Question 1

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

Accepted Answer

The value of the next best alternative foregone when making a decision.

Question 2

Suppose Country A can produce either 10 units of wheat or 20 units of corn with the same resources, while Country B can produce either 8 units of wheat or 16 units of corn. According to the theory of comparative advantage, which country should specialize in wheat?

Accepted Answer

Country B, because it has a lower opportunity cost in wheat.

Question 3

If the demand for a product increases while the supply remains constant, what will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price will increase and equilibrium quantity will increase.

Question 4

A government sets a price ceiling below the equilibrium price for rental apartments. What is the most likely result?

Accepted Answer

A shortage of apartments, as quantity demanded exceeds quantity supplied.

Question 5

Suppose the price elasticity of demand for a product is $$-2.5. If $$the price increases by $$10\%$$, what is the expected percentage change in quantity demanded?

Accepted Answer

$$-25\%$$

Question 6

Which of the following is a characteristic of a perfectly competitive market?

Accepted Answer

Products are homogeneous.

Question 7

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

$$Q = 20$$

Question 8

Which of the following best explains why oligopolies may engage in collusion?

Accepted Answer

To maximize joint profits by acting like a monopoly.

Question 9

If a firm in monopolistic competition is earning economic profits in the short run, what is likely to happen in the long run?

Accepted Answer

New firms will enter, driving economic profits to zero.

Question 10

Which of the following equations correctly represents the profit-maximizing rule for any firm?

Accepted Answer

$$MR = MC$$

Question 11

Suppose the government imposes a per-unit tax on a good. Which of the following is most likely to occur?

Accepted Answer

The equilibrium price increases and equilibrium quantity decreases.

Question 12

Which philosopher is most closely associated with the concept of the 'invisible hand' guiding market outcomes?

Accepted Answer

Adam Smith

Question 13

A firm’s total cost function is $$TC = 100 + 5Q + Q^2$. What is the marginal cost when Q = 3$?

Accepted Answer

$$MC = 11$$

Question 14

Which of the following best describes a public policy goal of antitrust laws?

Accepted Answer

To promote competition and prevent anti-competitive practices.

Question 15

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

Accepted Answer

The goods are substitutes.

Question 16

A firm in a perfectly competitive market faces a market price of $$P = 50. $$Its average total cost at the profit-maximizing output is $$ATC = 40. If $$the firm sells 100 units, what is its economic profit?

Accepted Answer

$$1,000$$

Question 17

Which of the following is NOT a characteristic of monopolistic competition?

Accepted Answer

Barriers to entry.

Question 18

Suppose the government sets a minimum wage above the equilibrium wage in the labor market. What is the likely outcome?

Accepted Answer

A surplus of labor (unemployment).

Question 19

If a firm’s marginal cost is below its average total cost, what happens to average total cost as output increases?

Accepted Answer

Average total cost decreases.

Question 20

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

Accepted Answer

As more of a variable input is added to a fixed input, the additional output from each new unit of input eventually decreases.

Microeconomics Course Syllabus and Key Topics Overview

Study Guide - Practice Questions

Study Guide - Flashcards