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Microeconomics Unit 1: Basic Economics Concepts

Key Terms- Define the following: 3 Economic Systems
1. Scarcity 1. Centrally Planned Economies
Individuals, businesses, and governments have Economic system where the government owns the
unlimited wants but limited resources. resources and decides what to make, how to make
2. Consumer Goods vs. Capital Goods it, and who gets it. Total government control of the
Consumer goods- (ex: pizza) goods made for direct economy
consumption 2. Free-Market Economies (Capitalism)
Capital goods- (ex: restaurant oven) goods made for Economic system where individual citizens own
indirect consumption. Goods that make consumer goods the resources and decides what to make, how to
3.Trade-offs make it, and who gets it. Little or no government
ALL possible options given up when you make a choice involvement in the economy
4. Opportunity Cost 3. Mixed Economies
The ONE best option given up when you make a choice Almost all economies are a mixture of the above
including the money, time, and forgone opportunities. systems.
Production Possibilities Curve (Frontier)
Use the chart to create a PPC to the right. Shoes Calculate the
30 Opportunity Cost:
A B C D E A→B: 1 Shoe
Hats 0 1 2 3 4 25 Z= Impossible
Shoes 30 29 25 15 0
B→C: 4 Shoes
20 E→D: 1 Hat
Label the following three points on the C→A: 2 Hats
graph: 15
X= Unemployment/Inefficiency
Y= Efficient 10 X= Inefficient
Z= Impossible given current resource Y= Efficient (on the curve)
5

0 1 2 3 4 Hats
Constant Opportunity Cost Increasing Opportunity Cost
Why does this occur? Resources are easily adaptable Why does this occur? Resources are not easily
between both products. adaptable between both products
Draw the graph below Draw the graph below
At combination A, all
As more tricycles are made, resources are put towards
Bicycles resources that are easily adaptable Bikes
making bikes, including
to producing either good are A resources that are better for
6 A moved away from bicycles and 20 making iPhones. The
towards tricycles. Opportunity 3 B opportunity cost of the first
cost for each tricycle is constant iPhone is small (3 bikes) as
2 17
at 2 bicycles. 5 resources, like electrical
4 B
engineers, are moved away
12 C from making bikes. As
2 C more iPhones are
2 produced, the opportunity
12 cost gets larger.
2
D D
1 2 3 1 2 3
Tricycles iPhones
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Efficiency Shifting the PPC
Difference between allocative and productive Identify the three shifters of the PPC
efficiency: 1. Change in resource quantity or quality
Productive Efficiency- Products are being produced 2. Change in Technology
in the least costly way (any point ON the curve) 3. Change in Trade (Doesn’t change the amount they
Allocative Efficiency- The products being produced can produce, but it does change the amount they can
are the ones most desired by society. Optimal point consume)
depends on the desires of society.
Production Possibilities Practice (draw 3 PPCs with pizza and cars)
Scenario: Workers lose their jobs Scenario: Increase in consumer Scenario: More resources that
due to a recession demand for pizza improve the production of cars
Pizza Pizza Pizza
The curve The curve
doesn’t shift. It is doesn’t shift. Only car
B
just a point Only the production is
inside the curve combination improved
A
changes

Cars Cars Cars

Absolute and Comparative Advantage
Output Questions Input Questions
The table shows the amount of sugar and cars each The table shows the number of hours it takes to produce a
country can make with the same number of resources ton of sausage and a ton of computers
Sugar (tons) Cars Sausage Computers
40 10 2 6
Cuba Canada
(1S costs ¼ Car) (1C costs 4 Sugar) (1S costs 1/3 comp) (1C costs 3 sausg)
50 100 10 10
Mexico UK
(1S costs 2 Cars) (1C costs ½ Sugar) (1S costs 1 comp) (1C costs 1 sausg)
1. Which country has an absolute advantage in sugar? 1. Which country has an absolute advantage in
How about cars? Mexico/Mexico sausage? How about computers? Canada/Canada
2. What is Cuba’s opportunity cost for producing one 2. What is Canada’s opportunity cost for producing one
car? 4 sugar computer? 3 sausage
3. Which country has a comparative advantage in 3. Which country has a comparative advantage in
cars? How about sugar? Mexico/Cuba computers? How about sausage? UK/Canada
4. For both countries to benefit from trade, how much 4. For both countries to benefit from trade, how many
sugar can be traded for each car? 1 Car for sausages can be traded for each computer? 1 comp
___1___ Sugar (any number between 4 and ½) for ___2___ sausage (any number between 3 and 1)
Circular Flow Matrix (Model)
Product Market- Places where individuals buy goods Draw the Circular Flow Matrix
and services from businesses
Factor (Resource) Market- Places where businesses buy
the factors (land, labor, capital) from individuals
Factor Payments- Payments made by businesses. Rent
for land, wages for labor, interest for capital
Transfer Payments- Payments made by the government
to meet a specific goal rather than pay for goods and
services (ex: welfare)

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Microeconomics Unit 2: Demand, Supply, and Consumer Choice

Demand Supply
The Law of Demand: The Law of Supply:
Inverse relationship between price P↑ Qd __↓_ Direct relationship between price P↑ Qs _↑__
and quantity demanded P↓ Qd __↑_ and quantity supplied P↓ Qs _↓__
What is the different between a change in quantity demanded and a change in demand?
A change in quantity demanded is movement along the curve due to a change in price. A change in demand
is when the entire demand curve shifts left or right due to a change in one of the shifters
Changes in Demand and Supply (Shifting the Curve)
What changes demand? (5 Shifters of Demand) What changes supply? (5 Shifters of Supply)
1. Tastes and preferences 1. Prices/availability of inputs (resources)
2. Number of consumers 2. Number of producers
3. Price of related goods- Substitutes and complements 3. Technology
4. Income 4. Government action: taxes & subsidies
5. Future expectations 5. Expectations of future profit
Substitutes: Price of A↑ Demand for B __↑_ Normal Goods: Income ↑ Demand ___↑_
Price of A↓ Demand for B __↓_ Income ↓ Demand ___↓_
Complements: Price of A↑ Demand for B __↓_ Inferior Goods: Income ↑ Demand ___↓_
Price of A↓ Demand for B __↑_ Income ↓ Demand ___↑_
Equilibrium and Disequilibrium Government Involvement
Draw a shortage Draw a surplus Price Ceiling- Legal cap on prices
S S designed to keep prices artificially low
When binding, ceilings go _below__
P2 equilibrium and result in a shortage.
Price Floor- Minimum legal price sellers
Pe Pe can sell a product
When binding, floors go __above_
P1 equilibrium and result in a surplus.
Subsidy- Government payment to
D D
producers designed to encourage them
Qs Qe Qd Qd Qe Qs to produce more
Supply and Demand Practice Double Shift Practice
Demand Decrease Demand Increase If demand increases AND supply increases
then price _indeterminate_ and quantity
Price _↓_ Price _↑_ __increases__
Quantity _↓_ Quantity _↑_ Price
S S1

A B
Supply Decrease Supply Increase
Price _↑_ Price _↓_ D D1
Quantity _↓_ Quantity _↑_
Quantity
Double Shift Rule: If TWO curves shift
at the same time, EITHER price or
quantity will be indeterminate.
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Inelastic Demand Elastic Demand Total Revenue Test

Characteristics Characteristics
Inelastic Demand
1. Necessity 1. Luxury
Price ↑, TR __↑__
2. Few Substitutes 2. Many
Price ↓, TR __↓__
3. Elasticity D Substitutes
Elastic Demand
D coefficient less than 1 3. Elasticity
Price ↑, TR __↓__
coefficient
Price ↓, TR__↑ __
greater than 1
Elasticity of Demand Coefficient Elasticity of Supply Coefficient
Equation- Equation-
Percent change in quantity demanded Percent change in quantity supplied
Percent change in price Percent change in price
Perfectly Inelastic = 0 Perfectly Inelastic = 0
Relatively Inelastic = Less than 1 Relatively Inelastic = Less than 1
Unit Elastic = 1 Unit Elastic = 1
Relatively Elastic = Greater than 1 Relatively Elastic = Greater than 1
Perfectly Elastic = ∞ Perfectly Elastic = ∞
Cross-Price Elasticity of Demand Income Elasticity of Demand
Definition- Shows what happens to one product Definition- Shows what happens to a product when
when the price changes for a different product there is a change in income
Equation- Percent change in quantity of product A Equation- Percent change in quantity
Percent change in price of product B Percent change in income
Positive: _Substitute_ Negative: _Complement_ Positive _Normal good_ Negative _Inferior good_
Consumer Surplus (CS) and Producer Surplus (PS)
Consumer Surplus (CS)- Difference Identify at equilibrium
between how much people are willing to 1. CS- ABC
pay and the price they do pay 2. PS- EFJ
Producer Surplus (PS)- Difference 3. DWL- None
between the price and how much the seller Identify when there is
is willing to sell the product for a price ceiling at $2
Deadweight Loss (DWL)- Lost efficiency 4. CS- ABE
when the optimal quantity is not being 5. PS- J
produced 6. DWL- CF
Welfare Economics and International Trade
The graph shows the domestic market for rice.
Identify and calculate the following at equilibrium
1. Consumer surplus- ABC = $300 = ($10 x 60)/2
2. Producer surplus- EFKMU = $240
3. Total surplus- ABCEFKMU= $540
Identify the following if this country buys rice
from other countries for $5
4. Quantity produced domestically- 30 units
5. Quantity imported- 60 units = (90 – 30)
6. Consumer surplus- ABCEFGJKMNQRT
7. Producer surplus- U
Identify if the government places a tariff of $1
8. Consumer surplus- ABCEFGJ
9. Tariff revenue- QR = $40 ($1 x 40 units)
10. Deadweight Loss- NTText
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Excise Tax Practice

