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

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

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 a country can produce either 100 units of wheat or 200 units of corn using all its resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$ 2 $ units of corn

Question 3

Which of the following statements about the Production Possibilities Curve (PPC) is correct?

Accepted Answer

Points on the PPC represent maximum possible output combinations.

Question 4

If a country discovers a new technology that increases productivity, how will its PPC change?

Accepted Answer

The PPC will shift outward.

Question 5

Which of the following is NOT a determinant of demand?

Accepted Answer

Production technology

Question 6

If the price of a substitute good increases, what is likely to happen to the demand for the original good?

Accepted Answer

Demand for the original good will increase.

Question 7

Suppose the market for coffee is in equilibrium. If a tax is imposed on coffee producers, what will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price will increase and quantity will decrease.

Question 8

Which formula correctly represents the price elasticity of demand?

Accepted Answer

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

Question 9

A price ceiling set below the equilibrium price will most likely result in:

Accepted Answer

A shortage of the good.

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

If the government imposes a quota on imported cars, what is the likely effect on domestic car prices?

Accepted Answer

Domestic car prices will increase.

Question 12

Which of the following graphs best illustrates the effect of a tax on consumer and producer surplus?

Accepted Answer

A supply and demand graph showing a wedge between the price buyers pay and the price sellers receive.

Question 13

Deadweight loss from a tax is represented by:

Accepted Answer

The area between the supply and demand curves that is lost due to the tax.

Question 14

If the price elasticity of demand for a product is $ |E_d| > 1 $, what does this imply?

Accepted Answer

Demand is elastic.

Question 15

Which of the following is true about the incidence of a tax?

Accepted Answer

The burden of the tax is shared between consumers and producers depending on elasticity.

Question 16

Suppose the government sets a price floor above the equilibrium price in the wheat market. What is the most likely outcome?

Accepted Answer

A surplus of wheat.

Question 17

Which of the following best explains allocative efficiency?

Accepted Answer

Resources are distributed so that consumer and producer surplus are maximized.

Question 18

If a firm faces increasing marginal opportunity costs, what will the shape of its PPC be?

Accepted Answer

Bowed outward (concave to the origin).

Question 19

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 20

Suppose the demand for a product is perfectly inelastic. If a tax is imposed, who bears the entire burden of the tax?

Accepted Answer

Consumers

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