Question 1

Suppose the demand curve for a product is given by $$P = 100 - Q. If $$the price increases from $$40 to 50$$, what is the change in quantity demanded?

Accepted Answer

$$10$$ units decrease

Question 2

If Maya has $$120 to $$spend on socks and shorts, with socks costing $$10$$ per pair and shorts costing $$20$$ per pair, which of the following combinations is affordable and exhausts her budget?

Accepted Answer

$$4$$ pairs of socks and $$4$$ pairs of shorts

Question 3

If the price elasticity of demand for a good is $$-2$$, and the price increases by $$10\%$$, what happens to the quantity demanded?

Accepted Answer

It decreases by $$20\%$$

Question 4

Which of the following is TRUE about the income elasticity of demand for a normal good?

Accepted Answer

It is positive

Question 5

A firm must choose between four factory locations. The monthly rent and opportunity cost of time for each location are given. If the opportunity cost of time is $$10$$ per hour, which location has the lowest total monthly cost?

Accepted Answer

The location with the lowest sum of rent and (commuting time $$	imes$$ $$10)$$

Question 6

If the demand for a good is perfectly inelastic, what will happen to total revenue if the price increases?

Accepted Answer

Total revenue will increase

Question 7

If two goods are substitutes, what happens to the demand for one good if the price of the other increases?

Accepted Answer

The demand increases

Question 8

Suppose the supply curve shifts to the right while the demand curve stays the same. What happens to equilibrium price and quantity?

Accepted Answer

Price decreases, quantity increases

Question 9

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

Accepted Answer

The goods are complements

Question 10

A consumer maximizes utility when the marginal utility per dollar spent is equal for all goods. If $$MU_x/P_x = MU_y/P_y$$, what does this mean?

Accepted Answer

The consumer is maximizing utility

Question 11

If the price of running shoes falls from $$60 to$$ $$50$$ and the quantity demanded increases from $$400 to$$ $$600$$, what is the price elasticity of demand (using the midpoint formula)?

Accepted Answer

$$2.2$$

Question 12

If a good is a necessity, its demand curve is likely to be:

Accepted Answer

Relatively inelastic

Question 13

If the opportunity cost of producing one more unit of a good increases as more is produced, this is an example of:

Accepted Answer

Increasing marginal cost

Question 14

If the price of a substitute increases, what happens to the equilibrium price and quantity of the original good?

Accepted Answer

Both equilibrium price and quantity increase

Question 15

If a consumer's budget increases, what happens to the consumer's budget constraint?

Accepted Answer

It shifts outward, parallel to the original constraint

Question 16

If the marginal utility of the last dollar spent on good $$A is $$greater than that on good $$B$$, what should the consumer do?

Accepted Answer

Buy more of good $$A$$ and less of good $$B$$

Question 17

If the price of a good increases and total revenue decreases, what can be said about the price elasticity of demand?

Accepted Answer

Demand is elastic

Question 18

If the government imposes a price ceiling below the equilibrium price, what is likely to occur?

Accepted Answer

A shortage

Question 19

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

Accepted Answer

The goods are substitutes

Question 20

If the price of a normal good increases, what happens to the consumer's real income?

Accepted Answer

It decreases

Microeconomics: Demand, Supply, Elasticity, and Consumer Choice – Study Notes

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