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

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

Question 1

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

Accepted Answer

The value of the next best alternative foregone when a choice is made.

Question 2

If a country can produce either 10 units of wheat or 20 units of corn using the same resources, what is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

2 units of corn

Question 3

Which statement best illustrates the law of demand?

Accepted Answer

As the price of a product increases, the quantity demanded decreases.

Question 4

Suppose the government imposes a price ceiling below the equilibrium price. What is the likely outcome in the market?

Accepted Answer

A shortage of goods

Question 5

Which formula correctly represents the price elasticity of demand?

Accepted Answer

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

Question 6

A firm faces the following costs: fixed costs of $$100 and variable costs of 200. $$What is the total cost?

Accepted Answer

$$300$$

Question 7

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

Accepted Answer

A homeowner planting trees that provide shade to neighbors

Question 8

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

Accepted Answer

The goods are substitutes.

Question 9

Which equation represents marginal cost?

Accepted Answer

$$\frac{\Delta TC}{\Delta Q}$$

Question 10

A perfectly competitive firm maximizes profit by producing the quantity where:

Accepted Answer

$$MC = MR$$

Question 11

Which of the following is NOT a characteristic of a monopoly?

Accepted Answer

Price taker

Question 12

If a firm in monopolistic competition increases advertising, what is the likely effect?

Accepted Answer

Increase in demand for its product

Question 13

Which formula represents average total cost?

Accepted Answer

$$\frac{TC}{Q}$$

Question 14

The Coase Theorem suggests that private parties can solve externality problems if:

Accepted Answer

Property rights are well-defined and transaction costs are low.

Question 15

Which of the following best describes a public good?

Accepted Answer

A good that is non-rival and non-excludable

Question 16

If the income elasticity of demand for a product is negative, the product is:

Accepted Answer

An inferior good

Question 17

Which equation represents profit maximization for a firm?

Accepted Answer

$$TR - TC$$

Question 18

A labor market is an example of which type of market?

Accepted Answer

Factor market

Question 19

Which of the following is a real-world example of a trade barrier?

Accepted Answer

Import tariffs imposed by the U.S. on steel

Question 20

If a firm faces decreasing returns to scale, what happens to average total cost as output increases?

Accepted Answer

Average total cost increases

Principles of Microeconomics (ECO 202) – Course Syllabus and Study Guide

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