AS.180.118
Reality Roundtable
Latest Midterm Exam Review
(With Solutions)
2026
1
,Multiple Choice (10 Questions)
In a Reality Roundtable simulation focusing on market equilibrium, which
factor most accurately explains the shift from equilibrium price P1 to P2
when supply decreases?
a) Increase in consumer income
b) Increase in production costs
c) Decrease in consumer preferences
d) Entry of new firms
Answer: b) Increase in production costs
Rationale: Higher production costs reduce supply, shifting the supply
curve left, raising equilibrium prices.
Which of the following best represents the impact of asymmetric
information in a Reality Roundtable negotiation on labor markets?
a) Firms pay wages equal to worker productivity
b) Workers with better information secure higher wages
c) Information asymmetry drives the market to perfect competition
d) Firms always hire the most skilled workers
Answer: b) Workers with better information secure higher wages
Rationale: Information asymmetry allows those with superior knowledge
to negotiate better wages.
When a Reality Roundtable introduces externalities in production, what
is the most efficient policy recommendation to correct the negative
externality?
a) Raising subsidies for producers
b) Implementing a Pigouvian tax
c) Encouraging monopolistic competition
d) Increasing product tariffs
Answer: b) Implementing a Pigouvian tax
Rationale: Pigouvian taxes internalize external costs, aligning private
costs with social costs.
2
, In a Reality Roundtable scenario involving dynamic pricing, what
economic concept best explains the price adjustments over real time?
a) Price elasticity of demand
b) Marginal utility theory
c) Market clearing price
d) Supply and demand lags
Answer: d) Supply and demand lags
Rationale: Lags cause price volatility necessitating adjustments to reach
equilibrium.
Which incentive mechanism used in Reality Roundtable enhances
cooperation among competing firms in an oligopoly setting?
a) Zero-sum game strategy
b) Tit-for-tat strategy
c) Price matching guarantee
d) Perfect price discrimination
Answer: b) Tit-for-tat strategy
Rationale: Tit-for-tat encourages cooperation by reciprocating
competitors' actions.
In Reality Roundtable dealing with public goods, why do free riders cause
market failure?
a) They increase total production
b) They contribute to subsidy revenue
c) They consume without paying, reducing incentive to produce
d) They compete with private goods producers
Answer: c) They consume without paying, reducing incentive to produce
Rationale: Free riders benefit without paying, leading to under-provision
of the good.
During the simulation of international trade, what is the primary effect of
introducing tariffs on imports?
a) Increase in consumer surplus
b) Decrease in domestic producer output
c) Increase in domestic prices
3
Reality Roundtable
Latest Midterm Exam Review
(With Solutions)
2026
1
,Multiple Choice (10 Questions)
In a Reality Roundtable simulation focusing on market equilibrium, which
factor most accurately explains the shift from equilibrium price P1 to P2
when supply decreases?
a) Increase in consumer income
b) Increase in production costs
c) Decrease in consumer preferences
d) Entry of new firms
Answer: b) Increase in production costs
Rationale: Higher production costs reduce supply, shifting the supply
curve left, raising equilibrium prices.
Which of the following best represents the impact of asymmetric
information in a Reality Roundtable negotiation on labor markets?
a) Firms pay wages equal to worker productivity
b) Workers with better information secure higher wages
c) Information asymmetry drives the market to perfect competition
d) Firms always hire the most skilled workers
Answer: b) Workers with better information secure higher wages
Rationale: Information asymmetry allows those with superior knowledge
to negotiate better wages.
When a Reality Roundtable introduces externalities in production, what
is the most efficient policy recommendation to correct the negative
externality?
a) Raising subsidies for producers
b) Implementing a Pigouvian tax
c) Encouraging monopolistic competition
d) Increasing product tariffs
Answer: b) Implementing a Pigouvian tax
Rationale: Pigouvian taxes internalize external costs, aligning private
costs with social costs.
2
, In a Reality Roundtable scenario involving dynamic pricing, what
economic concept best explains the price adjustments over real time?
a) Price elasticity of demand
b) Marginal utility theory
c) Market clearing price
d) Supply and demand lags
Answer: d) Supply and demand lags
Rationale: Lags cause price volatility necessitating adjustments to reach
equilibrium.
Which incentive mechanism used in Reality Roundtable enhances
cooperation among competing firms in an oligopoly setting?
a) Zero-sum game strategy
b) Tit-for-tat strategy
c) Price matching guarantee
d) Perfect price discrimination
Answer: b) Tit-for-tat strategy
Rationale: Tit-for-tat encourages cooperation by reciprocating
competitors' actions.
In Reality Roundtable dealing with public goods, why do free riders cause
market failure?
a) They increase total production
b) They contribute to subsidy revenue
c) They consume without paying, reducing incentive to produce
d) They compete with private goods producers
Answer: c) They consume without paying, reducing incentive to produce
Rationale: Free riders benefit without paying, leading to under-provision
of the good.
During the simulation of international trade, what is the primary effect of
introducing tariffs on imports?
a) Increase in consumer surplus
b) Decrease in domestic producer output
c) Increase in domestic prices
3
