Question 1

If marginal cost ($$MC) is $$above average total cost ($$ATC$$), what happens to $$ATC as $$output increases?

Accepted Answer

ATC will rise

Question 2

Which short-run cost curve is never U-shaped?

Accepted Answer

Average fixed cost ($$AFC)$$

Question 3

Refer to the cost table provided. What is the value of $$W ($$TVC at output 5)?

Accepted Answer

$$W = 5$$

Question 4

If a natural monopolist is forced to charge a price equal to marginal cost ($$MC$$), what is the likely outcome?

Accepted Answer

It will not be able to make economic profits

Question 5

Minimum efficient scale is the quantity at which:

Accepted Answer

Economies of scale end

Question 6

In which case are economic profits necessarily positive?

Accepted Answer

Total revenues exceed total costs

Question 7

What is the first step when calculating a firm’s profit or loss?

Accepted Answer

Find the quantity where $$MR = MC$$

Question 8

Why does the market supply curve in a perfectly competitive industry shift to the right when more firms enter?

Accepted Answer

There are more marginal cost curves to add during the horizontal summation process

Question 9

If a perfectly competitive firm is making short-run losses and expects market conditions to stay the same, what should it do?

Accepted Answer

Shut down temporarily

Question 10

In the long run, what can a monopoly firm do that firms in other market structures cannot?

Accepted Answer

Earn economic profits

Question 11

If demand falls in a decreasing cost industry, then in the long run:

Accepted Answer

Price will return to its previous level

Question 12

If a consumer cannot tell the difference between products produced by different firms in the same industry, the market structure is most likely:

Accepted Answer

Perfect competition

Question 13

A firm that engages in price discrimination will ___ than an otherwise identical firm that does not.

Accepted Answer

Make more profit and produce more quantity

Question 14

Is price discrimination good for consumers?

Accepted Answer

It is good for some consumers and bad for others

Question 15

A monopolistically competitive firm is producing 10 units, charging $$10, MR = 6$, MC = 8$, $$ATC = 9$. What can you conclude?

Accepted Answer

The profits of the firm are negative

Question 16

If a monopolist can sell nine units at $$6, or ten units at 5.75$$, what is the marginal revenue of the tenth unit?

Accepted Answer

$$MR = 3.50$$

Question 17

Profit-maximizing firms enter a competitive market when, for existing firms,

Accepted Answer

Price exceeds average total cost

Question 18

An upward sloping portion of the long run average total cost curve indicates:

Accepted Answer

Diseconomies of scale

Question 19

In a monopolistically competitive market, if the additional revenue from advertising equals the additional cost, the firm should:

Accepted Answer

Maintain its current amount of advertising

Question 20

If the government introduces a tuition cap below current tuition prices, what will happen in the market for higher education?

Accepted Answer

It would cause a shortage of higher education

Microeconomics Practice Final Exam – Step-by-Step Study Guidance

Study Guide - Practice Questions