Question 1

Suppose a city government imposes a binding price ceiling on apartment rents. Which of the following is the most likely immediate outcome in the rental market?

Accepted Answer

A shortage of apartments, as quantity demanded exceeds quantity supplied.

Question 2

A firm in a perfectly competitive market faces the following cost structure: $$TC = 100 + 5Q + Q^2$. If the market price is P = 25$, what is the profit-maximizing output for the firm?

Accepted Answer

$$Q = 20$$

Question 3

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

Accepted Answer

The value of the next best alternative forgone when a choice is made.

Question 4

If the price elasticity of demand for gasoline is $$|PED| = 0.3$$, and the government increases the gasoline tax, what will likely happen to total revenue from gasoline sales?

Accepted Answer

Total revenue will increase because demand is inelastic.

Question 5

A negative externality exists in the market for steel production. Which policy would most directly address the inefficiency caused by this externality?

Accepted Answer

A Pigouvian tax equal to the external cost imposed by steel production.

Question 6

Which of the following statements about monopolistic competition is correct?

Accepted Answer

Firms produce with excess capacity in the long run.

Question 7

Suppose the government imposes a per-unit tax on sellers in a market. If demand is more inelastic than supply, who bears the greater burden of the tax?

Accepted Answer

Buyers bear the greater burden.

Question 8

A monopolist faces the demand curve $$P = 100 - 2Q$$ and has marginal cost $$MC = 20. $$What is the profit-maximizing quantity?

Accepted Answer

$$Q = 10$$

Question 9

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

Accepted Answer

Non-rival and non-excludable.

Question 10

In the context of game theory, what is a Nash equilibrium?

Accepted Answer

A set of strategies where no player can improve their payoff by unilaterally changing their own strategy.

Question 11

A firm’s total cost is $$TC = 50 + 10Q. If $$the firm produces 5 units, what is its average total cost (ATC)?

Accepted Answer

$$ATC = 15$$

Question 12

Which of the following best explains why common resources tend to be overused?

Accepted Answer

They are rival and non-excludable, so individuals ignore the external cost imposed on others.

Question 13

If a firm’s marginal product of labor is falling as more workers are hired, which law is being illustrated?

Accepted Answer

Law of diminishing marginal product.

Question 14

Suppose a new technology reduces the cost of producing electric cars. What is the likely effect on the market for electric cars?

Accepted Answer

The supply curve shifts right, decreasing equilibrium price.

Question 15

Which of the following is true about the relationship between marginal cost (MC) and average total cost (ATC)?

Accepted Answer

MC intersects ATC at ATC's minimum point.

Question 16

A cartel agreement among oil producers is most likely to be unstable when:

Accepted Answer

Each firm has an incentive to cheat by increasing output.

Question 17

If a monopolist is regulated to set price equal to marginal cost ($$P = MC$$), but marginal cost is below average total cost ($$MC \u003c ATC$$), what is the likely outcome?

Accepted Answer

The monopolist incurs losses and may require a subsidy.

Question 18

Which of the following is an example of a club good?

Accepted Answer

A subscription-based streaming service.

Question 19

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

Accepted Answer

The goods are substitutes.

Question 20

A firm’s total revenue is $$TR = 200$$, explicit costs are $$120$$, and implicit costs are $$50. $$What is the firm’s economic profit?

Accepted Answer

$$30$$

Microeconomics Final Exam Review: Key Concepts and Models

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