Q: Which formula correctly represents the point elasticity of demand?

$$\frac{dQ}{dP} \times \frac{P}{Q}$$

Question 1

Suppose the demand for a product is given by $$Q_D = 100 - 2P$$ and the supply is given by $$Q_S = 20 + 3P. $$What is the equilibrium price and quantity in this market?

Accepted Answer

Equilibrium price is $$P = 16$$, equilibrium quantity is $$Q = 52$$

Question 2

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 3

If the price elasticity of demand for a product is $$-2$$, what will happen to total revenue if the price increases?

Accepted Answer

Total revenue will decrease

Question 4

A firm faces the following cost structure: $$TC = 100 + 5Q. $$What is the average total cost (ATC) when $$Q = 10$$?

Accepted Answer

$$ATC = 15$$

Question 5

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

Accepted Answer

There are significant barriers to entry

Question 6

Suppose a monopolist faces a linear demand curve and maximizes profit where $$MR = MC. If $$the marginal cost is constant at $$MC = 10$$ and the marginal revenue is $$MR = 40 - 2Q$$, what is the profit-maximizing quantity?

Accepted Answer

$$Q = 15$$

Question 7

Which formula correctly represents the point elasticity of demand?

Accepted Answer

$$\frac{dQ}{dP} 	imes \frac{P}{Q}$$

Question 8

If a firm’s marginal cost (MC) is greater than its marginal revenue (MR), what should the firm do to maximize profit?

Accepted Answer

Decrease output

Question 9

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

Accepted Answer

Vaccination against infectious diseases

Question 10

In the context of public goods, which property makes them susceptible to the 'free rider problem'?

Accepted Answer

Non-excludability

Question 11

Suppose the price of corn increases due to a drought. What is the likely effect on the market for beef, assuming corn is a major input for beef production?

Accepted Answer

Supply of beef decreases, price increases

Question 12

Which of the following best describes the Nash Equilibrium in a two-player game?

Accepted Answer

Each player chooses the strategy that maximizes their own payoff, given the other player's strategy

Question 13

If a monopolistically competitive firm is earning positive economic profits in the short run, what is likely to happen in the long run?

Accepted Answer

New firms will enter, driving profits to zero

Question 14

Which of the following is the correct formula for present value (PV) of a payment $$F$$ received $$t$$ periods from now at interest rate $$r$$?

Accepted Answer

$$PV = \frac{F}{(1 + r)^t}$$

Question 15

Which of the following is true about the relationship between elasticity and total revenue?

Accepted Answer

If demand is inelastic, a price increase will increase total revenue

Question 16

A firm’s total revenue is $$TR = P 	imes Q$$ and its total cost is $$TC = FC + VC. If$$ $$P \u003e AC$$, what does this imply about the firm’s profit?

Accepted Answer

The firm is making positive profit

Question 17

Which of the following is a likely result of imposing a binding price ceiling below equilibrium price?

Accepted Answer

A shortage of the good

Question 18

Which of the following is NOT a solution to the tragedy of the commons?

Accepted Answer

Increasing subsidies for use

Question 19

If the marginal product of labor (MPL) is decreasing as more labor is hired, which law is being illustrated?

Accepted Answer

Law of diminishing marginal returns

Microeconomics Final Exam Study Guide: Core Concepts, Models, and Applications (Chapters 1–15)

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