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 best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative forgone when making a decision.

Question 2

Suppose a student spends 3 hours studying for an economics exam instead of working at a job that pays $15 per hour. What is the opportunity cost of studying for the exam?

Accepted Answer

$45

Question 3

Which equation represents the budget constraint for a consumer who spends all their income $$I on $$two goods, $$x$$ and $$y$$, with prices $$P_x$$ and $$P_y$$?

Accepted Answer

$$I = P_x x + P_y y$$

Question 4

If the price of a substitute good increases, what is the likely effect on the demand for the original good?

Accepted Answer

Demand for the original good will increase.

Question 5

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 6

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Products are differentiated.

Question 7

If a firm faces the following cost function: $$TC = 100 + 5Q$$, what is the marginal cost (MC) of producing one more unit?

Accepted Answer

$$MC = 5$$

Question 8

Which of the following best explains the law of diminishing marginal returns?

Accepted Answer

As more units of a variable input are added to fixed inputs, the additional output from each new unit eventually decreases.

Question 9

Suppose the demand for a product is given by $$Q_d = 50 - 2P$$ and the supply is $$Q_s = 10 + 3P. $$What is the equilibrium price?

Accepted Answer

Question 10

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

Accepted Answer

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

Question 11

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

Accepted Answer

The goods are substitutes.

Question 12

A monopolist maximizes profit by producing the quantity where:

Accepted Answer

$$MR = MC$$

Question 13

Which of the following would cause a shift in the supply curve for wheat?

Accepted Answer

A technological improvement in wheat farming.

Question 14

If a price ceiling is set below the equilibrium price, what is the likely result?

Accepted Answer

A shortage of the good.

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

Which of the following best describes a public good?

Accepted Answer

A good that is non-excludable and non-rival in consumption.

Question 17

Suppose a firm in a perfectly competitive market faces a market price of $$P = 20$$ and has a cost function $$TC = 50 + 10Q. $$What is the firm's profit if it sells 5 units?

Accepted Answer

Question 18

Which of the following is an example of a negative externality?

Accepted Answer

A factory polluting a river used by local residents.

Question 19

Which of the following statements about comparative advantage is correct?

Accepted Answer

A country has a comparative advantage if it can produce a good at a lower opportunity cost than another country.

Question 20

Which of the following best describes the role of prices in a market economy?

Accepted Answer

Prices allocate resources and coordinate the actions of buyers and sellers.

ECON 201-012 Spring 2026: Principles of Microeconomics Syllabus and Course Structure

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