Question 1

Suppose the demand for a product is given by $Q_D = 120 - 4P$ and the supply is given by $Q_S = 2P$. What is the equilibrium price and quantity in this market?

Accepted Answer

Equilibrium price is $P = 15$, equilibrium quantity is $Q = 60$

Question 2

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

Accepted Answer

The value of the next best alternative foregone when a choice is made

Question 3

If the price elasticity of demand for a product is $-2$, what will happen to total revenue if the price increases?

Accepted Answer

Total revenue will decrease

Question 4

A firm’s marginal cost (MC) is given by $MC = 2Q$. If the market price is $P = 20$ in perfect competition, what is the profit-maximizing output for the firm?

Accepted Answer

$Q = 10$

Question 5

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Products are differentiated

Question 6

Suppose a monopolist faces the demand curve $P = 100 - Q$ and has a constant marginal cost of $MC = 40$. What is the profit-maximizing quantity?

Accepted Answer

$Q = 30$

Question 7

If a country has a comparative advantage in producing wheat, what does this imply?

Accepted Answer

It can produce wheat at a lower opportunity cost than other countries

Question 8

Which of the following best explains why the demand curve is downward sloping?

Accepted Answer

As price decreases, the quantity demanded increases due to substitution and income effects

Question 9

A public good is characterized by which two properties?

Accepted Answer

Non-excludability and non-rivalry

Question 10

Suppose the government imposes a price floor above the equilibrium price in the wheat market. What is the most likely outcome?

Accepted Answer

A surplus of wheat

Question 11

If the marginal product of labor (MPL) is decreasing as more workers are hired, which economic principle is being illustrated?

Accepted Answer

Principle of diminishing marginal product

Question 12

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

Accepted Answer

A factory emitting pollution that affects nearby residents

Question 13

In the context of game theory, what is a Nash Equilibrium?

Accepted Answer

A situation where no player can improve their payoff by unilaterally changing their strategy

Question 14

Suppose a monopolistically competitive firm is earning positive economic profits in the short run. What will happen in the long run?

Accepted Answer

Firms will enter the market, driving profits to zero

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’s total cost is given by $TC = 100 + 5Q + Q^2$. What is the marginal cost (MC) function?

Accepted Answer

$MC = 5 + 2Q$

Question 17

Which of the following is a likely result of a binding quota on imports?

Accepted Answer

Domestic producers gain, consumers lose

Question 18

Suppose the present value of receiving $100$ in one year is calculated using an interest rate of $5\%$. What is the present value?

Accepted Answer

$PV = \$95.24$

Question 19

Which of the following is a solution to the tragedy of the commons?

Accepted Answer

Establishing property rights

Question 20

If a firm’s average total cost (ATC) is minimized at $Q = 50$, and the market price is equal to the minimum ATC, what is the firm’s economic profit?

Accepted Answer

Zero

Microeconomics Final Exam Study Guide: Chapters 1–15

Study Guide - Practice Questions

Study Guide - Flashcards