competitive firm faces a market price of $$P = 50. If $$the firm's marginal cost (MC) at the profit-maximizing output is $$MC = 50$$, what should the firm do?

Accepted Answer

Maintain current output, as profit is maximized where $$MC = P.$$

Final Exam Study Guide: Principles of Microeconomics (Key Concepts)

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