Q: Which formula correctly calculates the point price elasticity of demand?

$$\frac{\Delta Q}{\Delta P} \times \frac{P}{Q}$$

Question 1

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 2

Suppose the demand for corn is given by $$Q_d = 400 - 2P$$ and the supply is $$Q_s = 2P - 20. $$What is the equilibrium price?

Accepted Answer

$$P = 105$$

Question 3

If the price elasticity of demand for a product is $$-2$$, what does this imply about consumer responsiveness?

Accepted Answer

A 1% increase in price leads to a 2% decrease in quantity demanded.

Question 4

Which formula correctly calculates the point price elasticity of demand?

Accepted Answer

$$\frac{\Delta Q}{\Delta P} 	imes \frac{P}{Q}$$

Question 5

A firm in perfect competition will maximize profit by producing the quantity where:

Accepted Answer

$$MR = MC$$

Question 6

If a government imposes a $2 per unit tax on a good, what happens to consumer surplus, producer surplus, and total surplus?

Accepted Answer

Consumer surplus and producer surplus both decrease; total surplus decreases by the deadweight loss.

Question 7

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

Accepted Answer

Products are differentiated.

Question 8

If the marginal physical product of labor is decreasing, what does this imply about the production process?

Accepted Answer

The law of diminishing marginal returns is in effect.

Question 9

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

Accepted Answer

$$ATC = 15$$

Question 10

Which of the following best explains why a price floor set above equilibrium price creates a surplus?

Accepted Answer

Quantity supplied exceeds quantity demanded.

Question 11

If a country imposes a tariff on imported goods, what is the most likely effect on domestic producers and consumers?

Accepted Answer

Domestic producers benefit, consumers face higher prices.

Question 12

Which equation represents total revenue for a firm?

Accepted Answer

$$TR = P 	imes Q$$

Question 13

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

Accepted Answer

Average cost decreases.

Question 14

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 15

If the price of a normal good increases, what happens to the quantity demanded, holding all else constant?

Accepted Answer

Quantity demanded decreases.

Question 16

Suppose the marginal revenue product of labor ($$MRP_L) is $$given by $$MRP_L = 20 - 2L. If $$the wage rate is $$10$$, how many units of labor should the firm hire to maximize profit?

Accepted Answer

$$L = 5$$

Question 17

Which of the following statements about consumer surplus is correct?

Accepted Answer

Consumer surplus is the area below the demand curve and above the price.

Question 18

If a firm in perfect competition is earning positive economic profits, what will happen in the long run?

Accepted Answer

New firms will enter, driving profits to zero.

Question 19

Which of the following best describes the law of demand?

Accepted Answer

As price increases, quantity demanded decreases.

Question 20

Suppose a firm’s total physical product ($$TPP) $$increases at a decreasing rate as more labor is added. What is happening to the marginal physical product ($$MPP$$)?

Accepted Answer

$$MPP is $$decreasing.

Microeconomics Study Guide: Core Concepts, Demand & Supply, Elasticity, Efficiency, and Market Structures (Chapters 1-8)

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