Question 1

Which of the following best describes the focus of microeconomics?

Accepted Answer

Microeconomics analyzes the behavior of individual consumers, firms, and industries as they operate in a market economy.

Question 2

Suppose the demand curve for a product is given by $$Q_D = 575 - 5P. $$What is the quantity demanded when the price is $$P = 100$$?

Accepted Answer

$$Q_D = 75$$

Question 3

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

Accepted Answer

Firms have significant control over price.

Question 4

If the price elasticity of demand for a product is $$-4.54$$, how would you classify the demand?

Accepted Answer

Elastic

Question 5

A firm faces the following cost structure: Fixed cost = $$15,000$$, Variable cost = $$14,000$$, Output = $$205$$ units. What is the average total cost (ATC)?

Accepted Answer

$$ATC = \frac{15,000 + 14,000}{205} = 141.46$$

Question 6

If the price of a substitute good rises, what is the expected effect on the equilibrium price and quantity of the original good?

Accepted Answer

Equilibrium price and quantity both rise.

Question 7

Given the demand curve $$Q_D = 625 - 5P$$, what is the price intercept?

Accepted Answer

$$P = 125$$

Question 8

Which of the following is an example of an explicit cost for a business?

Accepted Answer

Wages paid to employees

Question 9

Suppose a firm is producing at a level where $$MC = ATC. $$What does this indicate about the cost curves?

Accepted Answer

The firm is at the minimum point of the average total cost curve.

Question 10

If a firm faces diminishing marginal returns after hiring the fifth worker, what does this imply about the marginal product of labor?

Accepted Answer

Marginal product of labor decreases as more workers are hired.

Question 11

Which of the following market structures is characterized by differentiated products and many sellers?

Accepted Answer

Monopolistic competition

Question 12

If the supply curve for a product shifts to the left due to an increase in input prices, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price rises and equilibrium quantity falls.

Question 13

A firm in a perfectly competitive market is producing where $$P = MC = ATC. $$What is the firm's profit?

Accepted Answer

Zero economic profit

Question 14

If the price elasticity of demand for a product is $$-1$$, what does this imply?

Accepted Answer

Demand is unitary elastic

Question 15

Suppose the demand curve is $$Q = 500 - 5P. If $$the price is $$P = 50$$, what is the quantity demanded?

Accepted Answer

$$Q = 250$$

Question 16

Which of the following would cause a rightward shift in the demand curve for peanut butter?

Accepted Answer

A decrease in the price of bread, a complementary good.

Question 17

If a monopolist is producing at the profit-maximizing output, which of the following is true?

Accepted Answer

Price is greater than marginal cost.

Question 18

A firm’s economic profit is calculated as:

Accepted Answer

Total revenue minus explicit and implicit costs.

Question 19

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

Accepted Answer

The goods are complements.

Question 20

Suppose a firm’s total cost function is $$TC = 500 + 2Q. $$What is the marginal cost (MC)?

Accepted Answer

$$MC = 2$$

Microeconomics: Structured Study Notes and Problem Solutions

Study Guide - Practice Questions

Study Guide - Flashcards