Question 1

Which of the following best describes the primary focus of microeconomics?

Accepted Answer

The study of individual agents such as consumers, producers, and the government, and their decision-making processes.

Question 2

Suppose the government imposes a price ceiling below the equilibrium price in the rental housing market. Which of the following is the most likely outcome?

Accepted Answer

A shortage of rental housing units.

Question 3

If the price elasticity of demand for a product is $$-2$$, what will happen to total revenue if the price increases by 10%?

Accepted Answer

Total revenue will decrease by 20%.

Question 4

A firm in a perfectly competitive market faces which of the following demand curves?

Accepted Answer

A perfectly elastic (horizontal) demand curve.

Question 5

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

Accepted Answer

Vaccination programs that reduce disease spread.

Question 6

Suppose a firm’s marginal cost ($$MC) is $$given by $$MC = 2Q$$, and its marginal revenue ($$MR) is$$ $$MR = 20 - Q. $$What is the profit-maximizing quantity?

Accepted Answer

$$Q = 5$$

Question 7

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

Accepted Answer

The value of the next best alternative foregone when making a choice.

Question 8

A corrective tax is primarily used to:

Accepted Answer

Correct negative externalities by aligning private and social costs.

Question 9

If a firm experiences diminishing marginal returns to labor, what happens to output as more workers are hired?

Accepted Answer

Total output increases, but by smaller and smaller amounts with each additional worker.

Question 10

Which of the following is a characteristic of a public good?

Accepted Answer

It is non-excludable and non-rival in consumption.

Question 11

A monopolist maximizes profit by producing the quantity where:

Accepted Answer

$$MR = MC$$

Question 12

Which of the following best describes the principal-agent problem?

Accepted Answer

A conflict of interest between a person (principal) who delegates authority and the agent who carries out the task.

Question 13

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

Accepted Answer

A surplus of labor (unemployment).

Question 14

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

Accepted Answer

The goods are substitutes.

Question 15

Which of the following is an example of adverse selection?

Accepted Answer

High-risk individuals being more likely to buy health insurance than low-risk individuals.

Question 16

A firm’s total cost ($$TC) is $$given by $$TC = 100 + 5Q + Q^2$. What is the marginal cost (MC$) function?

Accepted Answer

$$MC = 5 + 2Q$$

Question 17

Which of the following best describes the effect of a per-unit tax imposed on sellers in a competitive market?

Accepted Answer

The supply curve shifts to the left (upward).

Question 18

In the context of market structures, which of the following is true for monopolistic competition?

Accepted Answer

Firms have some control over price due to product differentiation.

Question 19

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 20

Which of the following government interventions is most likely to improve efficiency in the presence of a negative externality?

Accepted Answer

Imposing a corrective tax equal to the external cost.

Microeconomics Course Overview and Study Guide

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