Microeconomics Final Exam Practice Test with 98
Questions (2026/2027)
Comprehensive Microeconomics Principles | Key Domains: Advanced Supply & Demand Analysis,
Consumer & Producer Surplus, Elasticity Applications, Theory of the Firm (Costs, Production,
Perfect Competition), Imperfect Competition (Monopoly, Oligopoly, Monopolistic Competition),
Factor Markets, Game Theory, and Market Failure & Government Role | Expert-Aligned Structure |
Comprehensive Final Practice Format
Introduction
This structured Microeconomics Final Exam Practice Test for 2026/2027 provides 98
comprehensive questions with correct answers and rationales. It is designed to simulate a
cumulative final exam, testing the integration of microeconomic principles across all major topic
areas, from foundational models to advanced analysis of firm behavior and market structures.
Exam Structure:
● Comprehensive Final Practice Test: (98 QUESTIONS)
Answer Format
All correct answers and graphical analyses must appear in bold and cyan blue, accompanied by
concise rationales explaining the application of an advanced microeconomic concept (e.g.,
calculating profit for a perfectly competitive firm using ATC and MR, identifying a Nash Equilibrium
in a payoff matrix), the welfare implications of a market structure (e.g., deadweight loss in
monopoly), the interpretation of a cost curve graph, and why alternative answers misapply theory
or represent flawed economic reasoning.
1. In perfect competition, a firm’s short-run supply curve is its:
● A. Entire marginal cost curve
● B. Marginal cost curve above minimum AVC
● C. Average total cost curve
● D. Average variable cost curve
B. Marginal cost curve above minimum AVC
A competitive firm maximizes profit by producing where P = MR = MC. However, it will only operate if P
≥ AVC to cover variable costs. Thus, the short-run supply curve is the portion of the MC curve that lies
above the minimum point of the AVC curve.
,2. A monopolist maximizes profit by producing where:
● A. Price equals marginal cost
● B. Marginal revenue equals marginal cost
● C. Total revenue is maximized
● D. Average total cost is minimized
B. Marginal revenue equals marginal cost
All profit-maximizing firms produce where MR = MC. For a monopolist, MR < P because to sell more, it
must lower the price on all units. The monopolist then sets the price on the demand curve
corresponding to that quantity, resulting in P > MC and allocative inefficiency.
3. If the cross-price elasticity of demand between two goods is +1.5, the goods are:
● A. Complements
● B. Substitutes
● C. Inferior
● D. Unrelated
B. Substitutes
A positive cross-price elasticity indicates that as the price of Good Y rises, demand for Good X
increases—characteristic of substitutes (e.g., coffee and tea). The magnitude (1.5) shows high
substitutability.
4. In the long run, firms in monopolistic competition:
● A. Earn positive economic profits
● B. Earn zero economic profits
● C. Always shut down
● D. Produce at minimum average total cost
B. Earn zero economic profits
Free entry and exit drive economic profits to zero in the long run. Firms produce where price equals
average total cost (but not at the minimum ATC), resulting in excess capacity and markup over
marginal cost—indicating both productive and allocative inefficiency.
5. An excise tax on sellers shifts the supply curve to the left, leading to:
● A. Higher price paid by buyers, lower price received by sellers
● B. Lower price paid by buyers, higher price received by sellers
● C. No change in equilibrium price
● D. Increased equilibrium quantity
, A. Higher price paid by buyers, lower price received by sellers
The tax creates a wedge between the price buyers pay and the price sellers receive. The burden is
shared based on elasticities: buyers pay more, sellers receive less, and equilibrium quantity falls,
creating deadweight loss.
6. The law of diminishing marginal returns applies in the:
● A. Long run only
● B. Short run only
● C. Both short and long run
● D. Neither short nor long run
B. Short run only
Diminishing marginal returns occur when at least one input is fixed (short run). As more of a variable
input (e.g., labor) is added to a fixed input (e.g., capital), the marginal product eventually falls. In the
long run, all inputs are variable, so firms can adjust scale.
7. A binding price ceiling results in a:
● A. Surplus
● B. Shortage
● C. Higher quality goods
● D. Increased efficiency
B. Shortage
A binding price ceiling is set below the equilibrium price. At this lower price, quantity demanded
exceeds quantity supplied, creating a shortage. This often leads to black markets, queuing, or reduced
quality as producers cut costs.
8. Consumer surplus is the area:
● A. Below the demand curve and above the price
● B. Above the supply curve and below the price
● C. Between the supply and demand curves
● D. Above the demand curve and below the price
A. Below the demand curve and above the price
Consumer surplus measures the net benefit to buyers—the difference between what they are willing to
pay (demand curve) and what they actually pay (market price). Graphically, it is the area below the
demand curve and above the price, up to the quantity sold.