Before tax
1. CS before tax: BACD
2. PS before tax: GHFE
After Tax
3. Tax per unit: $4 Per Unit
4. CS after tax: B
5. PS after tax: G
6. Dead weight loss: DE
7. Total tax revenue to gov: ACHF
8. Total spending by buyers: ACHFGI
9. Total revenue to sellers: GI
10. Total amount of tax buyer pay: AC
11. Total amount of tax sellers pay: HF
12. Is the demand curve between $12 and
$10 elastic, inelastic, or unit elastic?
Elastic. Price fell and total revenue went up
Consumer Choice and Maximizing Utility
Utility Maximizing Rule:
Marginal Utility A = Marginal Utility B
Price of A Price of B
You can choose any combination of two different
activities, the movies ($10) or riding go carts
($5). 3 2
1. If you only have $25, what combination 2 1
maximizes your utility? 2 movies and 1 go cart 1 .4
because you pick the one that gives you the .5 .2
most additional utility per dollar until all the
money is spent. 3. What is the total utility from consuming 3 movies
2. What combo is best if you have $40? and 2 go carts? 75 utils = 30+20+10+10+5
3 Movies and 2 Go Cart
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Unit 3: Costs of Production and Perfect Competition

Production and the Law of Diminishing Marginal Returns
Calculate MP. Plot TP and MP on Graph Output
Number of Total Marginal Stage 1 Stage 2 Stage 3
Workers Product Product 20
0 0 -
1 5 5 TP
15
2 15 10
3 19 4
4 20 1 10
5 20 0
6 18 -2
5
Define the Law of Diminishing Marginal Returns
As variable resources are added to fixed
resources, the additional output from each new
worker will eventually fall.
0 1 2 3 4 5 6 MP Workers
After which worker does diminishing marginal
Identify the three stages of returns: increasing, decreasing,
returns set in? After the 2nd Worker
and negative marginal returns
Revenue and Costs (Define the following)
Total Revenue- Fixed Cost (FC)- Costs that DON’T change as you
Price x Quantity produce more (ex: rent, insurance, etc.)
Accounting Profit- Variable Cost (VC)- Costs that DO change as you
Total Revenue – Explicit Costs produce more (wages to workers, raw materials, etc.)
Economic Profit- Total Cost (TC)- Fixed Costs + Variable Costs
Total Revenue – Explicit and Implicit Costs
Normal Profit- Marginal Cost (MC)- Additional cost to produce one
Zero Economic Profit (breaking even) additional output.
Short Run Cost Curves (at least one fixed resource) Long-Run Cost Curves (all resources are variable)
Draw and Label ATC, AVC, and MC Costs LRATC
Costs MC

ATC
AVC
Output
Economies of Scale- Long run average total cost
(LRATC) falls because mass production techniques
are used.
Diseconomies of Scale- Long run average total cost
Output (LRATC) increase as the firm gets too big and
Vertical distance between ATC and AVC is AFC difficult to manage.
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Calculating ATC, AVC, AFC, and MC

Fill in the blanks for a firm producing boxes of oranges: Assume this firm is in a perfectly
Output Variable Total competitive market and the price is $35
(boxes) AVC AFC ATC MC for each box.
Cost Cost
1. How many boxes should they
0 $0 $10 - - - - produce? Why? 3 Boxes of Oranges,
1 20 $30 $20 $10 $30 $20 Firms should produce as long as the
2 30 $40 $15 $5 $20 $10 additional revenue of a unit is greater
3 60 $70 $20 $3.3 $23 $30 than the additional cost. To maximize
4 100 $110 $25 $2.5 $27 $40 profit, produce where MR = MC
2. Calculate the profit at that quantity
TR= $105 and TC =$70, Profit = $35
Shut Down Point Per-Unit vs. Lump-Sum Characteristics of Perfect Competition
Shut Down Rule: A firm 1. A per unit tax shifts _MC, 1. Many small firms
should shut down if the price AVC, and ATC_ so quantity will 2. Identical products
fall below the minimum AVC _____Change (decrease)____. 3. No barriers to entry
Short-Run Supply Curve: The 2. A lump sum tax shifts __AFC 4. No control over the price
MC curve above minimum and ATC__ so quantity will 5. No economic profit in long run
AVC _____NOT change_______. 6. Efficient
Graphing Perfect Competition
Draw side-by-side graphs showing a perfectly competitive market and firm. Draw the firm making profit
Price Market Price Firm
S MC Firms are price
takers and produce
where MR= MC

PM MR=D=AR=P
Profit ATC

D
QM Quantity QF Quantity

Draw a perfectly competitive market and a firm with the firm making a loss
Price Market Price Firm
S MC
ATC

PM Loss MR=D=AR=P

D
QM Quantity QF Quantity
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Calculation Practice
Assume the price is $14 and the firm produces the
profit maximizing quantity. Identify the following:
1. Quantity- 10 units (MR=MC)
2. Total revenue- $140 = $14 x 10 units
3. Total cost- $100 = $10 x 10 units
4. Economic profit- $40 = $140 - $100
5. What will happen to the number of firms in the
market in the long run? Increase, firms will enter
Assume the market adjust to the long run. Identify:
6. Price- $9 (No economics profit, minimum ATC)
7. Quantity- 7 Units (MR=MC)
8. What will happen to number of firms in the
market? Not change. No incentive to enter or leave
If the price was $5, should the firm shut down in the
short run? Can’t tell, need an AVC curve to know
Perfect Competition in the Long Run
Draw side-by-side graphs showing a perfectly competitive market and firm in long run equilibrium
Price Market Price Firm
S MC

ATC

PM MR=D=AR=P

D
QM Quantity QF Quantity
From Short Run to Long Run
Draw what happens to each graph in the long run Draw what happens to each graph in the long run

Market: Firm: Market: Firm:

Price_↓_ Quantity _↑_ Price_↓_ Quantity_↓_ Price_↑_ Quantity _↓_ Price_↑_ Quantity_↑_
Efficiency in the Long Run
In the long run, perfectly competitive firms have both types of efficiency:
1.Productive Efficiency: they produce the quantity that is the lowest cost (Minimum ATC)
2.Allocative Efficiency: they produce the optimal quantity that society wants (Price = MC)
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Unit 4: Imperfect Competition

Characteristics of the Four Market Structures
Perfect Competition Monopolistic Competition Oligopoly Monopoly
• Many small firms • Large number of sellers • A Few Large Firms • One firm
• Identical products • Differentiated products (Less than 10) • Unique product
• Easy to enter and exit • Easy to enter and exit • High Barriers • High barriers to
• No need to advertise • A lot of non-price • Control Over Price enter and exit
• Firms are “Price competition • Mutual • Price Maker
Takers” • Some control over price Interdependence
Demand and Marginal Revenue Elastic and Inelastic Range
Why is demand greater than marginal revenue for all Price
imperfectly competitive firms? Elastic Inelastic
To sell another unit, the firm must lower the price of the
next unit and the units it could have sold at a higher
price. (It cannot price discriminate)
Why are monopolies inefficient?
1. Price is too high
2. Quantity is too low
3. They cause deadweight loss (P > MC)
Monopoly Graph (profit)
Demand
Draw and label a monopoly making profit Quantity
Price MC Total Revenue MR

PM
ATC
Profit

Total
MR D Revenue
QM Quantity Quantity
Monopoly Graph (loss) Barriers to Entry
Draw and label a monopoly making a loss Identify four common barriers that allow companies
Price MC to gain and maintain market power
ATC 1. Economies of Scale
2. Control of Scare Resources
PM Loss 3. Governmental or Legal Barriers
4. Technological Superiority

Natural Monopolies
What is a natural monopoly?
An industry where it is cheaper and more efficient to
MR Demand have a monopoly rather than several smaller
QM Quantity competing firms. Example: electric companies

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Regulating Monopolies Calculation Practice
Draw a natural monopoly. Identify: unregulated quantity (QM),
socially optimal quantity (QSO) and fair return quantity (QFR)
Price

MC

ATC

1. If this monopoly is unregulated, what is the

total revenue, total cost, and profit?
MR Demand TR= $1000, TC = $800, Profit =$200
QM QFR QSO 2. Shade in Deadweight loss
Quantity See above
Monopoly Practice
If this was competitive market
1. Price and quantity: P4, Q2
2. Consumer surplus: ACP4
If this is an unregulated monopoly
3. Price and quantity: P5, Q1
4. Consumer surplus: ABP5
5. Deadweight loss: BCG
6. Quantity total revenue maximized:Q3 MR=0
7. Quantity if it perfectly price discriminates:Q2
8. Elastic range of the demand curve: AD
9. If the government placed a per unit tax on this
monopoly then price __↑_ and quantity __↓_
10. If the government placed a lump sum subsidy
on this monopoly then price same and quantity
same. (Lump sum subsidies don’t shift MC)
Price Discrimination Perfectly Price Discriminating Monopoly
Identify the three conditions necessary for a firm to Draw and label a price discriminating monopoly
price discriminate Price MC
1. The firm must not be a price taker
2. The firm must be able to segregate the market and
identify consumers that are willing to pay more
3. The firm must be able to make sure consumers Profit ATC
cannot resell the product to other consumers
If a regular unregulated monopoly started perfectly
price discriminating, what would happen to consumer
surplus and deadweight loss?
There would be no consumer surplus and no D = MR
deadweight loss QM Quantity
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Oligopolies and Game Theory
1. If David decides to advertise now and Lindsey Assume that two business owners are deciding
decides to do it later, what is David’s expected between advertising now and advertising later. The
profit? $1000 chart shows expected profit with Lindsey’s on the left
2. What is Lindsey’s dominant strategy? Now
3. What is David’s dominant strategy? None
4. If both owners have the information but do not
actively collude, what will be the outcome?
Both will choose Now
Assume the advertising company offers a deal that
increases the profit for both owners by $2,000 but
only if they advertise later. Based on these changes:
5. What is Lindsey’s dominant strategy? None
6. What is David’s dominant strategy? Later
Kinked Demand Curve Nash Equilibrium
Draw non-colluding oligopoly Definition of Nash Equilibrium-
Price MC The optimal outcome where neither player can make
themselves better off by deviating from the current
strategy
ATC
P

