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

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

Question 1

Suppose the demand for corn in Albion is given by $$Q_D = 200 - 2P$$ and the supply is $$Q_S = 20 + 2P. $$What is the equilibrium price and quantity in this market?

Accepted Answer

Equilibrium price is $$P = 45$$, quantity is $$Q = 110$$

Question 2

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative forgone

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 true in a perfectly competitive market in the long run?

Accepted Answer

Price equals marginal cost and average cost

Question 6

Suppose a monopolist faces a linear demand curve and maximizes profit by producing where marginal revenue equals marginal cost. If the demand curve is $$P = 100 - Q$$ and marginal cost is $$MC = 20$$, what is the profit-maximizing quantity?

Accepted Answer

$$Q = 60$$

Question 7

Which of the following is NOT a characteristic of a public good?

Accepted Answer

Rival consumption

Question 8

If a firm’s marginal cost (MC) is less than its average cost (AC), what happens to the average cost as output increases?

Accepted Answer

Average cost decreases

Question 9

Which formula correctly represents the point elasticity of demand?

Accepted Answer

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

Question 10

A negative externality results in which of the following market outcomes?

Accepted Answer

Overproduction relative to the social optimum

Question 11

In the context of game theory, what is a Nash Equilibrium?

Accepted Answer

A situation where no player can improve their payoff by changing their strategy unilaterally

Question 12

Suppose the present value of receiving $$100 in$$ $$2$$ years at an interest rate of $$5\% is $$given by $$PV = \frac{100}{(1.05)^2$}. $$What is the present value?

Accepted Answer

$$PV = 90.70$$

Question 13

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

Accepted Answer

A shortage of the good

Question 14

If the marginal product of labor (MPL) is decreasing as more labor is hired, which principle does this illustrate?

Accepted Answer

Principle of diminishing marginal product

Question 15

In a monopolistically competitive market, which of the following is true in the long run?

Accepted Answer

Price equals average cost

Question 16

Which of the following best describes consumer surplus?

Accepted Answer

The area above price and below demand curve

Question 17

If a firm in perfect competition faces a market price of $$P = 10$$ and its average total cost is $$ATC = 8$$, what is the firm's profit per unit?

Accepted Answer

$$2$$

Question 18

Which of the following is a mechanism that can help avoid the tragedy of the commons?

Accepted Answer

Increasing individual contributions

Question 19

Suppose a firm’s marginal revenue (MR) is $$MR = 50 - Q$$ and its marginal cost (MC) is $$MC = 10 + Q. $$What is the profit-maximizing output?

Accepted Answer

$$Q = 20$$

Question 20

Which of the following is true about oligopoly markets?

Accepted Answer

Firms' decisions are interdependent and may lead to price wars

Microeconomics Final Exam Study Guide: Core Concepts, Models, and Applications

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