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Microeconomics Practice Exam — Free

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Microeconomics studies individual decision-making by consumers and firms, market structures, and how prices allocate resources. Exams combine graphical analysis — supply and demand shifts, consumer surplus — with calculation questions on elasticity, cost curves, and game theory. Practice exams sharpen graph-reading speed under exam conditions.

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Topics typically tested

  • Supply, demand & market equilibrium
  • Price elasticity of demand & supply
  • Consumer theory & indifference curves
  • Production costs & profit maximization
  • Market structures (monopoly, oligopoly)
  • Externalities & public goods

Sample Microeconomics exam questions

Three original questions in the style of a real Microeconomics exam, each with a worked solution. Your own practice exam can be built from your course's notes and syllabus.

Question 1Multiple choicePrice elasticity of demand & supply

A cinema raises its ticket price from $8 to $12, and weekly attendance falls from 300 tickets to 200 tickets. Using the midpoint (arc) method, what is the price elasticity of demand over this range (in absolute value), and what happens to the cinema's weekly ticket revenue?

  1. A.

    0.67; revenue rises

  2. B.

    1.0; revenue is unchanged

  3. C.

    1.5; revenue falls

  4. D.

    0.40; revenue rises

Worked solution
Answer:B

The midpoint method measures each percentage change against the average of the two values, so the elasticity is the same whichever direction the price moves.

Percentage change in quantity:

200−300(300+200)/2=−100250=−0.40\frac{200 - 300}{(300 + 200)/2} = \frac{-100}{250} = -0.40

Percentage change in price:

12−8(8+12)/2=410=0.40\frac{12 - 8}{(8 + 12)/2} = \frac{4}{10} = 0.40

Elasticity: Ed=−0.40/0.40=−1.0E_d = -0.40 / 0.40 = -1.0, or 1.01.0 in absolute value. Demand is unit elastic over this range.

Revenue check. Before: $8 × 300 = $2,400. After: $12 × 200 = $2,400. Revenue is unchanged, exactly as unit elasticity predicts: the 40% fall in quantity cancels the 40% rise in price.

Option A (0.67) is what you get by dividing each change by the starting value (−100/300-100/300 against 4/84/8); option C (1.5) uses the ending values (−100/200-100/200 against 4/124/12). Both apply the point-elasticity shortcut to a large change, and they give different answers depending on direction, which is exactly the problem the midpoint method avoids. Option D reports the percentage change in quantity alone and is not an elasticity.

Answer: B — elasticity 1.0 (unit elastic), revenue unchanged at $2,400 per week.

Question 2Short answerSupply, demand & market equilibrium

The weekly market for textbook rentals in a college town is described by Qd=120−2PQ_d = 120 - 2P and Qs=3P−30Q_s = 3P - 30, where PP is the price in dollars and QQ is rentals per week.

(a) Find the equilibrium price and quantity.

(b) The student union persuades the town to impose a price ceiling of $20 per rental. Find the quantity demanded, the quantity supplied, and the size of the resulting shortage or surplus.

Worked solution
Answer:

(a) P = $30, Q = 60 rentals per week; (b) at $20, quantity demanded 80, quantity supplied 30: a shortage of 50 rentals per week.

(a) Equilibrium. The market clears where quantity demanded equals quantity supplied, so set the two equations equal and solve for PP:

120−2P=3P−30⇒150=5P⇒P=30120 - 2P = 3P - 30 \quad\Rightarrow\quad 150 = 5P \quad\Rightarrow\quad P = 30

Substitute into either equation: Qd=120−2(30)=60Q_d = 120 - 2(30) = 60 and Qs=3(30)−30=60Q_s = 3(30) - 30 = 60. The two agree, confirming the solution. Equilibrium is $30 and 60 rentals per week.

(b) Price ceiling at $20. A ceiling below the equilibrium price is binding: the market cannot rise to $30, so trade takes place at $20.

Quantity demanded: Qd=120−2(20)=80Q_d = 120 - 2(20) = 80. The lower price pulls extra students into the market.

Quantity supplied: Qs=3(20)−30=30Q_s = 3(20) - 30 = 30. Owners rent out fewer books at the lower price.

Shortage =Qd−Qs=80−30=50= Q_d - Q_s = 80 - 30 = 50 rentals per week. Because sellers decide how much reaches the market, only 30 rentals change hands and 50 would-be renters go without. In practice that gap is rationed by queues, waiting lists or informal side payments rather than by price. (A ceiling set above $30 would not bind and would change nothing.)

Answer: (a) price $30, quantity 60 rentals per week; (b) quantity demanded 80, quantity supplied 30, shortage of 50 rentals per week.

Question 3Worked problemMarket structures (monopoly, oligopoly)

A patented water filter is sold by a single firm. Daily market demand is P=100−QP = 100 - Q, where PP is the price in dollars and QQ is filters per day. The firm's total cost is TC=100+20QTC = 100 + 20Q, so marginal cost is constant at $20 per filter.

(a) Find the profit-maximizing output, the price the monopolist charges, and its daily profit.

(b) Find the output and price that would prevail if the market were perfectly competitive with the same cost structure.

(c) Compute the deadweight loss from monopoly.

Worked solution
Answer:

(a) Q = 40 filters per day, P = $60, profit = $1,500 per day; (b) Q = 80, P = $20; (c) deadweight loss = $800 per day.

(a) Monopoly outcome. Total revenue is TR=PQ=(100−Q)Q=100Q−Q2TR = PQ = (100 - Q)Q = 100Q - Q^2, so marginal revenue is MR=100−2QMR = 100 - 2Q: for a linear demand curve, MR has the same intercept and twice the slope. Profit is maximized where MR=MCMR = MC:

100−2Q=20⇒Q∗=40100 - 2Q = 20 \quad\Rightarrow\quad Q^* = 40

Read the price off the demand curve, not the MR curve: P∗=100−40=60P^* = 100 - 40 = 60, so $60.

Profit =TR−TC=60×40−(100+20×40)=2,400−900=1,500= TR - TC = 60 \times 40 - (100 + 20 \times 40) = 2{,}400 - 900 = 1{,}500, so $1,500 per day. (The $100 fixed cost does not change the output decision, only the profit.)

(b) Competitive benchmark. With price-taking firms, price is driven down to marginal cost: P=MC=20P = MC = 20, and demand gives Q=100−20=80Q = 100 - 20 = 80 filters per day at $20.

(c) Deadweight loss. The monopolist restricts output from 80 to 40. For every unit between 40 and 80, consumers' willingness to pay (the demand curve) exceeds the $20 marginal cost, so those are mutually beneficial trades that do not happen. The lost surplus is the triangle between demand and MC over that range:

DWL=12(P∗−MC)(Qc−Q∗)=12(60−20)(80−40)=800\text{DWL} = \tfrac{1}{2}(P^* - MC)(Q_c - Q^*) = \tfrac{1}{2}(60 - 20)(80 - 40) = 800

So the deadweight loss is $800 per day. As a check, consumer surplus under monopoly is 12(100−60)(40)=800\tfrac{1}{2}(100 - 60)(40) = 800 and producer surplus is (60−20)(40)=1,600(60 - 20)(40) = 1{,}600; their sum ($2,400) plus the $800 deadweight loss equals the competitive total surplus 12(100−20)(80)=3,200\tfrac{1}{2}(100 - 20)(80) = 3{,}200.

Answer: (a) 40 filters per day at $60, profit $1,500 per day; (b) 80 filters per day at $20; (c) deadweight loss $800 per day.

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