Question 1

Suppose Country A can produce either 10 tons of wheat or 5 tons of steel with its available resources, while Country B can produce either 8 tons of wheat or 8 tons of steel. Which country has the comparative advantage in producing steel, and why?

Accepted Answer

Country B, because its opportunity cost of producing steel is lower.

Question 2

Which of the following best describes a public good?

Accepted Answer

A good that is non-excludable and non-rival in consumption.

Question 3

A factory emits pollution as a byproduct of production. The government imposes a Pigouvian tax to correct this externality. What is the purpose of this tax?

Accepted Answer

To incentivize the factory to produce at the socially optimal output level.

Question 4

In a competitive labor market, a firm will hire workers up to the point where:

Accepted Answer

$$MP 	imes P = W$$

Question 5

Which of the following is NOT a reason for wage inequality in the labor market?

Accepted Answer

Perfect competition in all labor markets

Question 6

A monopolist faces the demand curve $$P = 10 - Q. $$What is the marginal revenue (MR) curve?

Accepted Answer

$$MR = 10 - 2Q$$

Question 7

Which of the following is true about monopolistic competition in the long run?

Accepted Answer

Firms earn zero economic profit due to free entry and exit.

Question 8

In the Prisoners’ Dilemma, what is the Nash equilibrium?

Accepted Answer

Both players confess.

Question 9

Suppose you invest $1,000 at an annual interest rate of 5\%. What will be the value after 3 years, using the compound interest formula?

Accepted Answer

$$1,157.63$$

Question 10

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

Accepted Answer

Fish in the ocean

Question 11

If the probability of winning $500 is 0.2 and the probability of winning nothing is 0.8, what is the expected value of the gamble?

Accepted Answer

$$100$$

Question 12

Which of the following best describes the Coase Theorem?

Accepted Answer

Private bargaining can lead to efficient outcomes if property rights are well-defined and transaction costs are low.

Question 13

A monopolist maximizes profit by producing the quantity where:

Accepted Answer

$$MR = MC$$

Question 14

Which of the following is a characteristic of an oligopoly?

Accepted Answer

Few firms, each with some market power

Question 15

If the supply of labor increases due to population growth, what happens to the equilibrium wage and quantity of labor employed?

Accepted Answer

Wage decreases, quantity increases

Question 16

Which of the following is an example of statistical discrimination in the labor market?

Accepted Answer

An employer uses group characteristics as a proxy for productivity.

Question 17

If a monopolist can perfectly price discriminate, what happens to consumer surplus?

Accepted Answer

It becomes zero.

Question 18

Suppose you are offered $$1,000 today or 1$$,100 one year from now. If your discount rate is 8\%, which option has a higher present value?

Accepted Answer

Taking $1,000 today

Question 19

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

Accepted Answer

Long-run economic profits

Question 20

If a good is non-excludable but rival in consumption, what type of good is it?

Accepted Answer

Common pool resource

Microeconomics Final Exam Review: Chapters 8–15 Study Guide

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