Q: Which formula represents the elasticity of demand?

$$E_d = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}$$

Question 1

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases.

Question 2

Suppose the market for coffee is in equilibrium. If a new study reveals health benefits of coffee, what is the most likely immediate effect on the market?

Accepted Answer

The demand curve shifts right, causing a higher equilibrium price and quantity.

Question 3

Which equation represents the opportunity cost of producing one more unit of good X in terms of good Y, given a linear Production Possibilities Curve (PPC)?

Accepted Answer

$$OC_{X} = \frac{\Delta Y}{\Delta X}$$

Question 4

A monopolist faces the following demand curve: $$P = 100 - 2Q. $$What is the marginal revenue (MR) function?

Accepted Answer

$$MR = 100 - 4Q$$

Question 5

Which of the following is NOT a key characteristic of a monopoly?

Accepted Answer

Free entry and exit in the market

Question 6

If a firm is producing at a point inside its Production Possibilities Curve (PPC), what does this indicate?

Accepted Answer

The firm is not using all resources efficiently.

Question 7

Which of the following best describes price discrimination?

Accepted Answer

Charging different prices to different customers for the same product based on their willingness to pay.

Question 8

Suppose a firm faces the following cost functions: $$TC = 100 + 5Q + 2Q^2$. What is the marginal cost (MC) function?

Accepted Answer

Question 9

Which of the following is an example of a barrier to entry in a monopoly market?

Accepted Answer

Government licensing requirements

Question 10

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

Accepted Answer

Demand for the original good increases.

Question 11

A firm in perfect competition faces a market price of $$P = 20. $$Its cost function is $$TC = 10 + 5Q. $$What is the profit-maximizing output level?

Accepted Answer

$$Q = 3$$

Question 12

Which of the following statements about the long-run equilibrium in perfect competition is correct?

Accepted Answer

Firms earn zero economic profits.

Question 13

If a monopolist can perfectly price discriminate, what is the consumer surplus?

Accepted Answer

Consumer surplus is zero.

Question 14

Which formula represents the elasticity of demand?

Accepted Answer

$$E_d = \frac{\% 	ext{ change in quantity demanded}}{\% 	ext{ change in price}}$$

Question 15

Which of the following is true about the shape of the PPC when opportunity costs are increasing?

Accepted Answer

The PPC is bowed outward.

Question 16

Suppose a monopolist faces the following cost and demand functions: $$TC = 50 + 10Q$$, $$P = 40 - Q. $$What is the profit-maximizing output?

Accepted Answer

Question 17

Which of the following is NOT a type of market structure?

Accepted Answer

Price discrimination

Question 18

In the short run, which cost must always be paid by a firm, even if output is zero?

Accepted Answer

Fixed cost

Question 19

Which of the following is an example of comparative advantage?

Accepted Answer

A country produces a good at a lower opportunity cost than another country.

Question 20

If a firm’s marginal cost is less than marginal revenue, what should the firm do to maximize profit?

Accepted Answer

Increase output.

Final Exam Study Guide: Principles of Microeconomics

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