Question 1

Which of the following best describes a common resource?

Accepted Answer

Rival and non-excludable

Question 2

Suppose a city park is open to everyone and becomes crowded on weekends, reducing the enjoyment for each visitor. Which economic concept does this illustrate?

Accepted Answer

Tragedy of the Commons

Question 3

A firm has total fixed costs of $$200 and produces 50 units of output. What is its average fixed cost (AFC)?

$$AFC = \frac{TFC}{Q}$

Accepted Answer

$$AFC = \frac{200}{50} = 4$$

Question 4

Which of the following is true for a perfectly competitive firm in the short run?

Accepted Answer

It can earn positive economic profit, zero economic profit, or incur losses.

Question 5

A monopolist faces the following linear demand curve: $$P = 100 - 2Q. $$What is the marginal revenue (MR) curve?

Accepted Answer

$$MR = 100 - 4Q$$

Question 6

If a firm’s total revenue is $$1,000, explicit costs are 700$$, and implicit costs are $$200, what is the economic profit?

$$Economic\ Profit = Total\ Revenue - (Explicit\ Cost + Implicit\ Cost)$

Accepted Answer

$$1,000 - (700 + 200) = 100$$

Question 7

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

Accepted Answer

Significant barriers to entry

Question 8

A monopolist is regulated to set price equal to marginal cost ($$P = MC$$), but marginal cost is below average total cost ($$MC \u003c ATC). $$What is the likely outcome?

Accepted Answer

The monopolist will incur losses and may require a subsidy.

Question 9

If the market price is $$10$$, average total cost (ATC) is $$8$$, and the firm sells $$100$$ units, what is the economic profit?

$$Economic\ Profit = (P - ATC) 	imes Q$$

Accepted Answer

$$(10 - 8) 	imes 100 = 200$$

Question 10

Which of the following best explains why public goods are underprovided by private markets?

Accepted Answer

Because exclusion is difficult and free riding occurs

Question 11

A firm’s marginal cost (MC) curve intersects its average total cost (ATC) curve at ATC’s minimum point. What does this imply?

Accepted Answer

ATC is minimized when MC equals ATC

Question 12

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

Accepted Answer

A toll road with little traffic

Question 13

In the short run, a perfectly competitive firm will shut down if:

Accepted Answer

$$P \u003c AVC$$

Question 14

Which of the following statements about monopoly and perfect competition is correct?

Accepted Answer

A monopoly produces less and charges a higher price than a perfectly competitive market.

Question 15

Suppose a monopolist can perfectly price discriminate. What is the effect on consumer surplus and deadweight loss?

Accepted Answer

Consumer surplus is zero and deadweight loss is eliminated.

Question 16

If a firm’s marginal product (MP) of labor is decreasing as more workers are hired, which law is being illustrated?

Accepted Answer

Law of diminishing marginal product

Question 17

A natural monopoly exists when:

Accepted Answer

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

Question 18

Which formula correctly calculates average variable cost (AVC)?

Accepted Answer

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

Question 19

In the long run, what happens to economic profit in a perfectly competitive market?

Accepted Answer

It becomes zero due to free entry and exit.

Question 20

A two-part tariff is used by a natural monopoly to:

Accepted Answer

Charge a fixed fee plus a per-unit price to help cover fixed costs while keeping per-unit price closer to marginal cost.

Microeconomics Study Notes: Public Goods, Production & Cost, Perfect Competition, and Monopoly

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