Question 1

Which of the following best describes the primary objective of microeconomics?

Accepted Answer

To analyze the economic behavior of individuals, households, and firms within an economy, focusing on how they make decisions about allocating scarce resources.

Question 2

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

Accepted Answer

The quantity demanded will decrease.

Question 3

A bakery faces the following costs: fixed costs of $100 per day and variable costs of $2 per loaf of bread. If the bakery produces 50 loaves in a day, what is the average total cost (ATC) per loaf?

Accepted Answer

$\$4$

Question 4

If the cross-price elasticity of demand between two goods is positive, what does this indicate about the relationship between the goods?

Accepted Answer

They are substitutes.

Question 5

Which of the following equations correctly represents the profit-maximizing condition for a perfectly competitive firm?

Accepted Answer

$MR = MC$

Question 6

A government imposes a price ceiling below the equilibrium price in the market for rental apartments. What is the most likely outcome?

Accepted Answer

A shortage of rental apartments.

Question 7

Suppose a firm in a perfectly competitive market faces a market price of $\$10$ per unit. Its marginal cost (MC) is given by $MC = 2Q$, where $Q$ is the quantity produced. What is the profit-maximizing output level?

Accepted Answer

$Q = 5$

Question 8

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

Accepted Answer

A homeowner plants a garden, and neighbors benefit from the improved appearance.

Question 9

If the demand for a product is perfectly inelastic, what is the value of its price elasticity of demand?

Accepted Answer

$0$

Question 10

A monopolist faces the following demand curve: $P = 100 - 2Q$. Its marginal cost is constant at $MC = 20$. What is the profit-maximizing quantity?

Accepted Answer

$Q = 20$

Question 11

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

Accepted Answer

The value of the next best alternative forgone when making a choice.

Question 12

Suppose the government introduces a tax on gasoline. Which of the following is a likely effect in the gasoline market?

Accepted Answer

The supply curve shifts to the left.

Question 13

Which of the following statements about public goods is correct?

Accepted Answer

They are non-rivalrous and non-excludable.

Question 14

A firm’s total revenue (TR) is given by $TR = P 	imes Q$. If the price is $\$15$ and the firm sells 200 units, what is the total revenue?

Accepted Answer

$\$3,000$

Question 15

Which of the following is most likely to cause a rightward shift in the demand curve for electric vehicles?

Accepted Answer

An increase in the price of gasoline.

Question 16

If a firm’s marginal cost (MC) is below its average total cost (ATC), what will happen to the ATC as output increases?

Accepted Answer

ATC will decrease.

Question 17

Which of the following is an example of the tragedy of the commons?

Accepted Answer

Overfishing in a public lake leads to depletion of fish stocks.

Question 18

Suppose a consumer’s marginal utility per dollar spent on apples is greater than that for oranges. What should the consumer do to maximize total utility?

Accepted Answer

Buy more apples and fewer oranges.

Question 19

Which of the following best describes a perfectly competitive market?

Accepted Answer

Many buyers and sellers, identical products, and no barriers to entry.

Question 20

If a country can produce more of a good with the same resources than another country, it is said to have:

Accepted Answer

An absolute advantage.

Principles of Microeconomics: Structured Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards