Question 1

Suppose the demand for a product is given by $$Q_d = 100 - 2P$$ and the supply is $$Q_s = 20 + 3P. $$What is the equilibrium price?

Accepted Answer

$$P = 16$$

Question 2

If the price elasticity of demand for a good is $$-1.5$$, what does this imply about the good?

Accepted Answer

Demand is elastic; total revenue will decrease if price increases.

Question 3

A firm faces the following total cost function: $$TC = 100 + 5Q + 2Q^2$. What is the marginal cost when Q = 10$?

Accepted Answer

$$MC = 45$$

Question 4

Which of the following best describes a Giffen good?

Accepted Answer

A good for which demand increases as its price increases.

Question 5

If the cross-price elasticity of demand between goods X and Y is $$2.0$$, what does this indicate?

Accepted Answer

X and Y are substitutes.

Question 6

A consumer spends all their income on two goods, A and B. The marginal utility per dollar spent on A is higher than that on B. What should the consumer do to maximize utility?

Accepted Answer

Buy more of A and less of B.

Question 7

Suppose a firm in perfect competition faces a market price of $$P = 50. $$Its marginal cost is $$MC = 10 + 2Q. $$What is the profit-maximizing output?

Accepted Answer

$$Q = 20$$

Question 8

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

$$Q = 10$$

Question 9

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

Accepted Answer

Products are differentiated.

Question 10

If the government imposes a binding price ceiling below the equilibrium price, what is the likely result?

Accepted Answer

A shortage of the good.

Question 11

Suppose the income elasticity of demand for good X is $$-0.8. $$What type of good is X?

Accepted Answer

An inferior good.

Question 12

A firm’s total revenue is $$TR = 200Q - 2Q^2$. What is the marginal revenue when Q = 20$?

Accepted Answer

$$MR = 120$$

Question 13

If the price of a good increases by 10% and the quantity demanded falls by 15%, what is the price elasticity of demand?

Accepted Answer

$$-1.5$$

Question 14

Which of the following statements about consumer surplus is correct?

Accepted Answer

Consumer surplus is the difference between what consumers are willing to pay and what they actually pay.

Question 15

A tax is imposed on sellers of a good. Who bears the greater burden of the tax if demand is more inelastic than supply?

Accepted Answer

Buyers bear the greater burden.

Question 16

If a firm’s average total cost is minimized at $$Q = 50$$, and marginal cost equals average total cost at $$Q = 50$$, what does this imply?

Accepted Answer

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

Question 17

Suppose the government introduces a per-unit subsidy for a good. What is the likely effect on the market equilibrium?

Accepted Answer

Equilibrium price decreases and equilibrium quantity increases.

Question 18

A monopolist faces the demand curve $$P = 60 - Q$$ and has marginal cost $$MC = 20. $$What is the monopolist’s profit-maximizing price?

Accepted Answer

$$P = 40$$

Question 19

If a firm’s production function is $$Q = 2L + 3K$$, where $$L is $$labor and $$K is $$capital, what is the marginal product of labor?

Accepted Answer

$$2$$

Question 20

Which of the following is an example of a positive externality?

Accepted Answer

A homeowner planting a garden that beautifies the neighborhood.

Microeconomics Study Notes: Demand, Supply, Elasticity, and Market Equilibrium

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