CLEP Microeconomics chapter practice4 questions

35 Rapid Review: The Whole Course in One Pass

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 4

Demand for a competitive product increases in a constant-cost industry. Which sequence best describes adjustment?

The demand increase raises short-run price and profit. Entry shifts supply right until price returns to the constant-cost level at a larger industry output.
Show answer and explanation

E. Price and profit first rise; entry later restores the original price.

The demand increase raises short-run price and profit. Entry shifts supply right until price returns to the constant-cost level at a larger industry output.

Question 2

Question 2 of 4

A single-price monopolist faces a per-unit tax that raises marginal cost. What is the most likely result?

Higher marginal cost moves the MR=MC quantity left. The monopolist then reads a higher price from demand.
Show answer and explanation

D. Profit-maximizing output falls and price rises.

Higher marginal cost moves the MR=MC quantity left. The monopolist then reads a higher price from demand.

Question 3

Question 3 of 4

A vaccination creates benefits for people other than the recipient. Without policy, the competitive market will tend to

Buyers consider private benefit and omit benefits to others, so market demand understates social marginal benefit and quantity is too low.
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C. underproduce because social marginal benefit exceeds private marginal benefit

Buyers consider private benefit and omit benefits to others, so market demand understates social marginal benefit and quantity is too low.

Question 4

Question 4 of 4

A worker's marginal product is 10 units, product marginal revenue is 8, and the wage is 70. A profit-maximizing firm should

The worker's MRP is 10(8)=80, which exceeds the $70 wage, so hiring increases profit.
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A. hire the worker because MRP is $80

The worker's MRP is 10(8)=80, which exceeds the $70 wage, so hiring increases profit.

Quiz complete