Question 1

Which of the following best describes the central focus of microeconomics?

Accepted Answer

The analysis of the behavior of individual consumers, firms, and the interaction of these agents in markets.

Question 2

Suppose the market for electric cars is initially in equilibrium. If the government introduces a subsidy for electric car producers, which of the following is the most likely immediate effect on the market equilibrium?

Accepted Answer

The supply curve shifts to the right, leading to a lower equilibrium price and higher quantity.

Question 3

Which of the following statements about opportunity cost is correct?

Accepted Answer

Opportunity cost is the value of the next best alternative forgone when a choice is made.

Question 4

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

Accepted Answer

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

Question 5

A government imposes a price ceiling below the equilibrium price in the rental housing market. Which of the following outcomes is most likely?

Accepted Answer

A shortage of rental housing units.

Question 6

Suppose a firm in a perfectly competitive market faces the following cost structure: Total Cost $$TC = 100 + 5Q + Q^2$, where Q$ is output. If the market price is P = 25$, what is the profit-maximizing output level?

Accepted Answer

$$Q = 10$$

Question 7

Which of the following best explains why monopolies can earn long-run economic profits, unlike firms in perfect competition?

Accepted Answer

Barriers to entry prevent other firms from entering the market.

Question 8

If a consumer's marginal utility per dollar spent on good $$X is $$greater than that for good $$Y$$, what should the consumer do to maximize total utility?

Accepted Answer

Buy more of good $$X$$ and less of good $$Y.$$

Question 9

Which of the following is a characteristic of an oligopoly market structure?

Accepted Answer

A few large firms dominate the market and may engage in strategic behavior.

Question 10

Suppose the government introduces a tax on sugary drinks. Which of the following is a likely unintended consequence if the demand for sugary drinks is inelastic?

Accepted Answer

The quantity demanded will decrease slightly, and tax revenue will be high.

Question 11

A firm’s marginal cost is given by $$MC = 4 + 2Q. If $$the market price is $$P = 20 in $$perfect competition, what is the profit-maximizing output?

Accepted Answer

$$Q = 8$$

Question 12

Which of the following best describes the concept of consumer surplus?

Accepted Answer

The difference between the price consumers are willing to pay and the price they actually pay.

Question 13

If a country can produce either 100 units of wheat or 200 units of corn with its resources, what is the opportunity cost of producing one unit of wheat?

Accepted Answer

2 units of corn

Question 14

Which of the following is NOT a likely result of a binding minimum wage set above the equilibrium wage?

Accepted Answer

A shortage of labor in the market.

Question 15

Suppose the cross-price elasticity of demand between tea and coffee is $$+0.8. $$What does this indicate about the relationship between tea and coffee?

Accepted Answer

They are substitutes.

Question 16

A monopolist faces the demand curve $$P = 50 - Q$$ and has constant marginal cost $$MC = 10. $$What is the profit-maximizing quantity?

Accepted Answer

$$Q = 20$$

Question 17

Which of the following is a key assumption of the model of perfect competition?

Accepted Answer

Products are homogeneous.

Question 18

If a firm’s average total cost is minimized at $$Q = 50$$ units, but the firm is producing $$Q = 80$$ units, what can be said about the firm’s cost structure?

Accepted Answer

The firm is experiencing diseconomies of scale.

Question 19

Which of the following government policies is most likely to improve market efficiency in the presence of a negative externality?

Accepted Answer

Imposing a tax equal to the external cost.

Question 20

Suppose a consumer’s budget constraint is $$100 = 5X + 10Y$$, where $$X$$ and $$Y$$ are quantities of two goods. If the consumer spends all their income on $$Y$$, how many units of $$Y$$ can they buy?

Accepted Answer

$$10$$

Principles of Microeconomics (EC1021A650) – Course Syllabus and Structure Study Notes

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