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

Question 1

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

Accepted Answer

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

Question 2

Suppose the demand for coffee increases due to a rise in consumer income. Which of the following will most likely occur in the coffee market?

Accepted Answer

The equilibrium price and equilibrium quantity will both increase.

Question 3

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

Accepted Answer

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

Question 4

A government imposes a price ceiling below the equilibrium price in the rental housing market. What is the most likely outcome?

Accepted Answer

A shortage of rental housing units.

Question 5

Which equation correctly represents the calculation of marginal cost ($$MC) in $$production?

Accepted Answer

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

Question 6

A perfectly competitive firm faces a market price of $$P = 10. $$Its marginal cost curve is $$MC = 2Q. $$What is the profit-maximizing output level?

Accepted Answer

$$Q = 5$$

Question 7

Which of the following is an example of a public good?

Accepted Answer

National defense.

Question 8

If a firm can price discriminate, what must be true about the market?

Accepted Answer

The firm must be able to prevent resale between consumers.

Question 9

Suppose the government imposes a tax on the sale of gasoline. Which of the following is a likely effect?

Accepted Answer

The equilibrium price increases and the equilibrium quantity decreases.

Question 10

Which of the following best describes a market failure?

Accepted Answer

A situation where the market fails to allocate resources efficiently on its own.

Question 11

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

Accepted Answer

The goods are substitutes.

Question 12

Which formula is used to calculate the price elasticity of demand ($$E_d$$)?

Accepted Answer

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

Question 13

A monopolist maximizes profit where:

Accepted Answer

$$MR = MC$$

Question 14

Which of the following is a likely result of a binding minimum wage set above the equilibrium wage in the labor market?

Accepted Answer

Unemployment (a surplus of labor).

Question 15

If a firm’s total cost ($$TC) is $$given by $$TC = 100 + 5Q$$, what is the average total cost ($$ATC) $$when $$Q = 10$$?

Accepted Answer

$$ATC = 15$$

Question 16

Which of the following is an example of government intervention to correct a negative externality?

Accepted Answer

Imposing a tax on pollution emissions.

Question 17

Suppose the supply function for a good is $$Q_s = 2P$$ and the demand function is $$Q_d = 100 - P. $$What is the equilibrium price?

Accepted Answer

$$P = 33.33$$

Question 18

Which of the following best describes diminishing marginal utility?

Accepted Answer

As a consumer consumes more of a good, marginal utility decreases.

Question 19

Which of the following is a characteristic of a perfectly competitive market?

Accepted Answer

There are many buyers and sellers, and products are homogeneous.

Question 20

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

Accepted Answer

Domestic producers benefit, while domestic consumers face higher prices.

ECON*1050 Introductory Microeconomics: Course Syllabus and Study Guide

Study Guide - Practice Questions