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

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

Q: A firm’s marginal cost is calculated as:

$$\frac{\text{Change in total cost}}{\text{Change in quantity}}$$

Q: Which formula represents average fixed cost (AFC)?

$$\frac{\text{Total fixed cost}}{\text{Quantity}}$$

Question 1

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

Accepted Answer

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

Question 2

If a production possibility frontier (PPF) is bowed outward, what does this indicate about opportunity costs?

Accepted Answer

Opportunity costs increase as more of a good is produced.

Question 3

Suppose a country can produce either 10 units of food or 20 units of clothing. What is the opportunity cost of producing 1 unit of food?

Accepted Answer

$$2$$ units of clothing

Question 4

Which of the following is NOT a determinant of demand?

Accepted Answer

Technology

Question 5

A decrease in the price of a substitute good will have what effect on the demand for the original good?

Accepted Answer

Decrease demand for the original good

Question 6

If the price of a good increases and the quantity demanded decreases, this is an example of:

Accepted Answer

Movement along the demand curve

Question 7

Which formula correctly represents the price elasticity of demand?

Accepted Answer

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

Question 8

If the cross-price elasticity of demand between two goods is positive, the goods are:

Accepted Answer

Substitutes

Question 9

A firm’s marginal cost is calculated as:

Accepted Answer

$$\frac{	ext{Change in total cost}}{	ext{Change in quantity}}$$

Question 10

Which of the following is true about diminishing marginal returns?

Accepted Answer

Each additional unit of input increases output at a decreasing rate.

Question 11

If a firm’s average total cost (ATC) is $$10 and its marginal cost (MC) is 8$$, what will happen to ATC as output increases?

Accepted Answer

ATC will decrease

Question 12

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

Accepted Answer

Products are identical

Question 13

If a firm in perfect competition faces a market price of $$5 and its marginal cost is 7$$, what should the firm do?

Accepted Answer

Decrease output

Question 14

Which formula represents average fixed cost (AFC)?

Accepted Answer

$$\frac{	ext{Total fixed cost}}{	ext{Quantity}}$$

Question 15

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

Accepted Answer

A shortage of the good

Question 16

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 17

If the demand for a product is perfectly inelastic, what is the value of its price elasticity of demand?

Accepted Answer

$$0$$

Question 18

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

Accepted Answer

National defense

Question 19

If a firm’s total cost (TC) is $$100 when producing 10 units, and total cost rises to 120 $$when producing 12 units, what is the marginal cost of producing the 11th and 12th units?

Accepted Answer

$$\frac{120-100}{12-10} = 10$$

Question 20

Which of the following best describes the law of supply?

Accepted Answer

As price increases, quantity supplied increases.

Microeconomics Core Concepts: Principles, Models, and Market Analysis

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