Practice Microeconomics Questions and Answers

• A firm produces 100 units at an average variable cost of 5 and an average total cost of 12. What is the firm's Total Fixed Cost?
• If the Marginal Product of Labor (MPL) is 20 and the MRTS of Labor for Capital is 4, what is the Marginal Product of Capital (MPK)?
• A firm's TC = 50 + 5Q. What is the Average Variable Cost (AVC) when Q = 10?
• The price elasticity of demand is 2. If the price of the product is 20, what is the Marginal Revenue (MR)?
• If a production function is homogeneous of degree n, the Marginal Rate of Technical Substitution (MRTS) will be:
• In the context of a CES (Constant Elasticity of Substitution) production function, if the substitution parameter rho approaches zero, the function collapse...
• The "Output Elasticity of Total Cost" (Ec) is defined as the ratio of Marginal Cost to Average Total Cost (MC/ATC). If Ec < 1, the firm is experiencing:
• Under the condition of "Product Exhaustion" (Euler's Theorem), if a firm operates under Increasing Returns to Scale and pays each factor its marginal produ...
• A "Homothetic" production function is a monotonic transformation of a homogeneous function. For such functions, the Expansion Path is always:
• According to the Shephard’s Lemma in cost theory, the partial derivative of the cost function with respect to an input price (e.g., wage) gives:
• The "Elasticity of Substitution" for a Leontief Production Function is:
• In the short run, if a firm’s production function is Q = K^0.5 * L^0.5 and Capital (K) is fixed at 100 units, the Short-Run Marginal Cost (SRMC) curve wi...
• If the Elasticity of Scale (epsilon) is exactly 1.2 at a specific level of output, a 10% increase in all inputs will lead to:
• The "Cessation of Production" or the Long-run Exit Condition for a firm occurs when:
• A consumer has utility U = x^0.5 y^0.5, income M = 120, and prices px = 4 and py = 2. The Marshallian demand for x is:
• For a quasilinear utility function U(x,y) = x + ln y, with x as the numeraire and an interior solution, the income effect on the demand for x is:
• Suppose the demand function is Q = 240 - 4P. At P = 30, the absolute value of point price elasticity of demand is:
• If a firm has production function Q = K^0.5 L^0.5, then a 10% simultaneous increase in K and L changes output approximately by:
• A competitive firm faces P = 24 and has total cost C(q) = q²  + 4q + 16. Its profit-maximising output is:
• For a twice-differentiable production function, Euler's theorem implies constant returns to scale when:
• If the cross-price elasticity of demand for tea with respect to coffee is positive, tea and coffee are most appropriately classified as:
• Under second-degree price discrimination, a monopolist primarily uses differences in consumers' willingness to pay by:
• In a Bertrand duopoly with homogeneous products, identical constant marginal costs, and no capacity constraints, the Nash equilibrium price is generally:
• A compensated demand curve holds utility constant. Therefore, a movement along a compensated demand curve isolates the:
• A consumer has U = x^0.4 y^0.6, income 200, px=5 and py=10. The optimal expenditure share on x is:
• If inverse demand is P = 80 - 2Q, marginal revenue is:
• A monopolist faces P = 100 - Q and constant MC = 20. The profit-maximising quantity is:
• If total cost is TC = 100 + 10q + 2q², marginal cost at q=5 is:
• For a CES production function, the elasticity of substitution measures the percentage change in the:
• A Slutsky decomposition separates a price effect into:
• If a good is inferior but not Giffen, a price fall causes the substitution effect to increase quantity demanded while the income effect:
• In a Cournot duopoly with identical firms and inverse demand P = 100 - Q and zero marginal cost, each firm's Nash output is:
• The elasticity of substitution between capital and labour is exactly one for a:
• In long-run perfect competition, entry and exit tend to drive economic profit toward:
• If C = 50 + 0.8(Y-T), I=100, G=150, T=100, equilibrium income is: