Microeconomic Principles Flashcards
7 cards from real CEA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Microeconomic Principles flashcards as text
In a two-part tariff pricing strategy, a firm charges:
Answer: A fixed entry fee plus a per-unit usage price
A two-part tariff consists of a lump-sum access fee and a per-unit charge, allowing firms to capture more consumer surplus.
The Lerner Index measures market power as:
Answer: (P - MC) / P
The Lerner Index equals (P - MC) / P and ranges from 0 (perfect competition) to 1 (pure monopoly).
Which of the following is an example of a negative production externality?
Answer: A factory releasing pollutants into a river
A factory polluting a river imposes uncompensated costs on third parties, making it a classic negative production externality.
When a firm experiences diseconomies of scale, its long-run average total cost curve is:
Answer: Rising as output increases
Diseconomies of scale occur when increasing output causes long-run average total cost to rise, often due to coordination problems.
A price ceiling set below the equilibrium price will result in:
Answer: A shortage of the good
A binding price ceiling holds price below equilibrium, causing quantity demanded to exceed quantity supplied — a shortage.
In game theory, a Nash equilibrium occurs when:
Answer: Each player's strategy is optimal given the strategies of all other players
A Nash equilibrium is a strategy profile where no player can improve their payoff by unilaterally changing their strategy.
Which factor would cause the demand curve for a good to shift to the right (increase in demand)?
Answer: An increase in the price of a substitute good
When the price of a substitute rises, consumers shift to the original good, increasing its demand and shifting the curve rightward.