Question 1

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

Accepted Answer

The analysis of individual markets and the decision-making processes of households and firms.

Question 2

Suppose the demand for a product is given by $$ Q_d = 100 - 2P $$ and the supply is given by $$ Q_s = 4P . $$What is the equilibrium price?

Accepted Answer

$$ P = 14.29 $$

Question 3

Which of the following is an example of opportunity cost?

Accepted Answer

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

Question 4

If the price of a substitute good increases, what is likely to happen to the demand for the original good?

Accepted Answer

It will increase.

Question 5

A firm in perfect competition faces which of the following demand curves?

Accepted Answer

Perfectly elastic.

Question 6

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

Accepted Answer

$$ MR = MC $$

Question 7

Suppose a monopolist faces the following demand curve: $$ P = 50 - Q . If $$the monopolist's marginal cost is constant at $$ MC = 10 $$, what is the profit-maximizing quantity?

Accepted Answer

$$ Q = 20 $$

Question 8

Which of the following best describes consumer surplus?

Accepted Answer

The difference between what consumers are willing to pay and what they actually pay.

Question 9

If a country can produce a good at a lower opportunity cost than another country, it is said to have:

Accepted Answer

Comparative advantage.

Question 10

Which of the following is a likely result of a binding price ceiling set below the equilibrium price?

Accepted Answer

A shortage of the good.

Question 11

If the cross-price elasticity of demand between two goods is positive, the goods are:

Accepted Answer

Substitutes.

Question 12

Suppose the government imposes a per-unit tax on a good. Which of the following is true?

Accepted Answer

The price paid by buyers increases and the price received by sellers decreases.

Question 13

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Differentiated products.

Question 14

If a firm’s total cost function is $$ TC = 100 + 5Q + Q^2$ $$, what is the marginal cost when $$ Q = 3 $$?

Accepted Answer

$$ MC = 11 $$

Question 15

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 16

Which of the following is an example of a public good?

Accepted Answer

National defense.

Question 17

Suppose two countries, A and B, can produce only wheat and cloth. If country A has a lower opportunity cost of producing wheat than country B, which good should country A specialize in according to the theory of comparative advantage?

Accepted Answer

Wheat.

Question 18

Which of the following is true about the law of diminishing marginal utility?

Accepted Answer

As a consumer consumes more of a good, marginal utility eventually decreases.

Question 19

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

Accepted Answer

Shut down production.

Question 20

Which of the following best describes the concept of elasticity in economics?

Accepted Answer

The responsiveness of quantity demanded or supplied to a change in price.

Table of Contents: Principles of Microeconomics

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