Question 1

A competitive firm's short-run profit-maximizing output level $$q^* is $$determined by which of the following conditions?

Accepted Answer

$$p = MC_{q^*}$$ and $$p \geq AVC_{q^*}$$

Question 2

Given a cost function $$C(q) = 12 + \frac{q^2$}{8}$$, what is the firm's short-run supply function $$S(p)$$?

Accepted Answer

$$S(p) = 4p$$

Question 3

If the market demand is $$Q(p) = 10 - p$$ and the market supply is $$S(p) = 2p - 2$$, what is the equilibrium price $$p^*$$?

Accepted Answer

$$p^* = 4$$

Question 4

Which of the following best describes the producer surplus in a competitive market?

Accepted Answer

The area below the market price and above the market supply curve, between 0 and $$Q^*$$

Question 5

Suppose a firm faces a long-run cost function $$C(q) = 10q. $$What is the long-run supply curve for this firm?

Accepted Answer

$$p = 10$$ for $$q \u003e 0$$

Question 6

If the marginal cost curve for a firm shifts upward due to an increase in the price of a variable input, what happens to the firm's supply curve?

Accepted Answer

The supply curve shifts upward

Question 7

If there are 10 identical firms in a market, each with a supply function $$S_i(p) = 5p$$, what is the market supply function $$S(p)$$?

Accepted Answer

$$S(p) = 50p$$

Question 8

A price ceiling is imposed below the market-clearing price. Which of the following is a likely outcome?

Accepted Answer

A shortage and a deadweight loss

Question 9

Which equation correctly represents the condition for competitive equilibrium in a market?

Accepted Answer

$$Q(p^*) = S(p^*)$$

Question 10

If a price floor is set above the equilibrium price, what is the most likely effect on the market?

Accepted Answer

A surplus and a deadweight loss

Question 11

Which of the following is NOT a reason for a shift in the supply curve?

Accepted Answer

A change in consumer preferences

Question 12

Producer surplus for producing $$Q^*$$ units at price $$p$$ can be calculated as:

Accepted Answer

$$PS_{Q^*} = R(Q^*) - VC(Q^*)$$

Question 13

Which of the following best describes the effect of a price ceiling on total welfare?

Accepted Answer

Total welfare decreases due to deadweight loss

Question 14

In the long run, a competitive firm will exit the market if:

Accepted Answer

$$p  0$$

Question 15

If the marginal cost of production increases from $$MC_1 to$$ $$MC_2$$, what happens to the profit-maximizing output level at a fixed price $$p$$?

Accepted Answer

It decreases

Question 16

Which of the following is true about total welfare at the competitive equilibrium?

Accepted Answer

It is maximized

Question 17

A technological advancement that decreases marginal cost will have what effect on the supply curve?

Accepted Answer

Shift the supply curve downward

Question 18

If a firm’s marginal cost is always above its average variable cost, what does this imply about the firm’s supply curve?

Accepted Answer

The supply curve is the portion of the MC curve above AVC

Question 19

Which of the following is a correct statement about deadweight loss?

Accepted Answer

It represents the loss in total welfare due to market intervention

Question 20

If the market supply curve is $$S(p) = 7p$$ and the market demand curve is $$Q(p) = 20 - 2p$$, what is the equilibrium quantity?

Accepted Answer

$$q^* = 14$$

Competitive Supply, Market Equilibrium, and Welfare in Microeconomics

Study Guide - Practice Questions