Assume these two firms can choose between pricing

MR D high and pricing low. What is the Nash Equilibrium?
Q Quantity Firm 1 High, Firm 2 Low ($60, $90)

Monopolistic Competition
Draw a Mono. Comp. firm in long-run equilibrium Excess Capacity (define below and label on graph)
Price MC The gap between the minimum ATC output and the
profit maximizing output.
Given current resources, the firm can produce at the
ATC lowest costs (minimum ATC) but they decide not to.
PMC If a monopolistically competitive firm is making a
P = ATC, No profit in the short-run, what will happen to the demand
economic profit and number of firms in the long run?
in the long-run • New firms enter to make profit
• Firms must share same amount of consumers
• Demand for each firm falls until each firm makes
MR D Quantity no economic profit
QMC
What are examples of non-price competition? What are the two goals of advertising?
• Brand names or packaging 1. Increase the demand for the product or service
• Product attributes 2. Make the demand more inelastic
• Service
• Location
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Unit 5: The Resource Market

Define Key Terms
The Resource (Factor) Market- Derived Demand-
All markets where the factors of production (land, The demand for resources is determined (derived) by
labor, capital) are sold by households to businesses the products they help produce. (ex: the demand for
Demand for Labor- carpenters is derived by the demand of homes)
The number of workers that businesses are willing and Marginal Revenue Product (MRP)-
able to hire at different wages The additional revenue generated by an additional
Supply for Labor- resource (worker).
The number of workers that are willing and able to sell Marginal Resource Cost (MRC)-
their labor at different wages The additional cost of an additional resource (worker)

Demand and Supply for Labor Resource Shifters and Equilibrium

Draw a competitive market for plumbers. Label the Shifters of Labor Demand-
equilibrium wage and quantity 1. Change in the demand for the product
S1 S 2. Change in the productivity of the resource
Wage 3. Change in the price of related resources (substitute
W1 and complementary resources)
Shifters of Labor Supply-
We Wage- increases 1. Number of qualified workers
Quantity- decreases 2. Government regulation/licensing
3. Personal values regarding leisure and societal roles
D If the equilibrium wage for electricians is $15 an hour
and the government established a minimum wage of
Q1 Qe Quantity Labor $10 an hour, what will happen to the wage and
Assume the government establishes a certification quantity?
process that makes it harder to be a plumber. Show on They will stay the same. The minimum wage is below
the graph what will happen to the wage and quantity equilibrium and is not binding for electricians
Minimum Wage Labor Market Practice
Draw the results of a minimum wage. Label the 1. If the demand for houses increases, the wage of
quantity supplies (Qs) & the quantity demanded (Qd) carpenters will __↑__ and the quantity will __↑__.
2. Assume bricks and wood are substitute resources.
Wage If the price of bricks increases, the price of wood
Unemployment SL __↑___ and the quantity __↑___.
3. If the government removes all regulations for
$20 A $20 minimum wage becoming a dentist. The wages for dentists will
would increase Qs and __↓__ and the quantity will __↑___.
We decrease Qd resulting in 4. If demand for accountants falls at the same time
a surplus of labor that the supply increases, the wage will __↓__ and
(unemployment) the quantity will __be indeterminate___.
5. Will a binding minimum wage lead to relatively
DL less unemployment when the demand for labor is
inelastic or when it is elastic? When the demand is
Qd Qs Quantity of Labor inelastic there will be less unemployment. The
quantity demanded will decrease a little since
employers still need these workers
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Perfectly Competitive Labor Market and Firm
Draw side-by-side graphs showing a perfectly competitive market and firm hiring workers
Wage Market Wage Firm
S Firms are wage
takers and hire where
MRP = MRC

WM S= MRC

D= MRP
D
QM Quantity QF Quantity
Calculating MRP and MRC
Plot the MRP and MRC for the firm
Marginal Wage
Number of Total Marginal The firm should hire a worker
Revenue as long as the revenue the
Workers Product Product
Product 40
worker generates is greater
0 0 - - than the cost to hire them.
1 5 5 $25 Firms hire where
30
2 13 8 $40 MRP = MRC.
3 18 5 $25
4 21 3 $15 20 SL=MRC
5 20 -1 $-5
1.Assume perfectly competitive product and labor DL=MRP
markets. If the price of the product is $5 and the 10
wage is $20, how many workers should be hired? 3
2.How much is the profit or loss? $90 - $60 = $30
3.Assume that this firm develops a process that makes
only their workers more productive. The wage will 0 1 2 3 4 5 Workers
__stay the same___ and the quantity will ___↑___.
Combining Resources Monopsony
Least cost rule when combing resources- Draw a monopsony and label the unregulated
Marginal Product Labor = Marginal Product of Capital wage and quantity
Price of Labor Price of Capital Wage MRC Supply

Profit maximizing rule for combing resources-

MRPX = MRPY = 1
MRCX MRCY
Assume a company uses two resources, workers and
robots, and the MRC for each is $20. Currently the WM
MRP of the last worker hired is $30 and the MRP of
the last robot is $10. The company should __↑__ the
number of workers and __↓__ the number of robots. MRP = Demand
QM
Quantity
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Unit 6: Market Failures and the Role of the Government

Public Goods Externalities
Why are public goods a market failure? Negative Externality-
Businesses in the free-market won’t provide public A situation that results in external costs on others
goods and service since they can’t earn profit. If causing the marginal social cost to be higher than the
society wants them, the government needs to step in marginal private cost
Two Characteristic of Public Goods: Positive Externality-
1. Nonexclusion-Cannot exclude benefits of the A situation that results in external benefits on others
good. Everyone can use the good, even those that causing the marginal social benefit to be higher than
don’t pay. the marginal private benefit
2. Shared consumption-One person’s consumption of Why are externalities a market failure?
a good does not reduce the usefulness to others. They cause markets to produce the wrong output
Maximizing Rule for Public Goods- Tragedy of the Commons-
Public goods should be produced as long as the A lack of property rights causes individuals to uses
additional benefit to society is greater than the resources in a way that is contrary to the benefits of
additional cost. Produce where MSB = MSC society (example- overfishing)
Negative Externalities Positive Externalities
Draw a negative externality. Label the free market Draw a positive externality. Label the free market
quantity, optimal quantity, and deadweight loss quantity, optimal quantity, and deadweight loss
Price Dead Weight MSC Price
Loss S = MPC Dead Weight
S=MSC
Loss

Consumers ignore the

Firms ignore the social social benefits and
cost and produce at demand only their
their marginal private marginal private
cost (MPC) benefit (MPB)

D=MSB
D=MPB D=MSB
QOptimal Q Free Market Quantity Q Free Market QOptimal Quantity
Correcting Externalities Regulating Monopolies
Solutions to solve a negative externality- Label a monopoly unregulated, socially optimal, and
Per unit tax fair return
Price A= Unregulated
Government regulation decreasing output
B= Fair Return
Solutions to solve a positive externality- C= Soc. Optimal
Per unit subsidy
A MC
Government regulation that increases output
B ATC
How does Coase Theorem seek to solve negative
externalities? C
Coase Theorem suggests that establishing property
rights and allowing the parties involved to negotiate
alternatives leads to a more efficient solution (Ex: MR D
businesses buy the right to pollute up to a set limit) Quantity
Please don’t post online or give to your friends

84
 Thanks for buying this packet. Seriously. Thank you!
Income Inequality
What are transfer payments? Draw and label the Lorenz Curve showing equal
Government payments to individuals or distribution of income and the actual distribution
businesses designed to meet a specific objective
rather than pay for goods or resources. (Ex:
Welfare)
What is the Gini Coefficient?
A statistical measurement of income equality
where perfect equality is 0 and perfect inequality
is 1. On the graph, it is Area A divided by the
sum of areas A and B.
What would happen to the Gini Coefficient if the
government increased the amount it taxes
wealthier citizens and increase transfer payments
to the poor?
The Gini coefficient would get smaller.

