Question 1

Suppose the government imposes a binding price ceiling on a competitive market. Which of the following is most likely to occur as a result?

Accepted Answer

A shortage will develop because quantity demanded exceeds quantity supplied.

Question 2

A monopolist faces the following demand curve: $$P = 100 - 2Q. $$Its total cost function is $$TC = 20Q + 100. $$What is the profit-maximizing output for the monopolist?

Accepted Answer

$$Q = 16$$

Question 3

Which of the following best describes the 'efficient market hypothesis' as it relates to stocks?

Accepted Answer

Stock prices always reflect all available information, making it impossible to consistently outperform the market.

Question 4

If a firm experiences diminishing marginal returns, which of the following is true as it increases the quantity of a variable input?

Accepted Answer

Marginal product of the variable input decreases.

Question 5

A perfectly competitive firm faces a market price of $$P = 50. $$Its total cost function is $$TC = 20 + 10Q. $$What is the firm's profit-maximizing output in the short run?

Accepted Answer

$$Q is as $$large as possible, limited only by capacity, since $$P \u003e MC at $$all positive $$Q.$$

Question 6

Which of the following is a characteristic of a natural monopoly?

Accepted Answer

Average total cost declines over the relevant range of output due to economies of scale.

Question 7

Suppose a $$10$$ per-unit excise tax is imposed on a good with perfectly inelastic demand. Who bears the entire burden of the tax?

Accepted Answer

Consumers bear the entire burden.

Question 8

Which of the following best describes X-inefficiency in the context of monopoly?

Accepted Answer

The monopolist fails to minimize costs due to lack of competitive pressure.

Question 9

A monopolistically competitive firm in the long run will:

Accepted Answer

Earn zero economic profit due to free entry and exit.

Question 10

Which of the following is true about the marginal revenue product (MRP) of labor?

Accepted Answer

It is the additional revenue generated by employing one more unit of labor.

Question 11

Suppose the Herfindahl-Hirschman Index (HHI) for an industry is $$2,500. $$What does this indicate about the market structure?

Accepted Answer

The industry is highly concentrated, suggesting oligopoly or monopoly.

Question 12

If a firm’s total revenue is $$TR = 200Q$$ and its total cost is $$TC = 100 + 150Q$$, what is the firm’s economic profit when $$Q = 10$$?

Accepted Answer

$$500$$

Question 13

Which of the following is an example of product differentiation in monopolistic competition?

Accepted Answer

A smartphone company offering unique features and branding.

Question 14

In the short run, a perfectly competitive firm will shut down if:

Accepted Answer

Price is less than average variable cost.

Question 15

Which of the following best describes the concept of economic rent?

Accepted Answer

The payment to a factor of production in excess of what is needed to keep it in its current use.

Question 16

Suppose a market is characterized by mutual interdependence among firms. Which market structure does this best describe?

Accepted Answer

Oligopoly

Question 17

If the government wants to maximize tax revenue from a good, it should tax goods with which type of price elasticity of demand?

Accepted Answer

Perfectly inelastic demand

Question 18

Which of the following statements about the Lorenz curve is correct?

Accepted Answer

The Lorenz curve shows the distribution of income or wealth within a population.

Question 19

A firm in a perfectly competitive market has the following cost structure: $$TC = 100 + 5Q + Q^2$. If the market price is P = 25$, what is the profit-maximizing output?

Accepted Answer

$$Q = 20$$

Question 20

Which of the following is a likely consequence of price discrimination by a monopolist?

Accepted Answer

Consumer surplus is reduced and the monopolist's profit increases.

Microeconomics Final Exam Review: Key Concepts and Structures

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