Question 1

Which of the following best describes the equilibrium in a competitive market?

Accepted Answer

It is the point where the supply curve intersects the demand curve, and $$Q_s = Q_d.$$

Question 2

If the price elasticity of demand for a product is $$|PED| \u003e 1$$, what happens to total revenue when the price increases?

Accepted Answer

Total revenue decreases.

Question 3

A consumer faces the budget constraint $$P_X X + P_Y Y = I. If $$the price of good X doubles, what happens to the slope of the budget line?

Accepted Answer

The slope becomes steeper, changing from $$-\frac{P_X}{P_Y} to$$ $$-\frac{2P_X}{P_Y}.$$

Question 4

In consumer theory, the optimal bundle is chosen where:

Accepted Answer

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

Question 5

Suppose a firm in the short run has a fixed input (capital) and a variable input (labor). If the marginal product of labor ($$MP_L) is $$negative, which stage of production is the firm in?

Accepted Answer

Stage III: Negative returns

Question 6

Which market structure is characterized by many firms selling differentiated products and some market power?

Accepted Answer

Monopolistic competition

Question 7

A monopolist maximizes profit by producing the quantity where:

Accepted Answer

$$MR = MC$$

Question 8

If a good is inelastic ($$|PED| \u003c 1$$), what happens to total revenue when the price increases?

Accepted Answer

Total revenue increases.

Question 9

In the context of oligopoly, which of the following best explains why firms may collude?

Accepted Answer

Firms are interdependent and can increase profits by cooperating.

Question 10

If the marginal utility per dollar spent on good X is greater than that for good Y, what should the consumer do to maximize utility?

Accepted Answer

Buy more of good X and less of good Y.

Question 11

A firm in perfect competition will set its price:

Accepted Answer

Equal to marginal cost in the long run ($$P = MC)$$

Question 12

If a production function shows increasing returns to labor, what happens to total product as more labor is added?

Accepted Answer

Total product increases at an increasing rate.

Question 13

Which of the following is a key takeaway from microeconomics regarding human behavior?

Accepted Answer

People respond to incentives.

Question 14

Suppose the demand for a product is given by $$Q_d = 100 - 2P$$ and the supply is $$Q_s = 20 + 3P. $$What is the equilibrium price?

Accepted Answer

$$P = 16$$

Question 15

If a firm faces diminishing returns to labor, what happens to the marginal product of labor ($$MP_L) as $$more labor is added?

Accepted Answer

$$MP_L$$ decreases as more labor is added.

Question 16

Which of the following best describes a price taker?

Accepted Answer

A firm that cannot influence the market price and must accept the prevailing price.

Question 17

If the price of a good increases and the quantity demanded decreases only slightly, the demand for the good is:

Accepted Answer

Inelastic

Question 18

In a monopoly, why is marginal revenue ($$MR) $$less than price ($$P$$)?

Accepted Answer

Because the monopolist must lower the price to sell additional units.

Question 19

If a consumer's budget is $$I = 100$$, the price of X is $$P_X = 10$$, and the price of Y is $$P_Y = 20$$, what is the maximum quantity of Y the consumer can buy if they buy only Y?

Accepted Answer

$$5$$

Question 20

Which of the following scenarios best illustrates the concept of diminishing marginal utility?

Accepted Answer

A person enjoys their first slice of pizza more than their fourth slice.

Microeconomics: Core Concepts and Market Structures – Final Review Notes

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