Question 1

Which of the following best describes the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics examines individual decision-makers and markets, while macroeconomics analyzes the economy as a whole.

Question 2

Suppose the price of coffee increases. According to the law of demand, what is the expected effect on the quantity demanded of coffee, ceteris paribus?

Accepted Answer

Quantity demanded will decrease.

Question 3

If the price elasticity of demand for a product is $$|E_d| = 2.5$$, what does this indicate about consumer responsiveness?

Accepted Answer

Demand is elastic; consumers are highly responsive to price changes.

Question 4

A firm in monopolistic competition faces which of the following market characteristics?

Accepted Answer

Many firms, differentiated products, and free entry and exit.

Question 5

Which formula correctly represents the calculation of total revenue ($$TR) $$for a firm?

Accepted Answer

$$TR = P 	imes Q$$

Question 6

If a firm’s marginal cost ($$MC) is $$less than its marginal revenue ($$MR$$), what should the firm do to maximize profit?

Accepted Answer

Increase output.

Question 7

Which of the following is NOT a critical assumption of perfect competition?

Accepted Answer

There are significant barriers to entry.

Question 8

Suppose a government imposes a price ceiling below the equilibrium price. What is the likely market outcome?

Accepted Answer

A shortage will occur.

Question 9

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

Accepted Answer

The goods are substitutes.

Question 10

A consumer maximizes utility when the marginal utility per dollar spent is equal for all goods. Which equation expresses this condition for two goods, $$A$$ and $$B$$?

Accepted Answer

$$\frac{MU_A}{P_A} = \frac{MU_B}{P_B}$$

Question 11

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative forgone.

Question 12

If a firm faces the following cost structure: $$TC = FC + VC$$, where $$TC is $$total cost, $$FC is $$fixed cost, and $$VC is $$variable cost, what happens to $$TC if $$output increases?

Accepted Answer

Total cost increases due to variable cost.

Question 13

Which of the following is a real-world example of a public good?

Accepted Answer

National defense.

Question 14

Suppose the supply curve for wheat shifts to the right. What is the most likely effect on the equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases.

Question 15

Which equation represents the profit ($$\pi) of a $$firm?

Accepted Answer

$$\pi = TR - TC$$

Question 16

A monopolist maximizes profit by producing the quantity where:

Accepted Answer

$$MC = MR$$

Question 17

Which of the following is most likely to cause a movement along the demand curve for gasoline?

Accepted Answer

A change in the price of gasoline.

Question 18

If a firm in perfect competition earns zero economic profit in the long run, what does this imply?

Accepted Answer

The firm is earning normal profit.

Question 19

Which of the following is a likely effect of a binding minimum wage set above the equilibrium wage?

Accepted Answer

Unemployment increases among low-skilled workers.

Question 20

Suppose a consumer faces the following budget constraint: $$P_x X + P_y Y = I$$, where $$P_x$$ and $$P_y$$ are prices of goods $$X$$ and $$Y$$, and $$I is $$income. If $$P_x$$ increases, what happens to the consumer’s opportunity set?

Accepted Answer

The opportunity set contracts.

ECON102: Introductory Microeconomics Analysis and Policy – Syllabus and Study Guide

Study Guide - Practice Questions

Study Guide - Flashcards