Question 1

Suppose the price of coffee increases. According to the law of demand, what will most likely happen to the quantity demanded of coffee, ceteris paribus?

Accepted Answer

The quantity demanded will decrease.

Question 2

A market is in equilibrium when:

Accepted Answer

The quantity supplied equals the quantity demanded.

Question 3

Which of the following best describes a public good?

Accepted Answer

A good that is non-rival and non-excludable.

Question 4

If a market experiences a surplus, what is likely to happen to the price and why?

Accepted Answer

Price will fall because quantity supplied exceeds quantity demanded.

Question 5

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Products are differentiated.

Question 6

A monopolist faces the following demand curve: $$Q = 100 - 2P. $$What is the inverse demand function?

Accepted Answer

$$P = 50 - 0.5Q$$

Question 7

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

Accepted Answer

A factory emitting pollution that affects nearby residents.

Question 8

Suppose a country can produce either 10 units of wine or 20 units of cheese with the same resources. What is the opportunity cost of producing one unit of cheese?

Accepted Answer

0.5 units of wine

Question 9

Producer surplus is best defined as:

Accepted Answer

The difference between the price producers receive and the minimum price they are willing to accept.

Question 10

A tariff imposed on imported steel will most likely:

Accepted Answer

Increase domestic producer surplus and decrease total welfare.

Question 11

Which of the following is a plausible argument against free trade?

Accepted Answer

Free trade can harm certain domestic industries due to increased competition.

Question 12

If a monopolist can perfectly price discriminate, what happens to consumer surplus?

Accepted Answer

Consumer surplus is eliminated.

Question 13

Which of the following is an example of a common resource?

Accepted Answer

A public park during a festival

Question 14

Suppose the total cost (TC) for a firm is given by $$TC = 100 + 5Q. $$What is the variable cost (VC) when $$Q = 10$$?

Accepted Answer

$$VC = 50$$

Question 15

Which of the following best describes the 'tragedy of the commons'?

Accepted Answer

Common resources are overused because individuals ignore the negative effects on others.

Question 16

A country has an absolute advantage in producing a good if:

Accepted Answer

It can produce more of the good using the same resources as another country.

Question 17

If the market price is above the equilibrium price, which of the following will occur?

Accepted Answer

A surplus will develop.

Question 18

Which of the following is a property of a club good?

Accepted Answer

Non-rival and excludable

Question 19

Suppose a firm in a perfectly competitive market faces a market price of $$P = 20. If $$the firm's marginal cost (MC) at $$Q = 10 is$$ $$MC = 20$$, what should the firm do to maximize profit?

Accepted Answer

Maintain output at $$Q = 10$$ because $$MC = MR.$$

Question 20

Which of the following is an example of price discrimination?

Accepted Answer

A movie theater charging different prices for adults and children.

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