Types of Taxes Tax Incidence

1. Progressive Tax- takes a larger percent of Label the amount consumers and producers pay of tax
income from high income groups (takes more
percent from rich people). Price STax
2. Proportional Tax- takes the same percent of S
income from all income groups.
3. Regressive Tax- takes a larger percentage P1
from low income groups (takes more percent
from poor people). Consumer’s
Income Distribution Practice portion of tax
1. What is the difference between income P
inequality and wealth inequality?
Producer’s
Income looks at how earnings are distributed
portion of tax
and wealth inequality looks at how assets are D
distributed
Quantity
2. An increase in job training for low-skilled Who pays more of the tax:
workers would likely ___↓___ income 1. If demand is elastic and supply is inelastic? Producers
inequality and cause the Gini coefficient to 2. If demand is inelastic and supply is elastic? Consumers
___↓___. 3. If demand is perfectly inelastic? Consumers pay all
Congratulations! You’re done with microeconomics

85

Microeconomics 4 An effective price ceiling in the market for
Practice Exam #1 tea will most likely result in a/an
(A) decrease in demand for sugar, a
1 Which of the following factors of complement for tea
production would best be described as (B) increase in demand for coffee, a
human capital? substitute for tea
(A) money used to start a business (C) surplus of tea
(B) skills and training that help workers to (D) shortage of tea
complete their role in producing a finished (E) leftward shift in the supply curve of
product good X
(C) effort put forth by human workers
5 On a downward sloping, straight line
(D) currency provided to businesses
demand curve, which of the following is
through subsidies and other government
always true?
programs
(A) Price elasticity of demand is the same
(E) tools used to produce a finished product
at all points along the curve
2 Which of the following would make it (B) Price elasticity increases as quantity
possible for a country to consume beyond increases
its individual production possibilities (C) Price elasticity decreases as quantity
curve? increases
(A) decreasing the unemployment rate (D) Demand is perfectly elastic at the
(B) producing only products for which they midpoint of the demand curve
have an absolute advantage (E) Total revenue is higher when demand is
(C) importing products from other countries elastic than when demand is inelastic
at a relatively lower opportunity cost
(D) imposing a tariff on all imports 5 Skip this question. If your teacher gave this
(E) producing more consumer goods rather exam to you but he/she didn’t purchase
than capital goods Jacob Clifford’s Ultimate Review Packet
then you
3 Assume that pizza and stromboli are (A) should cheat since your teacher is a
substitutes. Which of the following best cheater
describes the effect on the pizza market if (B) must teach him/her about the free rider
the price of stromboli decreases? problem
(A) Demand for pizza will shift right (C) yell “my econ teacher doesn’t
(B) Demand for pizza will shift left understand econ!”
(C) Supply for pizza will shift right (D) must remind your teacher to do the
(D) Supply for pizza will shift left right thing
(E) Both demand and supply for pizza will (E) should do all of the above
shift left

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6 If consuming one unit of a good yields 50 9 Economic profit can be calculated as
utils and consuming two units of the good accounting profit plus
yields 70 utils, which of the following must (A) Implicit costs
be true? (B) Explicit costs
(A) The marginal utility of the first unit is (C) Total costs
20. (D) Fixed costs
(B) The marginal utility of the second unit (E) Variable costs
is 50.
(C) The marginal utility of the second unit 10 If a perfectly competitive firm produces at
is 20. an output level where price is greater than
(D) The total utility of consuming two units both marginal cost and average variable
is 120. cost, in order to maximize profit in the
(E) The total utility of consuming one unit short run, the firm should
is greater than the total utility of consuming (A) shut down production
two units. (B) produce more
(C) produce less
7 In the short run, diminishing marginal (D) lower price
returns begin when (E) change nothing, they are already
(A) total product of labor begins to fall. maximizing economic profit
(B) marginal product of labor becomes
negative. 11 Governments often allow some natural
(C) marginal revenue begins to fall. monopolies to exist without competition
(D) the average product of labor begins to because
fall. (A) unregulated natural monopolies are
(E) marginal product of labor begins to fall. allocatively efficient.
(B) unregulated natural monopolies are
productively efficient.
(C) natural monopolies cannot earn
economic profit unless subsidized by the
government.
(D) natural monopolies experience
economies of scale at the allocatively
efficient output.
(E) natural monopolies operate under the
protection of patents issued by the
government.

8 According to the graph above, what price

will this perfectly competitive firm charge
in the long run?
(A) P1
(B) P2
(C) P3
(D) P4
(E) P5

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12 Monopolistically competitive firms are 14 Assume the government establishes a new
usually less efficient than perfectly binding minimum wage. For a typical firm,
competitive firms because monopolistically which of the following will happen the
competitive firms marginal resource cost (MRC) and the
(A) have a lower price than competitive marginal revenue product (MRP) of the last
industries. worker hired.
(B) have a higher quantity than competitive MRC MRP
industries. (A) Increase Increase
(C) produce unique products with no close (B) Increase Decrease
substitutes. (C) No Change Increase
(D) produce where marginal costs does not (D) Decrease Increase
equal marginal revenue. (E) Decrease Decrease
(E) produce where price is greater than
marginal cost. 15 When consumption of a good generates a
positive externality and government takes
13 A perfectly competitive firm hires three action to fix the problem created by this
workers in a perfectly competitive labor externality, what problem is the
market. The daily marginal products of the government most likely attempting to fix?
three workers are listed below. (A) The product is overproduced, given the
social costs and benefits
Number of Marginal (B) The subsidy for production of this good
Workers Product is too high
1 200 (C) Society wants government to eliminate
2 150 the spillover costs
3 50 (D) Consumption of this good widens the
income inequality gap
Which of the following is most likely true? (E) The product is underproduced, given
(A) Worker 3 will receive the lowest wage the social costs and benefits
(B) All workers will receive a wage based
on their individual marginal revenue
product
(C) Each worker will receive the same
wage, equal to the marginal revenue
product of the last worker
(D) Each worker will receive the same
wage, equal to the marginal revenue
product of the first worker
(E) Each worker will receive the same
wage, based on the average product of all
workers hired

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Use the following graph to answer 18 In the competitive market for jelly beans (a
questions 16 & 17 normal good), all of the following are true
EXCEPT
(A) A decrease in consumer income would
shift demand to the left
(B) An increase in variable costs of
producing jelly beans would shift supply to
the left
(C) A decrease in the price of a substitute
good would shift demand to the left
(D) An increase in the number of buyers
would shift demand to the right
(E) A decrease in the price of jelly beans
would shift demand to the right

19 The quantity of acrylic paint supplied

decreased from 500 tons per week to 400
16 The graph above illustrates the production
tons per week when the price of acrylic
possibilities for Country X. Assume
paint decreased from $20 per ton to $10 per
Country X is currently producing 30 capital
ton. The price elasticity of supply for
goods and 40 consumer goods. Which of
acrylic paint over this price range is
the following combinations could Country
(A) perfectly elastic
X produce that would most likely accelerate
(B) perfectly inelastic
economic growth?
(C) relatively inelastic
(A) 0 capital goods; 50 consumer goods
(D) relatively elastic
(B) 90 capital goods; 20 consumer goods
(E) unit elastic
(C) 150 capital goods; 50 consumer goods
(D) 60 capital goods; 20 consumer goods 20 The difference between the price at which a
(E) None of the above combinations would producer would be willing to sell a candy
promote economic growth, as their current bar and the actual market price that she
combination already maximizes growth receives from the sale is best known as
(A) marginal utility
17 Using the same graph above, assuming
(B) marginal cost
Country X is producing efficiently,
(C) ability to pay
calculate their opportunity cost to increase
(D) consumer surplus
production of consumer goods from 20
(E) producer surplus
units to 30 units.
(A) 3 capital goods
(B) 10 capital goods
(C) 30 capital goods
(D) 10 consumer goods
(E) None, when producing efficiently, there
is no opportunity cost

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21 Johnny is currently spending his entire 23 A firm experiencing diseconomies of scale
weekly snack budget on 5 bags of candy will have
and 4 juice boxes. At his current level of (A) a long-run supply curve that is
consumption, Johnny's marginal utility for horizontal.
candy is 5 utils and his marginal utility for (B) a long-run marginal cost curve that
juice boxes is 10 utils. In order to maximize decreases as output increases.
his total utility, Johnny should (C) a long-run total cost that decreases as
(A) maintain his current level of output increases.
consumption of candy and juice boxes (D) a long-run average total cost that
regardless of the prices increases as output increases.
(B) consume more candy and fewer juice (E) a long-run average total cost that
boxes regardless of the prices decreases as output increases.
(C) consume more juice boxes and fewer
candy regardless of the prices 24 Which of the following best describes a
(D) maintain his current level of perfectly competitive market?
consumption if the price of candy is $2 and (A) a market structure with a large number
the price of a juice box is $1 of interdependent large firms selling
(E) maintain his current level of identical products
consumption if the price of candy is $1 and (B) a market structure with dozens of small
the price of a juice box is $2 firms offering a differentiated product with
easy entry into the market
(C) a market that is productively efficient,
but not allocatively efficient
(D) a market that has high barriers to entry
(E) a market structure where individual
firms have no control over the price that
they charge

22 Using the graph above, if this perfectly

competitive firm maintains marginal
revenue of $50 per unit, which of the
following accurately describes the firm's
profit/loss and output in the short run?
(A) Profit; output of less than 550
(B) Profit; output of more than 550
(C) Loss; output of less than 550
(D) Loss; output of more than 550
(E) Break even; output of more than 550