9. If the price elasticity of demand is -0.6, demand is:
Questions (2026/2027)
Comprehensive Microeconomics Principles | Key Domains: Advanced Supply & Demand Analysis,
Consumer & Producer Surplus, Elasticity Applications, Theory of the Firm (Costs, Production,
Perfect Competition), Imperfect Competition (Monopoly, Oligopoly, Monopolistic Competition),
Factor Markets, Game Theory, and Market Failure & Government Role | Expert-Aligned Structure |
Comprehensive Final Practice Format
Introduction
This structured Microeconomics Final Exam Practice Test for 2026/2027 provides 98
comprehensive questions with correct answers and rationales. It is designed to simulate a
cumulative final exam, testing the integration of microeconomic principles across all major topic
areas, from foundational models to advanced analysis of firm behavior and market structures.
Exam Structure:
● Comprehensive Final Practice Test: (98 QUESTIONS)
Answer Format
All correct answers and graphical analyses must appear in bold and cyan blue, accompanied by
concise rationales explaining the application of an advanced microeconomic concept (e.g.,
calculating profit for a perfectly competitive firm using ATC and MR, identifying a Nash Equilibrium
in a payoff matrix), the welfare implications of a market structure (e.g., deadweight loss in
monopoly), the interpretation of a cost curve graph, and why alternative answers misapply theory
or represent flawed economic reasoning.
1. In perfect competition, a firm’s short-run supply curve is its:
● A. Entire marginal cost curve
● B. Marginal cost curve above minimum AVC
● C. Average total cost curve
● D. Average variable cost curve
B. Marginal cost curve above minimum AVC
A competitive firm maximizes profit by producing where P = MR = MC. However, it will only operate if P
≥ AVC to cover variable costs. Thus, the short-run supply curve is the portion of the MC curve that lies
above the minimum point of the AVC curve.
,2. A monopolist maximizes profit by producing where:
● A. Price equals marginal cost
● B. Marginal revenue equals marginal cost
● C. Total revenue is maximized
● D. Average total cost is minimized
B. Marginal revenue equals marginal cost
All profit-maximizing firms produce where MR = MC. For a monopolist, MR < P because to sell more, it
must lower the price on all units. The monopolist then sets the price on the demand curve
corresponding to that quantity, resulting in P > MC and allocative inefficiency.
3. If the cross-price elasticity of demand between two goods is +1.5, the goods are:
● A. Complements
● B. Substitutes
● C. Inferior
● D. Unrelated
B. Substitutes
A positive cross-price elasticity indicates that as the price of Good Y rises, demand for Good X
increases—characteristic of substitutes (e.g., coffee and tea). The magnitude (1.5) shows high
substitutability.
4. In the long run, firms in monopolistic competition:
● A. Earn positive economic profits
● B. Earn zero economic profits
● C. Always shut down
● D. Produce at minimum average total cost
B. Earn zero economic profits
Free entry and exit drive economic profits to zero in the long run. Firms produce where price equals
average total cost (but not at the minimum ATC), resulting in excess capacity and markup over
marginal cost—indicating both productive and allocative inefficiency.
5. An excise tax on sellers shifts the supply curve to the left, leading to:
● A. Higher price paid by buyers, lower price received by sellers
● B. Lower price paid by buyers, higher price received by sellers
● C. No change in equilibrium price
● D. Increased equilibrium quantity
, A. Higher price paid by buyers, lower price received by sellers
The tax creates a wedge between the price buyers pay and the price sellers receive. The burden is
shared based on elasticities: buyers pay more, sellers receive less, and equilibrium quantity falls,
creating deadweight loss.
6. The law of diminishing marginal returns applies in the:
● A. Long run only
● B. Short run only
● C. Both short and long run
● D. Neither short nor long run
B. Short run only
Diminishing marginal returns occur when at least one input is fixed (short run). As more of a variable
input (e.g., labor) is added to a fixed input (e.g., capital), the marginal product eventually falls. In the
long run, all inputs are variable, so firms can adjust scale.
7. A binding price ceiling results in a:
● A. Surplus
● B. Shortage
● C. Higher quality goods
● D. Increased efficiency
B. Shortage
A binding price ceiling is set below the equilibrium price. At this lower price, quantity demanded
exceeds quantity supplied, creating a shortage. This often leads to black markets, queuing, or reduced
quality as producers cut costs.
8. Consumer surplus is the area:
● A. Below the demand curve and above the price
● B. Above the supply curve and below the price
● C. Between the supply and demand curves
● D. Above the demand curve and below the price
A. Below the demand curve and above the price
Consumer surplus measures the net benefit to buyers—the difference between what they are willing to
pay (demand curve) and what they actually pay (market price). Graphically, it is the area below the
demand curve and above the price, up to the quantity sold.
9. If the price elasticity of demand is -0.6, demand is:
