Question 1

Suppose a city government imposes a price ceiling on apartment rents that is below the market equilibrium price. Which of the following is the most likely outcome?

Accepted Answer

A shortage of apartments, as the quantity demanded exceeds the quantity supplied at the lower price.

Question 2

If the price elasticity of demand for a product is $$-1.2$$, what will happen to total revenue if the firm increases its price?

Accepted Answer

Total revenue will decrease because demand is elastic.

Question 3

Which of the following best describes the law of diminishing marginal returns?

Accepted Answer

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

Question 4

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 5

Which of the following statements about comparative advantage is correct?

Accepted Answer

A country should specialize in the good for which it has the lowest opportunity cost.

Question 6

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

Accepted Answer

Sellers, because they cannot change the quantity supplied.

Question 7

Which of the following is true about the intersection of the marginal cost (MC) curve and the average total cost (ATC) curve?

Accepted Answer

The MC curve intersects the ATC curve at the ATC curve's minimum point.

Question 8

A monopolist maximizes profit by producing the quantity where:

Accepted Answer

$$MR = MC$$

Question 9

Which of the following goods is both nonrival and nonexcludable?

Accepted Answer

National defense

Question 10

If both the demand and supply curves for a good shift to the right, what can we say about the equilibrium quantity and price?

Accepted Answer

Equilibrium quantity will increase, but the effect on price is ambiguous.

Question 11

Which of the following best explains why monopolies are considered inefficient?

Accepted Answer

They restrict output and charge a price above marginal cost, creating deadweight loss.

Question 12

Suppose a firm in a perfectly competitive market faces a market price of $$\10$ per unit. The firm's average total cost at its profit-maximizing output is $$\$$10$$ per unit. What is the firm's economic profit?

Accepted Answer

Zero economic profit

Question 13

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

Accepted Answer

A factory emitting pollution that affects nearby residents

Question 14

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

Accepted Answer

The goods are substitutes.

Question 15

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

Accepted Answer

There are many close substitutes available.

Question 16

A firm in monopolistic competition will earn zero economic profit in the long run because:

Accepted Answer

Entry of new firms eliminates profits.

Question 17

Suppose a firm faces the following costs: Total cost of producing 10 units is $$\100$, and total cost of producing 11 units is $$\$$108. $$What is the marginal cost of the 11th unit?

Accepted Answer

$$\8$

Question 18

Which of the following is a dominant strategy in game theory?

Accepted Answer

A strategy that is optimal regardless of what the other player does.

Question 19

If a good is rival but nonexcludable, which category does it belong to?

Accepted Answer

Common resource

Question 20

Suppose the government wants to reduce pollution using a market-based policy. Which of the following is an example of such a policy?

Accepted Answer

Imposing a tax on each unit of pollution emitted

Comprehensive Microeconomics Final Exam Study Guide

Study Guide - Practice Questions

Study Guide - Flashcards