Q: Suppose a tax of $t$ is imposed on a good. The new equilibrium quantity is $Q^*_{tax}$. What is the deadweight loss formula?

$\frac{1}{2} \times t \times (Q^* - Q^*_{tax})$

Q: Which formula correctly calculates consumer surplus?

$CS = \frac{1}{2} \times (Q^*) \times (P_{max} - P^*)$

Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative foregone when making a decision.

Question 2

Suppose a student spends 3 hours studying for microeconomics instead of working a part-time job that pays $15 per hour. What is the opportunity cost of studying?

Accepted Answer

$45

Question 3

If the market price of a product increases, what happens to consumer surplus, assuming all else remains constant?

Accepted Answer

Consumer surplus decreases.

Question 4

Given the demand function $Q_d = 100 - 2P$ and the supply function $Q_s = 20 + 3P$, what is the equilibrium price?

Accepted Answer

$P = 16$

Question 5

Which area on a supply and demand graph represents producer surplus?

Accepted Answer

The area above the supply curve and below the equilibrium price.

Question 6

A government imposes a tax on sellers. What is the immediate effect on the supply curve?

Accepted Answer

The supply curve shifts to the left.

Question 7

If ceteris paribus is violated and consumer incomes increase, what is the likely adjustment in the market for a normal good?

Accepted Answer

Demand increases, causing the equilibrium price and quantity to rise.

Question 8

Calculate the opportunity cost if a factory can produce either 100 units of product A or 200 units of product B. What is the opportunity cost of producing one unit of product A?

Accepted Answer

2 units of product B

Question 9

Which of the following best explains why consumer surplus exists in a market?

Accepted Answer

Consumers are willing to pay more than the market price for some units.

Question 10

Suppose a tax of $t$ is imposed on a good. The new equilibrium quantity is $Q^*_{tax}$. What is the deadweight loss formula?

Accepted Answer

$\frac{1}{2} 	imes t 	imes (Q^* - Q^*_{tax})$

Question 11

A market is in equilibrium. If the government sets a price ceiling below the equilibrium price, what will happen?

Accepted Answer

A shortage will occur.

Question 12

If the supply curve is perfectly inelastic, what is the effect of a tax on the equilibrium quantity?

Accepted Answer

Equilibrium quantity remains unchanged.

Question 13

Which of the following is NOT a violation of the ceteris paribus condition?

Accepted Answer

Holding all other factors constant while changing price.

Question 14

Suppose the government imposes a $10 per unit tax on a good. If the pre-tax equilibrium price is $50 and the post-tax price paid by buyers is $55, what is the price received by sellers?

Accepted Answer

$45

Question 15

If the demand for Begby's Taco Truck's tacos is elastic, what will happen to total revenue if the price increases?

Accepted Answer

Total revenue will decrease.

Question 16

Which formula correctly calculates consumer surplus?

Accepted Answer

$CS = \frac{1}{2} 	imes (Q^*) 	imes (P_{max} - P^*)$

Question 17

A market analysis shows that after a violation of ceteris paribus, the market price is above equilibrium. What adjustment will occur?

Accepted Answer

Quantity supplied will exceed quantity demanded, causing price to fall.

Question 18

If the government provides a subsidy to producers, what is the effect on the supply curve?

Accepted Answer

The supply curve shifts to the right.

Question 19

Which of the following is a real-world example of a violation of ceteris paribus in the market for gasoline?

Accepted Answer

A sudden increase in crude oil prices due to geopolitical conflict.

Question 20

If a market is not in equilibrium due to a sudden increase in demand, what will happen to price and quantity in the short run?

Accepted Answer

Price and quantity will both increase.

Mid-Term Exam Outline: Key Microeconomics Concepts and Applications

Study Guide - Practice Questions

Study Guide - Flashcards