Question 1

Suppose the market demand for a product is given by $$Q_d = 100 - 2P$$ and the market supply is $$Q_s = 4P. $$What is the equilibrium price?

Accepted Answer

$$P = 16.67$$

Question 2

If a firm in perfect competition faces a market price below its average variable cost, what should the firm do in the short run?

Accepted Answer

Shut down production immediately

Question 3

A country imposes a tariff on imported steel. Which of the following is a likely consequence?

Accepted Answer

Domestic producers of steel benefit from reduced competition

Question 4

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

Accepted Answer

The goods are substitutes

Question 5

Suppose a monopolist faces the following demand curve: $$P = 50 - Q. $$Its marginal cost is constant at $$MC = 10. $$What is the profit-maximizing quantity?

Accepted Answer

$$Q = 10$$

Question 6

Which of the following best describes the income effect?

Accepted Answer

A change in consumption resulting from a change in purchasing power

Question 7

A negative externality in production leads to which of the following outcomes in a free market?

Accepted Answer

The good is overproduced relative to the social optimum

Question 8

If a consumer maximizes utility by allocating their budget such that $$\frac{MU_x}{P_x} = \frac{MU_y}{P_y}$$, what does this condition represent?

Accepted Answer

The utility-maximizing rule

Question 9

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

There are significant barriers to entry

Question 10

Country A can produce either 10 tons of wheat or 20 tons of corn with the same resources. Country B can produce either 8 tons of wheat or 16 tons of corn. Which country has the comparative advantage in corn?

Accepted Answer

Country B

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

A firm’s marginal product of labor is equal to its marginal cost when:

Accepted Answer

The wage rate divided by marginal product equals marginal cost

Question 13

Which of the following would cause a rightward shift in the supply curve for smartphones?

Accepted Answer

A technological improvement in smartphone production

Question 14

In the long run, a perfectly competitive firm earns zero economic profit because:

Accepted Answer

Firms can freely enter and exit the market

Question 15

If a government wants to correct a positive externality, which policy is most appropriate?

Accepted Answer

Provide a subsidy to consumers or producers

Question 16

Which of the following best describes a Nash equilibrium in game theory?

Accepted Answer

No player can improve their payoff by unilaterally changing their strategy

Question 17

If the marginal cost curve is below the average total cost curve, what happens to average total cost as output increases?

Accepted Answer

Average total cost decreases

Question 18

Suppose the production possibilities frontier (PPF) for a country is bowed outward. What does this imply about opportunity costs?

Accepted Answer

Opportunity costs increase as more of one good is produced

Question 19

In an increasing cost industry, what happens to input prices as industry output expands?

Accepted Answer

Input prices increase

Question 20

If the government imposes a per-unit tax on a good with perfectly inelastic demand, who bears the entire burden of the tax?

Accepted Answer

Consumers

Microeconomics Final Review Guidance

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