Question 1

Suppose a country can produce either 100 units of wheat or 200 units of corn using all its resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

2 units of corn

Question 2

If the demand for a product 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

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

Accepted Answer

It measures how much quantity demanded changes in response to a change in price.

Question 4

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

Accepted Answer

A shortage of rental apartments

Question 5

If a monopolist faces the demand curve $$P = 50 - Q$$ and has constant marginal cost of $$MC = 10$$, what is the profit-maximizing quantity?

Accepted Answer

$$Q = 20$$

Question 6

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

Accepted Answer

Barriers to entry are high

Question 7

Suppose the government introduces a tax of $$t$$ per unit on a good. Which formula represents the new supply curve if the original supply curve is $$Q_s = 10 + 2P$$?

Accepted Answer

$$Q_s = 10 + 2(P - t)$$

Question 8

A firm in the short run has fixed costs of $$FC = 100$$ and variable costs given by $$VC = 5Q. $$What is the average total cost (ATC) when $$Q = 10$$?

Accepted Answer

$$ATC = 20$$

Question 9

Which of the following best explains why monopolies can earn long-run economic profits?

Accepted Answer

They face no competition due to barriers to entry

Question 10

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

Accepted Answer

Tea and coffee are substitutes

Question 11

A competitive firm maximizes profit by producing the quantity where:

Accepted Answer

$$P = MC$$

Question 12

Which of the following is an example of a market failure?

Accepted Answer

Pollution from a factory affecting nearby residents

Question 13

If a firm faces a downward-sloping demand curve, which market structure is it most likely operating in?

Accepted Answer

Monopoly

Question 14

Suppose the marginal cost (MC) of producing widgets is $$MC = 4Q. If $$the market price is $$P = 40$$, how many widgets should a perfectly competitive firm produce?

Accepted Answer

$$Q = 10$$

Question 15

Which of the following policies is most likely to correct a negative externality?

Accepted Answer

Imposing a tax equal to the external cost

Question 16

If the price of a good increases and total revenue decreases, what can you conclude about the price elasticity of demand?

Accepted Answer

Demand is elastic

Question 17

A firm faces the following cost structure: $$TC = 50 + 2Q^2$. What is the marginal cost (MC) function?

Accepted Answer

$$MC = 4Q$$

Question 18

Which of the following is a result of price discrimination by a monopoly?

Accepted Answer

Consumer surplus decreases

Question 19

If a country specializes in producing the good for which it has a comparative advantage, what is the likely outcome?

Accepted Answer

Total world output increases

Question 20

Suppose a firm in monopolistic competition earns zero economic profit in the long run. What does this imply about the relationship between price and average total cost (ATC)?

Accepted Answer

Price equals average total cost ($$P = ATC)$$

Principles of Microeconomics – Syllabus and Course Structure

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