BU.920.603
Microeconomics & Market Design
Midterms (Qns & Ans)
2025
General Instructions
1. Read All Questions Carefully: Make sure you understand each question.
2. Time Management: You have a specific amount of time to complete the exam.
Keep an eye on the clock and pace yourself.
3. Allowed Materials: Only use materials that are explicitly allowed. Unauthorized
materials can lead to disqualification.
4. ANS Format: Follow the required format for your ANS. For example, multiple-
choice questions might need you to select the best ANS, while essay questions
require detailed responses.
5. Academic Integrity: Adhere to the university's honor code. Any form of cheating or
plagiarism is strictly prohibited.
6. Technical Requirements: Ensure your computer and internet connection are
stable. For online exams, you might need a webcam and microphone for proctoring
purposes.
7. Submission: Submit your ANS before the time expires. Late submissions might
not be accepted.
©2024/2025
,1. Which of the following best describes the concept of "Pareto
Efficiency"?
- A. A situation where one individual can be made better off
without making anyone else worse off
- B. A situation where resources are allocated in a way that
maximizes total surplus
- C. A situation where no individual can be made better off
without making someone else worse off
- D. A situation where the government intervenes to correct
market failures
- ANS: C. A situation where no individual can be made better
off without making someone else worse off
- Rationale: Pareto Efficiency occurs when resources are
allocated in such a way that it is impossible to make any one
individual better off without making at least one individual worse
off.
2. What is the primary purpose of a "Pigovian Tax"?
- A. To raise government revenue
- B. To correct negative externalities
- C. To subsidize positive externalities
©2024/2025
, - D. To redistribute income
- ANS: B. To correct negative externalities
- Rationale: A Pigovian Tax is designed to correct negative
externalities by imposing a tax equal to the external cost of the
negative externality.
3. Which of the following market structures is characterized by a
large number of firms producing differentiated products?
- A. Perfect Competition
- B. Monopoly
- C. Monopolistic Competition
- D. Oligopoly
- ANS: C. Monopolistic Competition
- Rationale: Monopolistic competition is characterized by
many firms producing similar but differentiated products,
allowing for some degree of market power.
Fill-in-the-Blank Questions
4. The law of demand states that, all else being equal, as the
price of a good increases, the quantity demanded __________.
- ANS: Decreases
©2024/2025
Microeconomics & Market Design
Midterms (Qns & Ans)
2025
General Instructions
1. Read All Questions Carefully: Make sure you understand each question.
2. Time Management: You have a specific amount of time to complete the exam.
Keep an eye on the clock and pace yourself.
3. Allowed Materials: Only use materials that are explicitly allowed. Unauthorized
materials can lead to disqualification.
4. ANS Format: Follow the required format for your ANS. For example, multiple-
choice questions might need you to select the best ANS, while essay questions
require detailed responses.
5. Academic Integrity: Adhere to the university's honor code. Any form of cheating or
plagiarism is strictly prohibited.
6. Technical Requirements: Ensure your computer and internet connection are
stable. For online exams, you might need a webcam and microphone for proctoring
purposes.
7. Submission: Submit your ANS before the time expires. Late submissions might
not be accepted.
©2024/2025
,1. Which of the following best describes the concept of "Pareto
Efficiency"?
- A. A situation where one individual can be made better off
without making anyone else worse off
- B. A situation where resources are allocated in a way that
maximizes total surplus
- C. A situation where no individual can be made better off
without making someone else worse off
- D. A situation where the government intervenes to correct
market failures
- ANS: C. A situation where no individual can be made better
off without making someone else worse off
- Rationale: Pareto Efficiency occurs when resources are
allocated in such a way that it is impossible to make any one
individual better off without making at least one individual worse
off.
2. What is the primary purpose of a "Pigovian Tax"?
- A. To raise government revenue
- B. To correct negative externalities
- C. To subsidize positive externalities
©2024/2025
, - D. To redistribute income
- ANS: B. To correct negative externalities
- Rationale: A Pigovian Tax is designed to correct negative
externalities by imposing a tax equal to the external cost of the
negative externality.
3. Which of the following market structures is characterized by a
large number of firms producing differentiated products?
- A. Perfect Competition
- B. Monopoly
- C. Monopolistic Competition
- D. Oligopoly
- ANS: C. Monopolistic Competition
- Rationale: Monopolistic competition is characterized by
many firms producing similar but differentiated products,
allowing for some degree of market power.
Fill-in-the-Blank Questions
4. The law of demand states that, all else being equal, as the
price of a good increases, the quantity demanded __________.
- ANS: Decreases
©2024/2025
