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

$E_d = \frac{\%\ \text{change in quantity demanded}}{\%\ \text{change in price}}$

Question 1

Which of the following best describes the concept of opportunity cost in the context of a student deciding whether to attend a paid internship or take a summer course?

Accepted Answer

The salary the student would earn at the internship, if they choose the course.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn with its available resources. If the country decides to produce 50 units of wheat, what is the opportunity cost in terms of corn?

Accepted Answer

$100$ units of corn

Question 3

If the Production Possibility Frontier (PPF) for an economy shifts outward, which of the following is the most likely cause?

Accepted Answer

A technological advancement that increases productivity.

Question 4

A perfectly competitive market is characterized by which of the following?

Accepted Answer

Firms are price takers.

Question 5

Which of the following is NOT considered a factor of production?

Accepted Answer

Money

Question 6

If the price of a good increases and the quantity supplied increases as a result, this is best explained by which economic concept?

Accepted Answer

Law of Supply

Question 7

A rightward shift in the demand curve for electric cars could be caused by which of the following real-world events?

Accepted Answer

An increase in consumer income, assuming electric cars are normal goods.

Question 8

Suppose the government sets a price ceiling below the equilibrium price for rental apartments. What is the most likely outcome?

Accepted Answer

A shortage of apartments.

Question 9

If the price elasticity of demand for a product is $|E_d| = 2.5$, what does this imply about consumer responsiveness?

Accepted Answer

Demand is elastic; consumers are highly responsive to price changes.

Question 10

Which of the following best describes consumer surplus?

Accepted Answer

The difference between what consumers are willing to pay and what they actually pay.

Question 11

A movement along the supply curve is caused by:

Accepted Answer

A change in the price of the good itself.

Question 12

If a market is in equilibrium, which of the following must be true?

Accepted Answer

Quantity demanded equals quantity supplied.

Question 13

Which of the following real-world scenarios best illustrates the concept of scarcity?

Accepted Answer

A bakery has to decide how to allocate its limited supply of flour between making bread and pastries.

Question 14

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

Accepted Answer

The goods are substitutes.

Question 15

Suppose the government imposes a price floor above the equilibrium price for wheat. What is the likely result?

Accepted Answer

A surplus of wheat.

Question 16

Which formula correctly represents the price elasticity of demand?

Accepted Answer

$E_d = \frac{\%\ 	ext{change in quantity demanded}}{\%\ 	ext{change in price}}$

Question 17

Which of the following statements is a positive statement?

Accepted Answer

"Raising the minimum wage will increase unemployment among teenagers."

Question 18

If a firm faces increasing marginal opportunity costs as it produces more of a good, what will the shape of its PPF be?

Accepted Answer

A bow outward from the origin.

Question 19

Which of the following best explains why the PPF is typically bowed outward?

Accepted Answer

Resources are specialized and not perfectly adaptable to the production of both goods.

Question 20

Suppose a new technology reduces the cost of producing smartphones. What is the likely effect on the supply curve for smartphones?

Accepted Answer

The supply curve shifts to the right.

Core Concepts in Microeconomics: Study Guide

Study Guide - Practice Questions

Study Guide - Flashcards