Question 1

Which of the following best describes the law of demand in microeconomics?

Accepted Answer

As the price of a good increases, the quantity demanded decreases, ceteris paribus.

Question 2

Suppose the market for coffee is perfectly competitive. If the equilibrium price is $$5 and a firm tries to sell coffee for 6$$, what will likely happen?

Accepted Answer

The firm will lose customers to competitors selling at the equilibrium price.

Question 3

If 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 4

Which of the following is NOT a characteristic of a monopoly?

Accepted Answer

Perfect information

Question 5

A firm in monopolistic competition faces the following demand curve: $$P = 50 - Q. If $$the firm’s marginal cost is constant at $$MC = 10$$, what is the profit-maximizing quantity?

Accepted Answer

$$Q = 10$$

Question 6

Which of the following best explains why oligopolies may engage in collusion?

Accepted Answer

To maximize joint profits by acting like a monopoly

Question 7

If a country can produce either 100 units of wheat or 200 units of corn, and another country can produce either 80 units of wheat or 160 units of corn, which country has the comparative advantage in corn?

Accepted Answer

The second country

Question 8

Which formula represents marginal cost?

Accepted Answer

$$MC = \frac{\Delta TC}{\Delta Q}$$

Question 9

A consumer’s budget constraint is $$100$$, and the prices of goods X and Y are $$P_X = 10$$ and $$P_Y = 20. $$What is the maximum number of units of Y the consumer can buy if they buy only Y?

Accepted Answer

5

Question 10

Which of the following shifts the demand curve for a normal good to the right?

Accepted Answer

An increase in the price of a substitute good

Question 11

If the price elasticity of demand for a product is $$-2$$, what does this imply?

Accepted Answer

A 1% increase in price leads to a 2% decrease in quantity demanded

Question 12

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

Accepted Answer

National defense

Question 13

Suppose a firm’s total cost function is $$TC = 100 + 5Q. $$What is the average total cost when $$Q = 10$$?

Accepted Answer

$$ATC = 15$$

Question 14

Which of the following is most likely to result from a price ceiling set below the equilibrium price?

Accepted Answer

A shortage of the good

Question 15

If a firm in perfect competition faces a market price of $$P = 8$$ and its marginal cost is $$MC = 10$$, what should the firm do to maximize profit?

Accepted Answer

Decrease output

Question 16

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

Accepted Answer

The value of the next best alternative forgone

Question 17

A country imposes a tariff on imported steel. What is the most likely effect on domestic steel producers?

Accepted Answer

Domestic producers will benefit from reduced foreign competition.

Question 18

Which of the following is true about consumer surplus?

Accepted Answer

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

Question 19

If a firm’s marginal revenue is less than its marginal cost, what should the firm do?

Accepted Answer

Decrease output

Question 20

Which of the following is a likely result of international trade?

Accepted Answer

Countries specialize in goods for which they have a comparative advantage.

Microeconomics Syllabus and Study Guide: Foundations, Markets, and Policy

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