Question 1

Suppose the market for a product is in equilibrium at a price of $$10 and a quantity of 100 units. If the government imposes a price ceiling at 8$$, which of the following is most likely to occur?

Accepted Answer

A shortage will develop because quantity demanded will exceed quantity supplied.

Question 2

If the demand for a good is given by $$Q_d = 100 - 2P$$ and the supply is given by $$Q_s = 4P$$, what is the equilibrium price?

Accepted Answer

$$P = 14.29$$

Question 3

Which of the following best describes consumer surplus?

Accepted Answer

The area below the demand curve and above the market price, up to the quantity purchased.

Question 4

A tax is imposed on sellers in a market. Which of the following is true regarding the effect on equilibrium price and quantity?

Accepted Answer

Equilibrium price increases and equilibrium quantity decreases.

Question 5

Suppose the government provides a per-unit subsidy to producers. What is the effect on the supply curve?

Accepted Answer

The supply curve shifts to the right.

Question 6

If the marginal cost (MC) of producing a good is given by $$MC = 2Q + 5$$, what is the change in total cost when output increases from $$Q = 3 to$$ $$Q = 5$$?

Accepted Answer

$$
\22$

Question 7

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

Accepted Answer

A person receiving a flu vaccination, reducing the spread of disease.

Question 8

If a perfectly competitive firm faces a market price of $$P = 20$$ and its marginal cost is $$MC = 20 at$$ $$Q = 100$$, what should the firm do to maximize profit?

Accepted Answer

Maintain output at $$Q = 100.$$

Question 9

Suppose the total cost (TC) function for a firm is $$TC = 100 + 5Q + Q^2$. What is the average total cost (ATC) when Q = 10$?

Accepted Answer

$$
\15$

Question 10

Which of the following statements about public goods is correct?

Accepted Answer

Public goods are non-rival in consumption and non-excludable.

Question 11

If the price elasticity of demand for a product is $$-0.5$$, what will happen to total revenue if the price increases?

Accepted Answer

Total revenue will increase.

Question 12

Suppose a firm in a perfectly competitive market is producing at a level where $$P \u003c AVC. $$What should the firm do in the short run?

Accepted Answer

Shut down immediately.

Question 13

Which of the following best describes the deadweight loss from a tax?

Accepted Answer

The loss in total surplus that results because the tax discourages mutually beneficial trades.

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

Suppose the marginal product of labor is increasing as more workers are hired. Which of the following is true?

Accepted Answer

The firm is experiencing increasing marginal returns.

Question 16

A firm’s total revenue is $$TR = 200Q$$, and its total cost is $$TC = 50 + 100Q. $$What is the firm’s profit when $$Q = 10$$?

Accepted Answer

$$
\950$

Question 17

Which of the following is most likely to cause a rightward shift in the demand curve for electric vehicles?

Accepted Answer

An increase in consumer income, assuming electric vehicles are normal goods.

Question 18

If a firm’s average total cost (ATC) is decreasing as output increases, which of the following is true?

Accepted Answer

The firm is experiencing economies of scale.

Question 19

Suppose the government wants to correct a negative externality in the market for plastic bags. Which policy is most likely to achieve this?

Accepted Answer

Imposing a tax equal to the external cost per bag.

Question 20

If the marginal cost (MC) of producing the 10th unit is $$MC = 12$$ and the marginal revenue (MR) is $$MR = 10$$, what should a profit-maximizing firm do?

Accepted Answer

Decrease output.

Microeconomics Exam Study Guide: Market Equilibrium, Surplus, Externalities, Costs, and Perfect Competition

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