Question 1

Suppose a city government imposes a price ceiling on apartment rents that is set below the current market equilibrium. What is the most likely immediate effect in the apartment rental market?

Accepted Answer

A shortage of apartments will occur, as the quantity demanded will exceed the quantity supplied.

Question 2

If the price elasticity of demand for a product is $$-1.5$$, what will happen to total revenue if the firm increases the price of the product?

Accepted Answer

Total revenue will decrease because demand is elastic.

Question 3

A country can produce either 100 units of wheat or 200 units of corn with its available resources. What is the opportunity cost of producing 1 unit of wheat in terms of corn?

Accepted Answer

$$2$$ units of corn

Question 4

Which of the following best describes a public good?

Accepted Answer

It is nonrival and nonexcludable.

Question 5

Suppose the government imposes a per-unit tax on sellers in a market. If the supply is perfectly inelastic and demand is elastic, who bears the greater burden of the tax?

Accepted Answer

Sellers bear the entire burden of the tax.

Question 6

A monopolist faces the following demand curve: $$P = 100 - 2Q. $$Its marginal cost is constant at $$MC = 20. $$What is the profit-maximizing quantity for the monopolist?

Accepted Answer

Question 7

Which of the following statements about the law of diminishing marginal returns is correct?

Accepted Answer

As more units of a variable input are added to fixed inputs, marginal product eventually decreases.

Question 8

If both the demand and supply curves for a good shift to the right, but the increase in supply is greater than the increase in demand, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price falls and equilibrium quantity rises.

Question 9

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

Accepted Answer

A factory emits pollution that affects the health of nearby residents.

Question 10

A perfectly competitive firm will maximize profit by producing the quantity at which:

Accepted Answer

$$MR = MC$$

Question 11

Which of the following best explains why monopolies are considered inefficient from a social welfare perspective?

Accepted Answer

Monopolies restrict output so that price exceeds marginal cost, creating deadweight loss.

Question 12

If the cross-price elasticity of demand between two goods is positive, what does this imply about the relationship between the goods?

Accepted Answer

They are substitutes.

Question 13

Suppose a firm in a monopolistically competitive market is earning positive economic profits in the short run. What is most likely to happen in the long run?

Accepted Answer

New firms will enter, shifting the demand curve left until economic profit is zero.

Question 14

Which of the following is true about the long-run equilibrium in a perfectly competitive market?

Accepted Answer

Price equals minimum average total cost.

Question 15

A firm faces the following costs: Total Fixed Cost (TFC) = $$100$$, Total Variable Cost (TVC) = $$200 at an $$output of $$10$$ units. What is the Average Total Cost (ATC) at this output level?

Accepted Answer

$$ATC = \frac{TFC + TVC}{Q} = \frac{100 + 200}{10} = 30$$

Question 16

Which of the following is most likely to make the demand for a product more elastic?

Accepted Answer

There are many close substitutes available.

Question 17

If a country imposes a tariff on imported steel, what is the most likely effect on the domestic market for steel?

Accepted Answer

The price of steel will increase and imports will fall.

Question 18

Which of the following is an example of a common resource?

Accepted Answer

A public pasture used by many farmers for grazing

Question 19

Suppose a firm is producing at a level where $$MC \u003c MR. $$What should the firm do to maximize profit?

Accepted Answer

Increase output until $$MC = MR$$

Comprehensive Microeconomics Final Exam Study Guide

Study Guide - Practice Questions

Study Guide - Flashcards