Question 1

Which of the following best describes the focus of microeconomics?

Accepted Answer

Microeconomics analyzes the behavior of individual consumers, firms, and industries as they operate in a market economy.

Question 2

Suppose the demand curve for a product is given by $$Q_d = 575 - 5P. $$What is the price at which the quantity demanded is zero?

Accepted Answer

$$P = 115$$

Question 3

If the price elasticity of demand for a product is $$-4.54$$, how would you classify the demand?

Accepted Answer

Elastic

Question 4

A firm faces the following cost structure: Fixed cost = $$15,000$$, Variable cost = $$14,000$$, Output = $$205$$ units. What is the average total cost (ATC)?

Accepted Answer

$$ATC = \frac{15,000 + 14,000}{205} = 141.46$$

Question 5

Which of the following is NOT a characteristic of perfect competition?

Accepted Answer

Firms can influence the market price by changing their output.

Question 6

If the supply curve for wheat shifts to the left due to a drought, what is the most likely effect on equilibrium price and quantity?

Accepted Answer

Equilibrium price rises and equilibrium quantity falls.

Question 7

Given the demand curve $$Q_d = 500 - 5P$$, what is the slope of the demand curve?

Accepted Answer

$$-5$$

Question 8

If a firm is producing at a level where $$MC = ATC$$, what does this indicate about the cost curves?

Accepted Answer

The firm is at the minimum point of the average total cost curve.

Question 9

Suppose the price of a substitute good increases. What is the expected effect on the demand for the original good?

Accepted Answer

Demand for the original good increases.

Question 10

A monopolist faces the demand curve $$Q = 410 - 5P. If $$marginal cost is $$10$$, what is the profit-maximizing price?

Accepted Answer

$$P = 80$$

Question 11

Which of the following is an example of an explicit cost for a firm?

Accepted Answer

Wages paid to employees

Question 12

If the price elasticity of demand for a product is $$-1$$, what will happen to total revenue if the price increases by 10%?

Accepted Answer

Total revenue will not change.

Question 13

In the short run, if a firm is producing where $$P \u003e AVC$$ but $$P \u003c ATC$$, what should the firm do?

Accepted Answer

Continue to produce in the short run.

Question 14

Which of the following market structures is characterized by differentiated products and many sellers?

Accepted Answer

Monopolistic competition

Question 15

If the marginal product of labor is less than the average product of labor, what happens to the average product?

Accepted Answer

Average product decreases.

Question 16

A firm faces the following demand curve: $$Q = 225 - 20P. $$What is the quantity demanded when $$P = 5$$?

Accepted Answer

$$Q = 125$$

Question 17

Which of the following is a plausible reason for diminishing marginal returns in production?

Accepted Answer

Adding more workers leads to overcrowding and inefficiency.

Question 18

If a firm’s total revenue is $$130,000$$, explicit costs are $$87,000$$, and implicit costs are $$50,000$$, what is the economic profit?

Accepted Answer

$$-7,000$$

Question 19

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

Accepted Answer

Each firm chooses its best strategy given the strategy chosen by the other firm.

Question 20

If the price of a complementary good falls, what is the expected effect on the demand for the original good?

Accepted Answer

Demand for the original good increases.

Microeconomics Study Guide: Solutions to End of Chapter Problems (Farnham, Economics for Managers, 3e)

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