Q: The price elasticity of demand is calculated using which formula?

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

Question 1

Which of the following best describes the concept of 'efficiency' in microeconomics?

Accepted Answer

Maximizing total surplus in a market without regard to equity.

Question 2

Suppose the government introduces a price ceiling in the market for healthcare services. Which of the following is a likely consequence?

Accepted Answer

A shortage of healthcare services at the ceiling price.

Question 3

The price elasticity of demand is calculated using which formula?

Accepted Answer

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

Question 4

If the UP Express train increases its ticket price by 50% and ridership falls by 25%, what is the price elasticity of demand?

Accepted Answer

$$-0.5$$

Question 5

Which of the following is a necessary condition for successful price discrimination?

Accepted Answer

The firm must be able to prevent resale between buyers.

Question 6

Which factor would most likely increase the price elasticity of demand for a product?

Accepted Answer

A longer time period for consumers to adjust.

Question 7

According to the law of demand, what happens when the price of a good increases, all else equal?

Accepted Answer

The quantity demanded decreases.

Question 8

Which of the following is an example of a positive externality provided by the Amazon rainforest?

Accepted Answer

Global carbon sequestration reducing climate change.

Question 9

What is the definition of a public good?

Accepted Answer

A good that is non-excludable and non-rivalrous.

Question 10

In the circular flow diagram, households are ______ in input markets and ______ in output markets.

Accepted Answer

sellers; buyers

Question 11

Matty’s Mini-Patties should produce the quantity of hamburgers where:

Accepted Answer

$$MR = MC$$

Question 12

Which of the following is NOT a way businesses can directly benefit from paying higher wages?

Accepted Answer

Lower productivity.

Question 13

The tragedy of the commons is best described as:

Accepted Answer

Overuse of a shared resource because no one can be excluded.

Question 14

If a firm faces increasing marginal costs, what is the most likely explanation?

Accepted Answer

Diminishing returns to inputs.

Question 15

Which of the following would most likely decrease the elasticity of demand for labor?

Accepted Answer

Less ability to substitute capital for labor.

Question 16

Which statement best describes the equity gains from early childhood education (ECE) according to James Heckman?

Accepted Answer

ECE increases equality by providing capital to disadvantaged children.

Question 17

A successful price discrimination strategy requires:

Accepted Answer

Charging a lower price to the elastic demand group.

Question 18

Which of the following is a negative externality resulting from the destruction of the Amazon rainforest?

Accepted Answer

Global carbon emissions increase.

Question 19

If Matty’s marginal product of the third cook is 324 cookies and the price of each cookie is $0.50, what is the maximum hourly wage Matty should pay for the third cook?

Accepted Answer

$$324 	imes 0.50 = 162$$

Question 20

Which of the following best explains why the Amazon rainforest fits the definition of a public good?

Accepted Answer

Its benefits are non-excludable and non-rivalrous, such as climate regulation.

Microeconomics Comprehensive Exam Study Guide: Efficiency, Equity, Elasticity, Market Structures, and Public Goods

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