Question 1

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

Accepted Answer

$$P = 16$$

Question 2

Which of the following best describes a public good?

Accepted Answer

A good that is non-rival and non-excludable

Question 3

A monopolist faces the following demand curve: $$P = 50 - Q. If $$the monopolist can perfectly price discriminate (first-degree), what is the formula for profit?

Accepted Answer

$$\pi = Total\ Willingness\ to\ Pay - Total\ Cost$$

Question 4

If a country can produce 10 tons of wheat or 20 tons of rice with the same resources, what is the opportunity cost of producing 1 ton of wheat?

Accepted Answer

$$2$$ tons of rice

Question 5

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

Accepted Answer

Products are differentiated

Question 6

Suppose the government imposes a tariff of $$\5$ per unit on imported cars. If 1,000 cars are imported after the tariff, what is the tariff revenue?

Accepted Answer

$$\50$$,000$

Question 7

A negative externality exists when:

Accepted Answer

The marginal social cost exceeds the marginal private cost

Question 8

If the market price is set above the equilibrium price, which of the following will occur?

Accepted Answer

A surplus, because $$Q_s \u003e Q_d$$

Question 9

A firm’s total cost is $$TC = 100 + 5Q. If $$the firm produces 10 units, what is its average total cost (ATC)?

Accepted Answer

$$ATC = 15$$

Question 10

Which of the following is an argument commonly used against free trade?

Accepted Answer

It can harm domestic industries and lead to job losses

Question 11

If a monopolist can separate consumers into two groups and charge each a different price, this is an example of:

Accepted Answer

Third-degree price discrimination

Question 12

Suppose the marginal cost (MC) of producing a good is $$10$$, and the marginal external cost (MEC) is $$5. $$What is the marginal social cost (MSC)?

Accepted Answer

$$MSC = 15$$

Question 13

A club good is characterized by:

Accepted Answer

Non-rivalry and excludability

Question 14

If the area under the demand curve and above the market price for a good is $$50$$, what does this area represent?

Accepted Answer

Consumer surplus

Question 15

A country exports 500 units of a good. At the world price, domestic supply is 1,200 units and domestic demand is 700 units. What is the quantity of exports?

Accepted Answer

500 units

Question 16

Which of the following is a property of a common resource?

Accepted Answer

It is rival and non-excludable

Question 17

If a firm’s total revenue is $$TR = 200$$ and its total cost is $$TC = 150$$, what is its profit?

Accepted Answer

$$\pi = 50$$

Question 18

Which of the following is an example of a negative pecuniary externality?

Accepted Answer

A new technology lowers the price of an existing product, harming other firms

Question 19

If the area of a triangle representing deadweight loss from a tariff is calculated as $$\frac{1}{2} 	imes 100 	imes 5$$, what is the deadweight loss?

Accepted Answer

$$250$$

Question 20

Which of the following best explains the 'tragedy of the commons'?

Accepted Answer

Overuse of a rival, non-excludable resource leads to depletion

Principles of Microeconomics: Final Exam Study Guide

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