Question 1

Which of the following statements is a normative statement?

Accepted Answer

The government should increase the minimum wage to reduce income inequality.

Question 2

Suppose a consumer is deciding how to allocate their budget between two goods, X and Y. The price of X is $$2, the price of Y is 4$$, and the consumer has $20 to spend. Which of the following equations represents the consumer's budget constraint?

Accepted Answer

$$2Q_X + 4Q_Y = 20$$

Question 3

A perfectly competitive market is characterized by which of the following?

Accepted Answer

Many firms sell identical products and no single firm can influence the market price.

Question 4

If the marginal benefit (MB) of consuming an additional unit of a good is greater than the marginal cost (MC), what should a rational optimizing agent do?

Accepted Answer

Increase consumption of the good.

Question 5

Suppose the price elasticity of demand for a product is $$-2. If $$the price increases by 10%, what is the expected percentage change in quantity demanded?

Accepted Answer

$$-20\%$$

Question 6

Which of the following would cause a rightward shift in the demand curve for electric cars?

Accepted Answer

An increase in the price of gasoline.

Question 7

A firm’s marginal cost (MC) is given by $$MC = 2Q. If $$the firm’s total cost (TC) at $$Q = 0 is$$ $$10$$, what is the total cost function?

Accepted Answer

$$TC = Q^2$ + 10$$

Question 8

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

Accepted Answer

2 units of corn

Question 9

Which of the following best describes the free rider problem?

Accepted Answer

It occurs when individuals benefit from a good without paying for it, leading to under-provision of that good.

Question 10

Suppose the market for apartments in a city is in equilibrium. The local government imposes a price ceiling below the equilibrium price. What is the most likely outcome?

Accepted Answer

Excess demand (shortage) of apartments.

Question 11

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 12

A monopolist faces the demand curve $$P = 100 - 2Q. $$What is the marginal revenue (MR) curve?

Accepted Answer

$$MR = 100 - 4Q$$

Question 13

Which of the following is NOT a characteristic of a public good?

Accepted Answer

Rival in consumption

Question 14

Suppose a firm in a perfectly competitive market is producing at a level where $$P \u003c AVC. $$What should the firm do in the short run?

Accepted Answer

Shut down production immediately.

Question 15

If a negative externality exists in a market, what is the relationship between marginal social cost (MSC) and marginal private cost (MPC)?

Accepted Answer

$$MSC \u003e MPC$$

Question 16

Which of the following best explains why the supply curve is upward sloping in a perfectly competitive market?

Accepted Answer

As price increases, firms are willing to supply more because marginal cost increases with output.

Question 17

A country has a comparative advantage in producing a good if:

Accepted Answer

It can produce the good at a lower opportunity cost than other countries.

Question 18

Which of the following is a solution to the Tragedy of the Commons?

Accepted Answer

Establishing property rights or government regulation to limit use.

Question 19

In the context of labor markets, what is human capital?

Accepted Answer

The skills, education, and experience possessed by workers.

Question 20

In a monopolistically competitive market in the long run, what happens to economic profits?

Accepted Answer

Firms earn zero economic profits.

Comprehensive Study Notes for Microeconomics: Principles, Markets, and Applications

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