Question 1

Suppose a firm faces the following cost structure: Total Cost (TC) = $$500 + 10q$$, where $$q is $$the quantity produced. If the market price is $$20$$ per unit, what is the firm's profit-maximizing output in the short run?

Accepted Answer

$$q = 50$$

Question 2

A competitive firm faces a market price of $$P = 30$$ and has the following marginal cost function: $$MC = 2q. $$What is the profit-maximizing quantity for the firm?

Accepted Answer

$$q = 15$$

Question 3

If a monopolist faces the demand curve $$P = 100 - 2Q$$ and has constant marginal cost $$MC = 20$$, what is the profit-maximizing quantity?

Accepted Answer

$$Q = 20$$

Question 4

Suppose the government imposes a per-unit tax of $$t on a $$competitive market. Which of the following best describes the effect on equilibrium price and quantity?

Accepted Answer

Equilibrium price increases by less than $$t$$ and quantity decreases

Question 5

A firm’s average total cost (ATC) is minimized when:

Accepted Answer

$$MC = ATC$$

Question 6

If the marginal product of labor (MPL) is increasing, what happens to marginal cost (MC)?

Accepted Answer

MC decreases

Question 7

A monopolist practicing first-degree price discrimination will:

Accepted Answer

Produce the competitive output and capture all consumer surplus

Question 8

Suppose a firm’s total revenue (TR) is $$TR = 50q$$ and its total cost (TC) is $$TC = 10q + 200. $$What is the break-even quantity?

Accepted Answer

Question 9

If a firm’s marginal cost (MC) is $$MC = 5 + 2q$$ and the market price is $$P = 25$$, what is the profit-maximizing output?

Accepted Answer

$$q = 10$$

Question 10

Suppose a monopolist faces the demand curve $$P = 80 - Q$$ and has marginal cost $$MC = 20. $$What is the deadweight loss from monopoly?

Accepted Answer

$$400$$

Question 11

A firm’s total cost function is $$TC = 100 + 4q. If $$the firm produces 10 units, what is its average total cost (ATC)?

Accepted Answer

$$ATC = 14$$

Question 12

If a competitive firm’s price is below its average variable cost (AVC), what should the firm do in the short run?

Accepted Answer

Shut down production

Question 13

Suppose the marginal cost (MC) of producing the 21st unit is $$200$$ and the price offered is $$300. $$Should the firm produce the 21st unit?

Accepted Answer

Yes, because $$P \u003e MC$$

Question 14

If a natural monopoly is subject to marginal cost pricing, what is likely to happen?

Accepted Answer

The monopoly will require a subsidy to cover losses

Question 15

Suppose a firm’s marginal product of labor (MPL) is $$8$$ and the wage rate is $$w = 2. $$What is the marginal cost (MC) of production?

Accepted Answer

$$MC = 0.25$$

Question 16

If a competitive firm’s total revenue (TR) is less than its total variable cost (TVC), what should the firm do in the short run?

Accepted Answer

Shut down

Question 17

Suppose the market for soybeans is competitive. If a per-unit tax is imposed, what will happen in the long run?

Accepted Answer

Firms will exit the market

Question 18

A monopolist faces the demand curve $$P = 120 - 2Q$$ and marginal cost $$MC = 40. $$What is the profit-maximizing price?

Accepted Answer

$$P = 80$$

Question 19

If a firm’s average variable cost (AVC) is $$15$$ and average total cost (ATC) is $$20 at an $$output of $$q = 10$$, what are the firm’s total fixed costs?

Accepted Answer

$$TFC = 50$$

Question 20

Suppose a monopolist can perfectly price discriminate. What is the resulting consumer surplus?

Accepted Answer

Consumer surplus is zero

Microeconomics Midterm 2: Key Concepts and Applications

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