ECS2601
Intermediate
Microeconomics
Comprehensive Final
Exam Review
Q&A
2024
,1. When consumers become more price sensitive and the demand
for a product decreases, what does this indicate about the market?
A. The market is in perfect competition
B. The market is a monopoly
C. The market is in monopolistic competition
D. The market is an oligopoly
Correct Answer: A. The market is in perfect competition
Rationale: In a perfectly competitive market, consumers have
many choices and can easily switch between products based on
price.
2. In a monopoly market, how does the demand curve compare to
a perfectly competitive market?
A. The demand curve is downward sloping in both markets
B. The demand curve is perfectly elastic in a monopoly market
C. The demand curve is perfectly elastic in a perfectly
competitive market
D. The demand curve is upward sloping in a monopoly market
Correct Answer: A. The demand curve is downward sloping in
both markets
Rationale: In both monopoly and perfect competition markets, the
demand curve slopes downward because as price decreases,
quantity demanded increases.
3. What happens to consumer surplus when a firm increases its
price in a perfectly competitive market?
A. Consumer surplus increases
B. Consumer surplus decreases
C. Consumer surplus remains constant
D. Consumer surplus is eliminated
Correct Answer: B. Consumer surplus decreases
Rationale: When a firm increases its price in a perfectly
, competitive market, consumers are less willing to pay the higher
price, resulting in a decrease in consumer surplus.
4. How does a decrease in production costs affect supply in a
perfectly competitive market?
A. Supply increases
B. Supply decreases
C. Supply remains constant
D. Supply becomes perfectly elastic
Correct Answer: A. Supply increases
Rationale: When production costs decrease, firms are able to
supply more goods at each price level, leading to an increase in
supply.
5. In which market structure is there the greatest degree of product
differentiation?
A. Perfect competition
B. Monopoly
C. Monopolistic competition
D. Oligopoly
Correct Answer: C. Monopolistic competition
Rationale: Monopolistic competition allows for a greater degree
of product differentiation compared to perfect competition,
monopoly, and oligopoly.
6. How do firms in an oligopoly market typically behave?
A. They collaborate to set prices and output levels
B. They compete fiercely on price to gain market share
C. They produce identical products in order to maintain market
power
D. They operate independently to maximize profit
Correct Answer: A. They collaborate to set prices and output
levels
Intermediate
Microeconomics
Comprehensive Final
Exam Review
Q&A
2024
,1. When consumers become more price sensitive and the demand
for a product decreases, what does this indicate about the market?
A. The market is in perfect competition
B. The market is a monopoly
C. The market is in monopolistic competition
D. The market is an oligopoly
Correct Answer: A. The market is in perfect competition
Rationale: In a perfectly competitive market, consumers have
many choices and can easily switch between products based on
price.
2. In a monopoly market, how does the demand curve compare to
a perfectly competitive market?
A. The demand curve is downward sloping in both markets
B. The demand curve is perfectly elastic in a monopoly market
C. The demand curve is perfectly elastic in a perfectly
competitive market
D. The demand curve is upward sloping in a monopoly market
Correct Answer: A. The demand curve is downward sloping in
both markets
Rationale: In both monopoly and perfect competition markets, the
demand curve slopes downward because as price decreases,
quantity demanded increases.
3. What happens to consumer surplus when a firm increases its
price in a perfectly competitive market?
A. Consumer surplus increases
B. Consumer surplus decreases
C. Consumer surplus remains constant
D. Consumer surplus is eliminated
Correct Answer: B. Consumer surplus decreases
Rationale: When a firm increases its price in a perfectly
, competitive market, consumers are less willing to pay the higher
price, resulting in a decrease in consumer surplus.
4. How does a decrease in production costs affect supply in a
perfectly competitive market?
A. Supply increases
B. Supply decreases
C. Supply remains constant
D. Supply becomes perfectly elastic
Correct Answer: A. Supply increases
Rationale: When production costs decrease, firms are able to
supply more goods at each price level, leading to an increase in
supply.
5. In which market structure is there the greatest degree of product
differentiation?
A. Perfect competition
B. Monopoly
C. Monopolistic competition
D. Oligopoly
Correct Answer: C. Monopolistic competition
Rationale: Monopolistic competition allows for a greater degree
of product differentiation compared to perfect competition,
monopoly, and oligopoly.
6. How do firms in an oligopoly market typically behave?
A. They collaborate to set prices and output levels
B. They compete fiercely on price to gain market share
C. They produce identical products in order to maintain market
power
D. They operate independently to maximize profit
Correct Answer: A. They collaborate to set prices and output
levels
