Question 1

A monopolist faces the demand curve $$Q = 100 - 0.5p. $$What is the inverse demand function $$p(Q)$$?

Accepted Answer

$$p(Q) = 200 - 2Q$$

Question 2

Given the cost function $$C(q) = 100 + 4q^2$, what is the marginal cost (MC) function?

Accepted Answer

$$MC(q) = 8q$$

Question 3

Suppose a competitive market has demand $$Q(p) = 18 - 2p$$ and supply $$S(p) = 4p. $$What is the equilibrium price?

Accepted Answer

$$p = 3$$

Question 4

A monopolist maximizes profit where marginal revenue equals marginal cost. If $$MR = 200 - 4q$$ and $$MC = 8q$$, what is the profit-maximizing output?

Accepted Answer

$$q = 16.67$$

Question 5

If a firm’s production function is $$F(L, K) = 2LK$$ and capital is fixed at $$K = 10$$, what is the cost function if the wage rate is $$w = 40$$ and the rental rate of capital is $$r = 80$$?

Accepted Answer

$$C(q) = 2q + 800$$

Question 6

A firm’s cost function is $$C(q) = 4000 + 8q^2$. What is the average variable cost (AVC)?

Accepted Answer

$$AVC(q) = 8q$$

Question 7

Suppose there are 100 identical firms in a competitive market, each with a supply curve $$S_i(p) = 15p. $$What is the market supply curve?

Accepted Answer

$$S(p) = 1500p$$

Question 8

A production function $$F(L, K) = 4L$$^{0.3}$$K^{0.7}$ exhibits which type of returns to scale?

Accepted Answer

Constant returns to scale

Question 9

If a legal service charges each customer their exact willingness to pay, this is an example of:

Accepted Answer

First-degree price discrimination

Question 10

If the price of cheese increases in a perfectly competitive pizza market, what happens to the profit-maximizing output of a pizza shop?

Accepted Answer

Output decreases because the marginal cost curve shifts upward.

Question 11

A firm has a production function $$F(L, K) = L + K. If$$ $$L = 3$$ and $$K = 1$$, what is the maximum output?

Accepted Answer

$$4$$

Question 12

Suppose the cost function for a competitive orange juice producer is $$C(q) = 100 + 4q^2$. What is this firm’s supply curve?

Accepted Answer

$$S(p) = 0.125p$$

Question 13

True or False: In the short run, all inputs are variable.

Accepted Answer

False

Question 14

At the profit-maximizing level of output $$q \u003e 0$$, which statement is incorrect?

Accepted Answer

Marginal profit is maximized.

Question 15

A monopolist sells at a price ____ the competitive equilibrium price and sells ____ the competitive equilibrium output level.

Accepted Answer

higher than, less than

Question 16

A firm’s isoquants are L-shaped and its isocost lines have a wage rate $$w = 25$$ and rental rate $$r = 20. $$What is the minimum cost of producing 10 units if the optimal input combination is $$L = 2$$, $$K = 4$$?

Accepted Answer

$$C = 130$$

Question 17

True or False: The law of diminishing marginal returns is satisfied if the total product curve becomes steeper as labor increases.

Accepted Answer

False

Question 18

If the market price is $$1$$ and the average variable cost (AVC) is always greater than $$1$$, should a competitive firm shut down in the short run?

Accepted Answer

Yes, because $$P \u003c AVC$$

Question 19

When the market price is $$9$$, a competitive firm produces $$q = 1$$ unit and average cost is $$4. $$What is the firm’s profit?

Accepted Answer

$$5$$

Question 20

Suppose the market demand is $$Q(p) = 100 - 0.5p. $$What is the marginal revenue function $$MR(q)$$ for a monopolist?

Accepted Answer

$$MR(q) = 200 - 4q$$

Microeconomics Exam Study Guide: Monopoly, Competition, Cost, and Production

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