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28 In a perfectly competitive labor market,
imposing a binding minimum wage will
bring about what change(s) on the demand
and supply graph?
(A) increase in wage, decrease in quantity
of workers hired
(B) increase in wage, increase in quantity of
workers hired
(C) decrease in wage, decrease in quantity
of workers hired
(D) decrease in wage, increase in quantity
of workers hired
(E) none of the above, imposing a binding
minimum wage will have no effect on wage
25 The graph above illustrates the costs and
revenues for an unregulated monopoly or the quantity of workers hired
producing in the short run. What price and 29 A firm hires two inputs, labor and capital,
quantity combination will this firm choose in perfectly competitive resource markets.
to profit maximize or loss minimize? The firm sells its product in a perfectly
(A) P = 75; Q = 40 competitive market for $10 per unit. The
(B) P = 60; Q = 40 marginal cost to hire each unit of capital is
(C) P = 45; Q = 60 $150 per day, and the marginal product of
(D) P = 60; Q = 75 labor is 10. Assuming the firm hires the
(E) P = 30; Q = 40 least-cost combination of labor and capital,
26 Which of the following best describes the the firm's marginal product of capital and
the daily wage per worker must be equal to
marginal revenue curve as a single-price
monopolist increases its output in the short which of the following?
(A) Marginal product of capital must be 10
run?
(A) decreasing at first, then increasing and the daily wage for labor must be $50.
(B) Marginal product of capital must be 10
(B) increasing at first, then decreasing
(C) horizontal and equal to the market price and the daily wage for labor must be $100.
(C) Marginal product of capital must be 15
(D) decreasing and equal to the
monopolist's demand curve and the daily wage for labor must be $50.
(D) Marginal product of capital must be 15
(E) decreasing and below the monopolist's
demand curve and the daily wage for labor must be $75.
(E) Marginal product of capital must be 15
27 Which of the following is not true of a and the daily wage for labor must be $100.
monopolistically competitive firm in long-
run equilibrium?
(A) Price equals average total cost and
marginal cost
(B) Price equals average total cost but is
greater than marginal cost.
(C) Marginal cost equals marginal revenue
(D) The firm uses product differentiation.
(E) The firm earns a normal profit

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30 Which of the following is the best example 33 An early frost destroys 20% of the coffee
of a pure public good? bean crop. If the supply and demand for
(A) A public fishing pond that only charges coffee beans are both relatively inelastic,
a fee to out-of-state residents and the frost does not impact the quality of
(B) A fire station that provides protection to the coffee beans that make it to market,
the surrounding community which of the following will most likely
(C) Satellite television service that charges occur to the equilibrium price and quantity
$49 per month of coffee beans?
(D) An old town firehouse that has been (A) Price and quantity will both increase
converted into a successful restaurant (B) Price and quantity will both decrease
(E) Music downloads that cost $0.99 cents (C) Price will increase, quantity will
each decrease
(D) Price will decrease, quantity will
31 Which of the following is a fundamental increase
aspect of the free market economics (E) Price will not change, quantity will
system? decrease
(A) Most economic decisions are based
upon the ideas of both Adam Smith and
Karl Marx.
(B) Public control of the means of
production.
(C) The protection of private property
rights.
(D) Economic decisions made to preserve
traditions and the status quo.
(E) Central planners set the price of
resources, but the price of products are set
by unregulated markets.

32 In 2014, 13 billion bushels of corn were

harvested and sold for $3.70 per bushel.
The next year, 13 billion bushels of corn
were harvested and sold at $3.50 per 34 The graph above shows the supply and
bushel. Which of the following changes in demand for water filters. If the government
supply and demand could have caused this imposes a price floor at $40 per unit, the
change? result will be
(A) Supply decreased while demand (A) a surplus of 300 units
decreased (B) a shortage of 300 units
(B) Supply increased while demand (C) a surplus of 400 units
decreased (D) a shortage of 400 units
(C) Supply decreased while demand (E) None of the above
increased
(D) Supply increased while demand
increased
(E) Supply increased while demand did not
change

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35 Which of the following is true if the 38 Which of the following accurately
government enacts a per-unit tax on a differentiates allocative efficiency and
product with relatively inelastic demand productive efficiency on a firm graph?
and relatively elastic supply? (A) Allocative efficiency is where P =
(A) The price that consumers pay will minimum average total cost; Productive
decrease. efficiency is where P = MC
(B) The demand for the product will (B) Allocative efficiency is where MC =
decrease. MR; Productive efficiency is where P =
(C) The tax burden will fall equally on both minimum average total cost
consumers and producers. (C) Allocative efficiency is where P = MC;
(D) The tax burden will fall more on Productive efficiency is where P =
consumers than on producers. minimum average total cost
(E) The consumer surplus will increase. (D) Allocative efficiency is where MR = 0;
Productive efficiency is where MC = MR
36 Herman spends his entire income on only (E) Allocative efficiency is where P = MC;
two goods: bagels and juice. Currently, his Productive efficiency is where economic
MU for bagels is 12, and his MU for juice losses are minimized
is 6. If the price for each bagel is $3, and
the price for each juice is $1, this Herman 39 Assume peanut farmers hire their workers
should in a perfectly competitive labor market and
(A) buy more bagels and more juice sell their product in a perfectly competitive
(B) buy less bagels and less juice product market. A decrease in the demand
(C) buy more bagels and less juice for peanuts will result in which of the
(D) buy less bagels and more juice following changes in the labor market?
(E) none of the above, Herman is already (A) neither supply nor demand will shift, as
maximizing his utility labor and products are unrelated in this
case.
37 If none of a firm's costs are fixed, which of (B) The supply curve for labor will shift to
the following must be true as its output the right.
increases? (C) The demand curve for labor will shift to
(A) Average total cost is increasing the right.
(B) Marginal cost equals Average total cost (D) The supply curve for labor will shift to
(C) The firm is experiencing constant the left.
returns to scale (E) The demand curve for labor will shift to
(D) Average total cost equals average the left.
variable cost
(E) Marginal product of labor is decreasing 40 A firm must be able to separate consumers
into different groups based on their
elasticity of demand in order to
(A) product differentiate
(B) profit maximize
(C) price discriminate
(D) experience economies of scale
(E) maximize consumer surplus

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41 Oligopolistic firms all share this 43 Assume this firm hires all workers for a
characteristic, which is not typically found wage of $50 per day, and can sell as many
in any other market structure. units as it produces at the market price of
(A) They spend more than half their $10 per unit. Calculate the profit-
revenue on highly competitive advertising maximizing quantity of labor and the
(B) They differentiate their products Marginal Revenue Product (MRP) for the
(C) They price discriminate last worker hired.
(D) They produce identical products (A) 4 workers; $100
(E) They are mutually interdependent (B) 4 workers; $10
(C) 5 workers; $100
42 (D) 5 workers: $50
All of the following are true statements (E) 5 workers; $10
about market structures EXCEPT
(A) The demand curve for a perfectly
competitive firm is perfectly elastic
(B) Monopolistically competitive firms
earn a normal profit in the long run
(C) Oligopolistic firms are more
interdependent than monopolistically
competitive firms
(D) Competitive firms are more likely to
experience economies of scale than
oligopolistic firms
(E) Perfectly competitive firms are always
productively efficient in the long run

44 Assume that a Regional Hospital Network

is the only firm hiring neurosurgeons.
Using the graph provided, identify the wage
and quantity of neurosurgeons hired by this
profit maximizing firm.
(A) W1; 40
(B) W2; 60
(C) W3; 65
(D) W2; 40
(E) W3; 40

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45 Assume that all individuals benefit from flu 48 Historically, coal miners had a very high
shots, regardless of whether they purchase a risk of developing various lung diseases,
flu shot themselves. Which of the due in part to lack of ventilation.
following best explains why the number of Engineering advancements allowed better
people who choose to get a flu shot is not ventilation in mines, eliminating some of
the same as the socially optimal quantity of this risk. Which is the most likely impact of
vaccinations. these engineering advancements upon the
(A) Vaccinations generate negative supply and demand for labor in the mining
externalities. industry?
(B) Vaccinations are non-excludable. (A) Demand curve will shift left, supply
(C) Vaccinations result in diseconomies of curve will shift right
scale. (B) Demand curve will shift left, supply
(D) The marginal cost of a vaccination is curve will shift left
zero. (C) Demand curve will shift right, supply
(E) Vaccinations generate positive curve will shift right
externalities. (D) Demand curve will not shift, supply
curve will shift left
46 All of the following are true about an (E) Demand curve will not shift, supply
country's production possibilities curve curve will shift right
EXCEPT
(A) If it is bowed out (concave to the 49 If the demand for health care is very
origin), it is experiencing increasing inelastic, an increase in the price of health
opportunity costs of production care will
(B) An increase in unemployment causes (A) increase the total revenue of health care
the curve to shift inward towards the origin. providers
(C) It shows the alternative combinations of (B) decrease the total revenue of health care
goods that can be produced given a providers
country's scarce resources (C) decrease the total consumer
(D) If it is a straight line, the country is expenditures on health care
experiencing constant opportunity costs of (D) cause the demand for health care to
production increase
(E) Producing a quantity on the production (E) have no effect on the total revenue of
possibilities curve is always productively health care providers
efficient
50 If only one supplier in a perfectly
47 Sports cars are a normal good. Which of the competitive market received a per-unit
following contribute to the downward subsidy this year, how will this subsidy
sloping demand for sports cars? impact the firm's price and output in the
I. Law of diminishing marginal short run?
utility (A) price will increase; output will increase
II. Substitution effect (B) price will not change; output will
III. Income effect increase
IV. Allocative efficiency (C) price will decrease; output will increase
(D) price will not change; output will
(A) I and II only decrease
(B) II and III only (E) price will decrease; output will decrease
(C) I and III only
(D) I, II and III only
(E) I, II, III and IV

