Question 1

Which of the following best describes the difference between a change in demand and a change in quantity demanded?

Accepted Answer

A change in demand refers to a shift of the entire demand curve due to non-price factors, while a change in quantity demanded refers to movement along the demand curve due to a change in the good's price.

Question 2

Suppose the demand for coffee is given by $$ Q_d = 100 - 2P $$ and the supply is $$ Q_s = 20 + 3P . $$What is the equilibrium price?

Accepted Answer

$$ P = 16 $$

Question 3

If the government imposes a price ceiling below the equilibrium price, what is the most likely outcome in the market?

Accepted Answer

A shortage will occur because quantity demanded exceeds quantity supplied.

Question 4

Which of the following best describes the concept of price elasticity of demand?

Accepted Answer

It measures the responsiveness of quantity demanded to changes in price.

Question 5

If the cross-price elasticity of demand between tea and coffee is positive, what does this indicate?

Accepted Answer

Tea and coffee are substitutes.

Question 6

A firm in a perfectly competitive market faces which of the following demand curves?

Accepted Answer

A perfectly elastic (horizontal) demand curve at the market price.

Question 7

Suppose a monopolist faces the following demand curve: $$ P = 50 - Q . If $$the monopolist wants to maximize profit, what condition must be met?

Accepted Answer

Set marginal cost equal to marginal revenue.

Question 8

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

Accepted Answer

A person getting vaccinated, reducing the spread of disease.

Question 9

If the income elasticity of demand for a good is negative, what type of good is it?

Accepted Answer

Inferior good

Question 10

Which of the following best explains why firms in monopolistic competition advertise?

Accepted Answer

To differentiate their product from competitors and increase market share.

Question 11

Suppose the government imposes a tax on a good. Which of the following is most likely to occur?

Accepted Answer

The equilibrium price increases and equilibrium quantity decreases.

Question 12

Which of the following is true about the marginal product of labor in the short run?

Accepted Answer

It eventually declines due to the law of diminishing returns.

Question 13

In the long run, firms experience economies of scale when:

Accepted Answer

Average total cost decreases as output increases.

Question 14

Which of the following is a characteristic of an oligopoly?

Accepted Answer

A few firms with significant market power.

Question 15

If a firm faces the following cost functions: $$ TC = 100 + 5Q $$, what is the marginal cost?

Accepted Answer

$$ MC = 5 $$

Question 16

Which of the following best describes the effect of a subsidy on the market for solar panels?

Accepted Answer

The supply curve shifts to the right, decreasing equilibrium price and increasing quantity.

Question 17

Suppose the price elasticity of demand for gasoline is $$ -0.2 . If $$the price increases by 10%, what is the expected percentage change in quantity demanded?

Accepted Answer

$$ -2	ext{	extpercent} $$

Question 18

Which of the following is NOT a source of market failure?

Accepted Answer

Perfect competition

Question 19

If a firm in a perfectly competitive market can sell as much as it wants at the market price, what is its marginal revenue?

Accepted Answer

Marginal revenue equals the market price.

Question 20

Which of the following best describes the role of government in correcting negative externalities?

Accepted Answer

Imposing taxes or regulations to reduce the external cost.

Principles of Microeconomics: Course Syllabus and Study Guide

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