Q: A firm’s total cost (TC) is given by $$TC = FC + VC$$, where $$FC is $$fixed cost and $$VC is $$variable cost. If $$FC = \100$ and VC = 5Q$, what is the average total cost (ATC) when Q = 10$?

$$ATC = \frac{100 + 5 \times 10}{10} = \frac{150}{10} = 15$$

Q: Suppose the marginal product of labor (MPL) is given by $$MPL = 10 - 0.5L$$, where $$L is $$the number of workers. What is the value of $$MPL$$ when $$L = 8$$?

$$MPL = 10 - 0.5 \times 8 = 6$$

Question 1

Suppose a student spends 3 hours studying for a microeconomics exam instead of working at a part-time job that pays $15 per hour. What is the opportunity cost of studying for the exam?

Accepted Answer

$$45, because the student gives up 3 hours of work at 15 $$per hour.

Question 2

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases.

Question 3

If the market for coffee is in equilibrium and there is a sudden increase in the price of tea (a substitute), what is most likely to happen to the equilibrium price and quantity of coffee?

Accepted Answer

Equilibrium price and quantity of coffee will both increase.

Question 4

A firm’s total cost (TC) is given by $$TC = FC + VC$$, where $$FC is $$fixed cost and $$VC is $$variable cost. If $$FC = \100$ and VC = 5Q$, what is the average total cost (ATC) when Q = 10$?

Accepted Answer

$$ATC = \frac{100 + 5 	imes 10}{10} = \frac{150}{10} = 15$$

Question 5

Which of the following statements about perfect competition is correct?

Accepted Answer

Firms in perfect competition are price takers.

Question 6

Suppose the marginal product of labor (MPL) is given by $$MPL = 10 - 0.5L$$, where $$L is $$the number of workers. What is the value of $$MPL$$ when $$L = 8$$?

Accepted Answer

$$MPL = 10 - 0.5 	imes 8 = 6$$

Question 7

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

Accepted Answer

$$Q = 20$$

Question 8

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

Accepted Answer

A person getting vaccinated, reducing disease spread.

Question 9

If a firm in a perfectly competitive market is producing at a level where $$P \u003c AVC$$, what should the firm do in the short run?

Accepted Answer

Shut down immediately.

Question 10

Which of the following best describes the difference between public goods and common resources?

Accepted Answer

Public goods are non-excludable and non-rival, while common resources are non-excludable but rival.

Question 11

Suppose the cross-price elasticity of demand between two goods is positive. What does this imply about the relationship between the two goods?

Accepted Answer

They are substitutes.

Question 12

A firm’s production function is $$Q = L$$^{0.5}$$K^{0.5}$$, where $$L is $$labor and $$K is $$capital. If $$L = 16$$ and $$K = 9$$, what is the output $$Q$?

Accepted Answer

$$Q = 12$$

Question 13

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

Accepted Answer

A technological advancement in electric car manufacturing.

Question 14

In the short run, which cost must a firm pay even if it produces zero output?

Accepted Answer

Fixed cost

Question 15

If a monopolistically competitive firm is earning zero economic profit in the long run, which of the following must be true?

Accepted Answer

Price equals average total cost.

Question 16

Suppose two firms in an oligopoly collude to set prices. What is the likely effect on consumer surplus and deadweight loss compared to perfect competition?

Accepted Answer

Consumer surplus decreases and deadweight loss increases.

Question 17

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

Accepted Answer

A public park is overused and becomes polluted.

Question 18

If the price elasticity of demand for a product is $$-2$$, what will happen to total revenue if the firm increases the price?

Accepted Answer

Total revenue will decrease.

Question 19

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 apartments.

Question 20

Which of the following best explains why public goods are underprovided in a free market?

Accepted Answer

Because of the free-rider problem.

Microeconomics Course Structure and Key Topics

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