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51 Why does the marginal cost of producing
cookies eventually increases in the short
run?
(A) economies of scale
(B) diseconomies of scale
(C) increasing fixed costs
(D) diminishing marginal product
(E) increasing marginal product
56 SpeedCo and Fast Track are the only two
52 Which of the following is always true about companies providing local 24-hour delivery
the relationship between a firm's ATC and service. If these firms do not collude and
MC curves in the short run? both follow their dominant strategy,
(A) the ATC curve intersects the MC curve according to the payoff matrix above, how
at the minimum point of the MC curve much profit will each company earn?
(B) the MC curve intersects the ATC curve (A) Fast Track: 70, SpeedCo: 60
at the minimum point of the ATC curve (B) Fast Track: 100, SpeedCo: 20
(C) the MC curve intersects the ATC curve (C) Fast Track: 20, SpeedCo: 100
at the maximum point of the ATC curve (D) Fast Track: 30, SpeedCo: 30
(D) ATC and MC are always equal (E) Fast Track: 60, SpeedCo: 70
(E) ATC and MC are never equal
57 A monopolistically competitive firm is
53 Assuming all of a firm's cost are explicit, currently in long-run equilibrium. If the
the output level where accounting profit is output of the firm is 50 units and the price
maximized will always be where the firm receives for each product is $10,
(A) Total revenue equals total implicit costs what is the total cost for this firm?
(B) price equals average total cost (A) $5
(C) price equals marginal cost (B) $10
(D) the difference between marginal (C) $50
revenue and marginal cost is maximized (D) $500
(E) marginal cost equals marginal revenue (E) There is not enough information given
to determine average total cost.
54 Which of the following is least likely to
increase economic profit in any given
market?
(A) Effective price discrimination
(B) A few firms consolidating market
shares
(C) A government subsidy
(D) An effective price floor
(E) Low barriers to entry

55 Which of the following will most likely

occur if a perfectly competitive market is
replaced by a single-price monopolist?
(A) The deadweight loss will increase
(B) Profit-maximizing output will increase
(C) Price will decrease
(D) Economic profit will decrease
(E) The firm's total revenue will increase

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58 Floor-Mart is one of many firms hiring 60 How would making a country's income tax
workers in a perfectly competitive labor more progressive affect the income
market. If Floor-Mart's demand for labor inequality of its citizens?
increases, how will this impact the number (A) It would increase income inequality
of workers hired by Floor-Mart and the (B) It would decrease income inequality
equilibrium wage in this labor market. (C) It would not affect income inequality
(A) The firm will hire fewer workers and (D) It would increase the wage difference
the equilibrium wage will increase. between men and women
(B) The firm will hire the same number of (E) It would not affect the wage difference
workers and the equilibrium wage will between men and women
increase.
(C) The firm will hire the same number of
workers and the equilibrium wage will
decrease.
(D) The firm will hire more workers and
the equilibrium wage will increase.
(E) The firm will hire more workers and the
equilibrium wage will remain the same.

59 Assume the marginal social cost of the last

unit of Iocane Powder provided is greater
than the marginal social benefit. Which of
the following can be used to achieve a more
efficient outcome in the market for Iocane
Powder?
(A) A per-unit subsidy for Iocane Powder
(B) A lump-sum subsidy for Iocane Powder
(C) A per-unit tax for Iocane Powder
(D) A lump-sum tax for Iocane Powder
(E) Perfect price discrimination

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MICROECONOMICS
Practice Exam #1
Q# Ans. Unit Topic Q# Ans. Unit Topic
1 B 1 Human Capital 31 C 1 Economic Systems
2 C 1 Comparative Advantage 32 B 2 Double Shifts
3 B 2 Substitutes 33 C 2 Supply and Demand
4 D 2 Price Controls 34 E 2 Price Controls
5 C 2 Elasticity of Demand 35 D 2 Taxes and Elasticity
6 C 2 Marginal Utility 36 D 2 Maximizing Utility
7 E 3 Diminishing Returns 37 D 3 Costs of Production
8 B 3 Perfect Competition 38 C 3 Efficiency
9 A 3 Economic Profit 39 E 5 Derived Demand
10 B 3 Maximizing Profit 40 C 4 Monopolistic Behavior
11 D 4 Natural Monopolies 41 E 4 Oligopolies
12 E 4 Efficiency 42 D 4 Market Structures
13 C 5 Labor Market 43 D 5 Marginal Revenue Product
14 A 5 Resource Market 44 E 5 Monopsony
15 E 6 Externalities 45 E 6 Externalities
16 B 1 Capital and Growth 46 B 1 Production Possibilities
17 C 1 Opportunity Cost 47 D 3 Demand
18 E 2 Supply and Demand 48 E 5 Competitive Labor Market
19 C 2 Elasticity of Supply 49 A 2 Elasticity of Demand
20 E 2 Welfare Economics 50 B 3 Subsidies
21 E 2 Maximizing Utility 51 D 3 Costs of Production
22 C 3 Perfect Competition 52 B 3 Costs of Production
23 D 4 Long Run Costs 53 E 3 Maximizing Profit
24 E 5 Perfect Competition 54 E 4 Market Structures
25 B 4 Maximizing Profit 55 A 4 Monopolistic Behavior
26 E 4 Monopoly Demand 56 D 4 Game Theory
27 A 4 Monopolistic Competition 57 D 4 Monopolistic Competition
28 A 5 Minimum Wage 58 E 5 Competitive Labor Market
29 E 5 Least-Cost Combination 59 C 6 Externalities
30 B 6 Public/Private Goods 60 B 6 Income Inequality

Thank you for buying the Ultimate Review Packet and supporting ACDC Econ.
To watch a video of me going over each of these questions please go to:
http://www.acdcecon.com/exams
- Jacob Clifford

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 Microeconomics 3 Assume tomatoes are an input used in
Practice Exam #2 traditional sauce. If the price of tomatoes
decreases, and at the same time, there is an
1 On Friday evenings, Spencer usually works a increase in the price of alfredo sauce — a
5-hour shift at the Burger Shack, earning $8 substitute for traditional sauce, which of the
per hour. Spencer’s friend asks him if he following will definitely result from the
would like to go to the baseball game this combination of these factors?
Friday night. If Spencer chooses not to work (A) The equilibrium quantity of traditional
this Friday and instead purchases a ticket to sauce will increase.
the game for $30, what is Spencer’s (B) The equilibrium quantity of traditional
opportunity cost of this decision? sauce will decrease.
(A) $8 (C) The equilibrium quantity of traditional
(B) $30 sauce will be unaffected.
(C) $38 (D) The equilibrium price of traditional sauce
(D) $40 will increase.
(E) $70 (E) The equilibrium price of traditional sauce
will decrease.

4 A local coffee shop increases the price of a

coffee from $3.25 to $3.50. If the demand for
coffee is relatively price inelastic, how will
2 The table above provides the number of this change most likely affect the amount of
minutes it takes for Noah and Sydney to mow coffee purchased and the coffee shop's total
lawns and to pull weeds. Assuming they revenue?
choose their jobs based on the principle of (A) The amount purchased remains the same;
comparative advantage, which of the revenue increases
following should occur? (B) The amount purchased increases; revenue
(A) Noah should mow lawns while Sydney increases
pulls weeds. (C) The amount purchased decreases;
(B) Sydney should mow lawns while Noah revenue decreases
pulls weeds. (D) The amount purchased decreases;
(C) Both Noah and Sydney should pull revenue increases
weeds, and they should hire an additional (E) The amount purchased decreases; revenue
worker to mow lawns. remain the same
(D) Noah should split his time equally 5 The cross-price elasticity of demand for
between both jobs.
Good X and Good Y is equal to +1.0. What
(E) Sydney should split his time equally does this indicate about the relationship
between both jobs.
between Good X and Good Y?
(A) Good X and Good Y are unit elastic
(B) Good X and Good Y are complements
(C) Good X and Good Y are substitutes
(D) Good X and Good Y are both normal
goods
(E) Good X and Good Y are both inferior
goods

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6 The law of diminishing marginal utility is 10 Compared to a monopoly with identical
most commonly used to help explain the demand and cost curves, a perfectly
(A) law of demand competitive firm will
(B) law of supply (A) charge a lower price and produce a
(C) shape of the production possibilities higher output
curve (B) charge the same price and produce a
(D) law of increasing opportunity costs higher output
(E) horizontal demand curve for a perfectly (C) charge a lower price and produce the
competitive firm same output
(D) charge a higher price and produce a
7 If the government levies a lump-sum tax on lower output
cell phone manufacturers, which of the (E) charge a higher price and produce the
following will occur in the short run? same output
(A) Marginal cost will increase.
(B) Quantity of cell phones produced will Use the following graph to answer questions
increase. 11 & 12
(C) Quantity of cell phones produced will
decrease.
(D) Average total cost will increase.
(E) Average variable cost will increase.

8 Which of the following is always true for

production in the short run, but never true in
the long run?
(A) Average total costs are increasing
(B) Marginal costs are constant.
(C) Decisions made only affect production
for less than one year
(D) None of the factors of production are
variable
(E) At least one factor of production is fixed.
11 Above is a graph illustrating the costs and
9 Which of the following is true for a profit revenues for an unregulated, single-price
maximizing firm in any type of market monopoly. Assuming this monopoly is
structure? profit-maximizing, calculate the area of total
(A) total revenue equals total cost consumer surplus
(B) Price is greater than marginal cost (A) $25
(C) Price is equal to marginal cost (B) $180
(D) total revenue is greater than marginal (C) $300
revenue (D) $500
(E) marginal revenue equals marginal cost (E) $1,500

