Q: Which equation represents the deadweight loss from a tax?

$DWL = \frac{1}{2} \times (Q_{before} - Q_{after}) \times Tax$

Question 1

Suppose the government imposes a price ceiling on gasoline that is below the equilibrium price. Which of the following is most likely to occur as a result?

Accepted Answer

A shortage of gasoline, as quantity demanded exceeds quantity supplied.

Question 2

If a tax is imposed on sellers of a product, which of the following best describes the effect on the supply curve?

Accepted Answer

The supply curve shifts to the left, decreasing quantity supplied at every price.

Question 3

Which formula correctly calculates consumer surplus in a market?

Accepted Answer

$CS = \int_{0}^{Q^*} [D(q) - P^*] dq$

Question 4

A factory emits pollution that affects nearby residents. Which term best describes this situation?

Accepted Answer

Negative externality

Question 5

Which of the following is an example of a public good?

Accepted Answer

National defense

Question 6

Suppose a tax is imposed on a good with perfectly inelastic demand. Who bears the entire burden of the tax?

Accepted Answer

Consumers

Question 7

Which equation represents the deadweight loss from a tax?

Accepted Answer

$DWL = \frac{1}{2} 	imes (Q_{before} - Q_{after}) 	imes Tax$

Question 8

Which of the following best describes the law of diminishing marginal utility?

Accepted Answer

As a consumer consumes more of a good, marginal utility decreases.

Question 9

A common resource, such as a fishery, is likely to be overused because:

Accepted Answer

It is non-excludable and rival in consumption.

Question 10

Which of the following is true about the socially optimal quantity in the presence of a negative externality?

Accepted Answer

It is less than the market equilibrium quantity.

Question 11

Suppose the marginal utility per dollar spent on apples is higher than that for oranges. What should a rational consumer do?

Accepted Answer

Buy more apples and fewer oranges.

Question 12

Which formula correctly expresses average variable cost (AVC)?

Accepted Answer

$AVC = \frac{VC}{Q}$

Question 13

If a country can produce a good at a lower opportunity cost than another country, it is said to have:

Accepted Answer

Comparative advantage

Question 14

Which of the following is NOT a characteristic of a public good?

Accepted Answer

Rivalry in consumption

Question 15

A tax on cigarettes is intended to reduce smoking due to its negative health effects. This is an example of:

Accepted Answer

Internalizing a negative externality

Question 16

Which equation represents marginal cost (MC)?

Accepted Answer

$MC = \frac{\Delta TC}{\Delta Q}$

Question 17

If the government subsidizes flu vaccinations, which type of externality is it trying to address?

Accepted Answer

Positive externality

Question 18

Which of the following best describes the outcome in the prisoner's dilemma game?

Accepted Answer

Both players act in their own self-interest and end up worse off.

Question 19

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

Accepted Answer

The value of a social media platform increases as more people join.

Question 20

Suppose a firm faces the following costs: fixed cost $FC = 100$, variable cost $VC = 200$, and output $Q = 50$. What is the average total cost (ATC)?

Accepted Answer

$ATC = \frac{100 + 200}{50} = 6$

Microeconomics Study Guide: Welfare, Externalities, Public Goods, Consumer Behavior, and Production

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