Q: Which formula correctly calculates the price elasticity of demand?

$$ \frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in price}} $$

Question 1

Which of the following statements best describes the difference between normative and positive statements in economics?

Accepted Answer

Positive statements are objective and testable, while normative statements are subjective and value-based.

Question 2

Suppose a country can produce either 10 units of wheat or 20 units of corn using all its resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$$ 2 $$ units of corn

Question 3

Which of the following best illustrates the concept of marginal cost?

Accepted Answer

The cost of producing one more unit of a good.

Question 4

If the price of a substitute good increases, what is likely to happen to the demand curve for the original good?

Accepted Answer

The demand curve will shift to the right.

Question 5

Given the demand function $$ Q_d = 100 - 2P $$ and the supply function $$ Q_s = 20 + 3P $$, what is the equilibrium price?

Accepted Answer

$$ P = 16 $$

Question 6

Which of the following is an example of a positive statement?

Accepted Answer

"Increasing the minimum wage will lead to higher unemployment among teenagers."

Question 7

If a country has an absolute advantage in producing both cars and computers, what must be true for it to benefit from trade with another country?

Accepted Answer

It must have a comparative advantage in at least one good.

Question 8

Suppose the price elasticity of demand for a product is $$ -2 . If $$the price increases by 10%, what will happen to the quantity demanded?

Accepted Answer

It will decrease by 20%.

Question 9

Which of the following best describes the Production Possibility Frontier (PPF)?

Accepted Answer

A graph showing the maximum combinations of two goods that can be produced with available resources and technology.

Question 10

If the cross-price elasticity of demand between two goods is positive, what does this indicate?

Accepted Answer

The goods are substitutes.

Question 11

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 12

If the income elasticity of demand for a good is $$ 1.5 $$, what type of good is it?

Accepted Answer

Normal good

Question 13

Suppose the supply curve shifts to the right due to technological improvement. What happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases.

Question 14

If a market has a shortage, which of the following is true?

Accepted Answer

Quantity demanded is greater than quantity supplied.

Question 15

Which formula correctly calculates the price elasticity of demand?

Accepted Answer

$$ \frac{	ext{Percentage change in quantity demanded}}{	ext{Percentage change in price}} $$

Question 16

In a two-person, two-good economy, terms of trade are determined by:

Accepted Answer

The opportunity costs of each person.

Question 17

If the market supply is the sum of individual supplies, which equation represents the market supply if two firms have supply functions $$ Q_{s1} = 2P $$ and $$ Q_{s2} = 3P $$?

Accepted Answer

$$ Q_s = 5P $$

Question 18

Which of the following would cause a movement along the supply curve rather than a shift?

Accepted Answer

A change in the price of the good.

Question 19

If the marginal benefit curve is downward sloping and the marginal cost curve is upward sloping, the equilibrium is found where:

Accepted Answer

Marginal benefit equals marginal cost.

Question 20

A decrease in consumer income will most likely cause the demand curve for an inferior good to:

Accepted Answer

Shift to the right.

Core Concepts and Computations in Microeconomics

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