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12 At what price (P) and quantity (Q) 15 Assuming national defense is a pure public
combination would this monopolist maximize good, which of the following is the best
total revenue? explanation for why it is impossible for the
(A) P = $30; Q = 50 private sector to provide a sufficient quantity
(B) P = $23; Q = 70 of national defense?
(C) P = $20; Q = 80 (A) the marginal social benefit of national
(D) P = $0; Q = 160 defense would equal the marginal social cost
(E) P = $0; Q = 0 (B) national defense imposes a negative
externality upon the public
13 Which of the following best describes the (C) the private sector could not pay for all the
supply and demand curves for a firm hiring costs of national defense
labor in a perfectly competitive labor market? (D) the private sector cannot be trusted with
(A) Firm's demand curve for labor is providing national defense
horizontal, firm's supply curve for labor is (E) the private sector could not exclude non-
upward sloping payers from enjoying the benefits of national
(B) Firm's demand curve for labor is defense
horizontal, firm's supply curve for labor is
horizontal 16 A country will most likely cause an outward
(C) Firm's demand curve for labor is shift in its production possibilities by
horizontal, firm's supply curve for labor is (A) Increasing the price of product(s) for
downward sloping which it has a comparative advantage
(D) Firm's demand curve for labor is (B) Investing in the development of new
downward sloping, firm's supply curve for technology
labor is upward sloping (C) Producing more of its most expensive
(E) Firm's demand curve for labor is products
downward sloping, firm's supply curve for (D) Reducing foreign trade and increasing
labor is horizontal taxes on businesses
(E) Reducing its spending for developing
14 A firm produces tennis shoes, hiring labor human capital
from a perfectly competitive labor market.
This firm will profit maximize if it continues 17 The law of increasing opportunity costs
to hire workers until the marginal factor cost directly explains the shape of which of the
of labor is equal to the following curves?
(A) marginal factor cost of capital (A) The average fixed cost curve
(B) marginal revenue product of labor (B) The market demand curve
(C) market demand for labor (C) A concave production possibility curve
(D) price of the good that labor is producing (D) A straight-line production possibilities
(E) wage paid to each worker curve
(E) The marginal revenue curve

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18 If the price of baseball caps increases, which 21 When the price of both pizza and tacos is
of the following will most likely occur in the zero, Mr. Box chooses to eat a taco. If Mr.
market for baseball caps? Box has to pay, he chooses to eat pizza.
(A) The demand for baseball caps will Assuming Mr. Box is a rational consumer,
decrease which of the following must be true when
(B) The supply of baseball caps will increase Mr. Box has to pay?
(C) The quantity supplied for baseball caps (A) the price of pizza is greater than the price
will increase of a taco
(D) The demand will decrease and the supply (B) the price of a taco is greater than the price
will increase of pizza
(E) There will be a shortage of baseball caps (C) the marginal utility of pizza equals the
in the market marginal utility of a taco
(D) the marginal utility per dollar of a taco is
19 As the price of cinnamon increases by 10 greater than the marginal utility per dollar of
percent, and as a result, the quantity pizza
demanded for spice X decreases by 5 percent. (E) the marginal utility of a taco equals zero
Based on this information, calculate the value
of the cross price elasticity of demand 22 At 10 units of output, a firm’s total fixed cost
coefficient and determine whether cinnamon is $60,000. If the firm’s total cost is
and spice X are complements or substitutes. $100,000, its average variable cost is equal to
(A) 2.0; substitutes (A) $160,000
(B) -2.0; complements (B) $40,000
(C) 0.5; substitutes (C) $6,000
(D) -0.5; complements (D) $4,000
(E) -0.5; substitutes (E) $0

20 Allocative efficiency always occurs when a 23 Assume that soybeans are produced in a
firm produces a quantity where constant cost perfectly competitive market
(A) price equals marginal cost that is currently in in long-run equilibrium.
(B) price exceeds average total cost An increase in the number of consumers
(C) marginal revenue equals marginal cost shifts demand for soybeans, but has no effect
(D) average revenue equals average total cost on supply. Which of the following best
(E) average total cost is at its minimum describes the effect of price in the short run
and in the long run?
(A) Price will increase in the short run; Price
will increase in the long run.
(B) Price will increase in the short run; Price
will remain constant in the long run.
(C) Price will decrease in the short run; Price
will increase in the long run.
(D) Price will decrease in the short run; Price
will decrease in the long run.
(E) Price will decrease in the short run; Price
will remain constant in the long run.

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 28 Assume the marginal product of capital is 50,
and the marginal product of labor is 150. If
the price to hire each unit of capital is $50 per
day, while the price to hire each unit of labor
is $100 per day, which of the following is
true for a firm hiring all inputs from perfectly
competitive markets?
(A) The firm should maintain the units of
capital and labor it has hired, it is already
producing at its least-cost combination of
labor and capital.
(B) The firm is currently maximizing profits.
24 According to this long-run average total cost
(C) The firm should hire more labor and less
curve, if this firm produces any quantity less
capital in order to decrease costs.
than Q1, the firm will experience
(D) The firm should hire more capital and
(A) diseconomies of scale
less labor in order to decrease costs.
(B) economies of scale
(E) None of the above
(C) constant returns to scale
(D) increasing opportunity costs 29 Assume that PCI is a firm that hires 100
(E) productive efficiency workers in a perfectly competitive labor
market to produce paper clips in its factory.
25 The profit-maximizing quantity for a
The government raises minimum wage above
monopolist that is unregulated will always be
PCI's current wage. How will this impact
(A) where marginal cost and the demand
PCI's marginal factor cost for labor employed
curve cross
and the marginal revenue product of the last
(B) where price equals marginal cost
worker hired?
(C) where marginal revenue equals price
(A) Marginal factor cost will increase and the
(D) where marginal revenue equals zero
marginal revenue product will decrease.
(E) in the elastic region of the demand curve
(B) Marginal factor cost will decrease and the
26 A firm producing in monopolistic marginal revenue product will decrease.
competition is not productively efficient in (C) Marginal factor cost will decrease and the
the long run because marginal revenue product will increase.
(A) there are no barriers to entry (D) Marginal factor cost will increase and the
(B) firms are mutually interdependent marginal revenue product will increase.
(C) the price is set above minimum ATC (E) Marginal factor cost will increase and the
(D) long-run profits are usually positive marginal revenue product will stay the same.
(E) they experience diseconomies of scale

27 For both a perfectly competitive firm and a

monopolistically competitive firm, all of the
following statements are true in the long run,
EXCEPT
(A) Total revenue = Total costs
(B) Price = Average total cost
(C) Marginal costs = Marginal revenue
(D) Price = Average revenue
(E) Price = Marginal costs

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30 Free public radio is commonly described by 33 All of the following would shift the supply
economists as a public good because curve for grapes in the short run EXCEPT
(A) The total revenue is equal to the total (A) an increase in the wages paid to grape
costs of operation harvesters
(B) It is both non-rival and non-excludable (B) the elimination of per-unit subsidies
(C) The opportunity cost to access a provided for firm's producing grapes
broadcast from a free public radio station is (C) an increase in government regulations
lower than that of a privately-owned radio concerning grape production
station (D) a strike by all vineyard workers
(D) It provides benefits to millions of (E) an increase in all household incomes
individuals
(E) It is funded primarily through charitable 34 Assume the demand for NZT is perfectly
donations inelastic and the supply for NZT is relatively
elastic. Which of the following would result
from a decrease in supply?
(A) Price will increase; Quantity will
decrease
(B) Price will decrease; Quantity will
increase
(C) Price will remain the same; Quantity will
decrease
(D) Price will increase; Quantity will remain
the same
31 The table above shows the production (E) Price will decrease; Quantity will
combinations for two different countries. If decrease
Omega-land is currently producing 6 units of
coal and 12 units of steel, what is their 35 Of the following, which is the best example
opportunity cost for producing 6 more units of consumer surplus?
of steel (A) An individual who spends less than he or
(A) 6 units of steel she earns in a given year
(B) 6 units of coal (B) An individual who pays less for a pizza
(C) 4 units of coal than he or she thinks it is worth
(D) 2 units of coal (C) An individual who pays more for a pizza
(E) 1 unit of coal than he or she thinks it is worth
(D) An individual who pays exactly what he
32 Which of the following best describes the law or she thinks pizza is worth
of supply? (E) When quantity supplied is greater than
(A) When the supply for a good increases, the quantity demanded in a market
price will increase
(B) When the supply for a good increases, the 36 When marginal revenue is equal to zero, total
price will decrease revenue must be
(C) When the price of a good increases, its (A) increasing
supply increases. (B) decreasing
(D) When the price of a good increases, its (C) at its minimum
quantity supplied increases. (D) at its maximum
(E) When the price of a good increases, its (E) equal to zero
supply and demand will both decrease

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37 Q TC 40 Assume that Denver Electric controls a
0 $15 monopoly over the supply of electricity in the
1 $35 surrounding area. Which of the following
2 $50 government actions would most likely
3 $60 decrease the deadweight loss due to the
4 $64 inefficiency of this monopoly?
The table above shows a firm's total cost (A) Imposing a lump-sum tax on Denver
(TC) of producing various units of output. Electric
What is the average variable cost of (B) Imposing a per-unit tax on Denver
producing 3 units? Electric
(A) $10 (C) Granting a lump-sum subsidy on Denver
(B) $15 Electric
(C) $20 (D) Granting a per-unit subsidy to Denver
(D) $45 Electric
(E) $60 (E) Setting a binding price floor

38 In a perfectly competitive product market, if

both the quantity and price for a product
decrease, which of the following most likely
caused this change?
(A) a decrease in demand
(B) an increase in demand
(C) a decrease in supply
(D) an increase in supply 41 The payoff matrix above illustrates the daily
(E) an increase in both demand and supply profit earned by the only two ice cube
manufacturers operating in a small town.
39 If a firm’s average total cost is above price at
The numbers to the left in each cell are for
the loss-minimizing output, the firm should
Frozen Inc. At Nash Equilibrium, how much
continue to produce in the short run as long
combined daily profit will the two companies
as the
earn together?
(A) price is above the marginal cost.
(A) $250
(B) price is above the average variable cost.
(B) $500
(C) average total cost is above the marginal
(C) $550
cost.
(D) $700
(D) marginal cost is equal to the average
(E) $750
variable cost.
(E) firm is earning an accounting profit.
41 Skip this question. This exam was created for
students that support Jacob Clifford and
purchase the Ultimate Review Packet. If
someone gave this to you for free then they
are:
(A) Discouraging innovation and
entrepreneurship
(B) Stealing from Mr. Clifford
(C) Breaking intellectual property right laws
(D) Being a total jerk
(E) All of the above

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42 If a single-price monopolist suddenly finds a 44 Assume the creation of a public park
legal way to perfectly price discriminate, how generates a positive externality for the
will this impact this monopolist’s consumer surrounding community. Which of the
surplus and deadweight loss? following would be true of the costs and
(A) Consumer surplus will decrease slightly; benefits of creating public parks in this
deadweight loss will remain constant community?
(B) Consumer surplus will remain constant; (A) Marginal social cost is less than marginal
deadweight loss will decrease slightly social benefit.
(C) Consumer surplus will remain constant ; (B) Marginal social benefit is less than
deadweight loss will be completely marginal social cost
eliminated (C) The market equilibrium output is greater
(D) Consumer surplus and deadweight loss than the socially efficient output.
will both remain constant (D) The market equilibrium output is equal to
(E) Consumer surplus and deadweight loss the socially efficient output.
will be eliminated completely (E) The marginal social benefit of a park is
greater than the marginal social benefit of a
school.

