Q: Which formula correctly represents the calculation of economic profit?

$\text{Economic Profit} = \text{Total Revenue} - (\text{Explicit Costs} + \text{Implicit Costs})$

Q: Which of the following best describes accounting profit?

$\text{Accounting Profit} = \text{Total Revenue} - \text{Explicit Costs}$

Q: Which of the following equations represents the price elasticity of demand?

$\text{Price Elasticity of Demand} = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}$

Question 1

Which of the following best describes the difference between a change in demand and a change in quantity demanded?

Accepted Answer

A change in quantity demanded is caused by a change in price, while a change in demand is caused by non-price factors.

Question 2

Suppose the price of a product increases. What typically happens to the quantity demanded and quantity supplied?

Accepted Answer

Quantity demanded decreases and quantity supplied increases.

Question 3

If both demand and supply increase simultaneously, what happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price may increase, decrease, or stay the same, but equilibrium quantity will increase.

Question 4

Which formula correctly represents the calculation of economic profit?

Accepted Answer

$	ext{Economic Profit} = 	ext{Total Revenue} - (	ext{Explicit Costs} + 	ext{Implicit Costs})$

Question 5

A price floor set above the equilibrium price will most likely result in:

Accepted Answer

A surplus in the market.

Question 6

If the price elasticity of demand for a product is greater than 1, the demand is considered:

Accepted Answer

Elastic

Question 7

Which of the following is NOT a source of monopoly power?

Accepted Answer

Perfect competition

Question 8

A natural monopoly occurs when:

Accepted Answer

A single firm can supply the entire market at a lower cost than multiple firms due to economies of scale.

Question 9

If a monopolist faces the following cost and revenue data: $	ext{Total Revenue} = \$500$, $	ext{Total Cost} = \$300$, what is the monopolist's profit?

Accepted Answer

$\$200$

Question 10

Which of the following best explains why monopolies are often considered undesirable in most cases?

Accepted Answer

They can restrict output and raise prices, leading to allocative inefficiency.

Question 11

Which of the following is a basic reason behind antitrust laws?

Accepted Answer

To promote competition and prevent market power abuse.

Question 12

If a firm increases the price of its product and its total revenue decreases, the demand for its product is:

Accepted Answer

Elastic

Question 13

Which of the following best describes accounting profit?

Accepted Answer

$	ext{Accounting Profit} = 	ext{Total Revenue} - 	ext{Explicit Costs}$

Question 14

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

Accepted Answer

A shortage will occur.

Question 15

If income increases and demand for a good decreases, the good is classified as:

Accepted Answer

An inferior good

Question 16

Which of the following equations represents the price elasticity of demand?

Accepted Answer

$	ext{Price Elasticity of Demand} = \frac{\% 	ext{ change in quantity demanded}}{\% 	ext{ change in price}}$

Question 17

A monopolist maximizes profit by producing the quantity where:

Accepted Answer

$MR = MC$

Question 18

If a monopolist faces a downward-sloping demand curve, what happens to marginal revenue as output increases?

Accepted Answer

Marginal revenue decreases.

Question 19

Which of the following is true about the effect of an increase in both demand and supply on equilibrium price?

Accepted Answer

Equilibrium price may increase, decrease, or stay the same depending on the magnitude of the shifts.

Question 20

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

Accepted Answer

Consumer surplus is eliminated.

Microeconomics Final Exam Study Guide: Key Concepts and Topics

Study Guide - Practice Questions

Study Guide - Flashcards