45 The primary reason governments pass

antitrust legislation is to
(A) prevent large firms from merging or
forming monopolies
(B) protect small businesses from foreign
competition
(C) limit the number of firms in certain
market structures
(D) protect consumers from fraudulent
business practices
(E) allow the government to seize private
43 The graph above shows a firm hiring semi- property when necessary for the common
skilled labor in a perfectly competitive labor good
market. If a new technology allows only the
46 Using the same amount of time and
workers in this firm to double their marginal
resources, Lydia can assemble either 8 block
productivity, how will this effect the wage
towers or 4 jigsaw puzzles; Anna can
and optimal number of workers hired once
assemble either 4 block towers or 4 jigsaw
this firm implements this new technology? ,
puzzles. Based on this information, which of
(A) Wage increases and the number of
the following statements is correct?
workers hired increases
(A) Lydia has a comparative advantage in
(B) Wage increases and the quantity of
assembling jigsaw puzzles
workers decreases
(B) Anna has a comparative advantage in
(C) Wage remains the same and the quantity
assembling jigsaw puzzles
of workers increases
(C) Anna has an absolute advantage in
(D) Wage remains the same and the quantity
assembling jigsaw puzzles
of workers decreases
(D) Anna has an absolute advantage in
(E) Both wage and quantity of workers hired
assembling block towers
remains the same
(E) Lydia has a comparative advantage in
assembling both block towers and jigsaw
puzzles
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47 Which of the following will cause the 49 The graph shows the supply and demand
demand curve for grape jelly to shift to the curves for gallons of orange juice. Which of
left? the following will occur if the government
(A) A decrease in the price of peanut butter establishes a price floor at $6.00 per gallon?
assuming that peanut butter and jelly are (A) a shortage and an increase in consumer
complements surplus
(B) An increase in the price of marshmallow (B) a shortage and a decrease in consumer
fluff assuming that grape jelly and surplus
marshmallow fluff are substitutes (C) a surplus and an increase in consumer
(C) A increase in the income of consumers, surplus
assuming that grape jelly is an inferior good (D) a surplus and a decrease in consumer
(D) An increase in the wages of workers who surplus
work in the jelly factories (E) neither a surplus or shortage will occur
(E) A decrease in the number of firms
producing grape jelly 50 Assume that restaurant meals are normal with
an income elasticity of +1.5. If income
48 Assume marshmallows and graham crackers decreases by 10%, the quantity of restaurant
are complements. If the price of graham meals demanded should:
crackers decreases, which of the following (A) Increase by more than 10%
will most likely occur in the short run in the (B) Increase by less than 10%
marshmallow market? (C) Decrease by more than 10%
(A) Demand for marshmallows will decrease (D) Decrease by less than 10%
(B) Supply for marshmallows will decrease (E) Decrease by exactly 10%
(C) Price and quantity for marshmallows will
increase 51 If a firm's marginal product of labor is
(D) Price and quantity for marshmallows will decreasing, assuming that labor is the firm's
decrease only variable input, which of the following
(E) Quantity for marshmallows will increase, must be true in the short run?
while price for marshmallows is (A) Marginal cost is increasing
indeterminate (B) Marginal cost is decreasing
(C) Average product of labor is decreasing
(D) Marginal product of labor is decreasing
(E) Total product of labor is decreasing

52 If a firm produces 40 units when it hires a

total of 20 workers and 100 units when it
hires a total of 40 workers the firm is
experiencing
(A) productive efficiency
(B) diseconomies of scale
(C) increasing returns to scale
(D) decreasing returns to scale
(E) constant returns to scale

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53 A chocolate manufacturer earned 1 million 57 A firm that hires its labor in a perfectly
dollars in total revenue, which was enough to competitive labor market will hire workers up
cover all of its explicit costs. However, an to the point where wage equals
economist concludes that the firm is not (A) marginal revenue
earning a normal profit or an economic profit. (B) marginal revenue product
Which of the following must be true? (C) marginal physical product
(A) fixed costs are greater than accounting (D) price of the good produced by the last
profits worker
(B) accounting profits are greater than (E) marginal factor cost
explicit costs.
(C) explicit costs are less than implicit costs 58 In the short run, if marginal cost is greater
(D) implicit costs are greater than accounting than average total cost, which of the
profits following must be true?
(E) implicit costs are less than explicit costs (A) The average total cost is increasing
(B) The marginal cost equals marginal
54 If a firm is producing where price and revenue
marginal cost are identical which of the (C) The average fixed cost is increasing
following must be true? (D) The marginal cost is less than average
(A) total revenue is maximized variable cost
(B) economic profit is maximized (E) The marginal cost is decreasing
(C) The firm is producing the productively
efficient output 59 When consumption of a good generates a
(D) The firm is producing the allocatively negative externality, which of the following
efficient output is correct?
(E) The firm is perfectly competitive (A) The government could eliminate
deadweight loss by imposing a per-unit
55 Compared to perfectly competitive firms, subsidy
monopolies achieve all of the following in the (B) The government could eliminate
long run EXCEPT deadweight loss by imposing a lump-sum tax.
(A) Deadweight loss (C) The government could eliminate
(B) Allocative efficiency deadweight loss by imposing a per-unit tax.
(C) Higher prices (D) If government does not intervene,
(D) Lower levels of output Marginal social benefit is greater than
(E) Long-run economic profit marginal private benefit.
(E) If government does not intervene,
56 Mutual interdependence and price leadership marginal private cost is greater than marginal
are often characteristics of which of the social cost.
following market structures?
(A) Monopoly
(B) Monopolistic competition
(C) Oligopoly
(D) Perfect competition
(E) Natural monopoly

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60 The Lorenz curve is used by economists to
measure which of the following?
(A) The responsiveness of quantity demanded
or supplied to a change in price
(B) the impact changes in unemployment and
inflation have upon one another
(C) the change in tax revenue in response to a
change in the tax rate
(D) how equally, or unequally, income is
distributed among a population
(E) how equally, or unequally, wealth is
distributed among a population

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 Microeconomics

Practice Exam #2
Q# Ans. Unit Topic Q# Ans. Unit Topic
1 E 1 Opportunity Cost 31 D 1 Opportunity Cost
2 B 1 Comparative Advantage 32 D 2 Law of Supply
3 A 2 Double Shifts 33 E 2 Supply and Demand
4 D 2 Elasticity/Total Revenue 34 D 2 Elasticity of Demand
5 C 2 Cross Price Elasticity 35 B 2 Consumer Surplus
6 A 2 Law of Demand 36 D 4 Maximizing Total Revenue
7 D 3 Lump Sum Tax 37 B 3 Costs of Production
8 E 3 Short run vs. Long Run 38 A 2 Supply and Demand
9 E 3 Profit Maximization 39 B 3 Shut Down Rule
10 A 4 Monopoly Price/Output 40 D 4 Regulating Monopolies
11 D 4 Consumer Surplus 41 D 4 Game Theory
12 C 4 Maximizing Total Revenue 42 E 4 Price Discrimination
13 E 5 Competitive Labor Market 43 C 5 Competitive Labor Market
14 B 5 Competitive Labor Market 44 A 4 Externalities
15 E 6 Public Goods 45 A 6 Anti-Trust Laws
16 B 1 Investment and Growth 46 B 1 Comparative Advantage
17 C 1 Production Possibilities 47 C 2 Demand Shifters
18 C 2 Demand 48 C 2 Demand Shifters
19 D 2 Cross-Price Elasticity 49 D 2 Price Controls
20 A 3 Efficiency 50 C 2 Income Elasticity
21 B 2 Marginal Utility 51 A 3 Costs of Production
22 D 3 Costs of Production 52 C 3 Long Run Production
23 B 3 Perfect Competition 53 D 3 Economic Profit
24 B 3 Long Run Average Costs 54 D 4 Efficiency
25 E 4 Monopoly and Profit 55 B 4 Monopolies
26 C 4 Monopolistic Competition 56 C 4 Market Structures
27 E 4 Monopolistic Competition 57 B 5 Competitive Labor Market
28 C 5 Least-Cost Combination 58 A 3 Costs of Production
29 D 5 Minimum Wage 59 C 6 Negative Externalities
30 B 6 Public Goods 60 D 6 Income Inequality

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To watch a video of me going over each of these questions please go to:
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- Jacob Clifford

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