Q: Which of the following equations 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?

Accepted Answer

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

Question 2

Suppose a consumer is deciding between buying a book or going to a movie. The book costs $15 and the movie costs $12. If the consumer chooses the movie, what is the opportunity cost?

Accepted Answer

The enjoyment from the book, valued at $15.

Question 3

If the demand for a product increases while the supply remains constant, what will most likely happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price will increase and quantity will increase.

Question 4

Which of the following equations represents the price elasticity of demand?

Accepted Answer

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

Question 5

A firm in a perfectly competitive market faces which of the following demand curves?

Accepted Answer

A perfectly elastic (horizontal) demand curve.

Question 6

If a monopolist wants to maximize profit, it should produce the quantity where:

Accepted Answer

$MR = MC$

Question 7

Suppose the cross-price elasticity of demand between two goods is positive. What does this imply about the relationship between the two goods?

Accepted Answer

They are substitutes.

Question 8

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Products are differentiated.

Question 9

A firm’s marginal cost (MC) is given by $MC = 2Q$. If the market price is $P = 20$ in perfect competition, what is the profit-maximizing output?

Accepted Answer

$Q = 10$

Question 10

Which of the following best explains why monopolies can earn long-run economic profits, while perfectly competitive firms cannot?

Accepted Answer

Monopolies have barriers to entry that prevent new firms from entering the market.

Question 11

If the government imposes a price ceiling below the equilibrium price, what is the most likely result?

Accepted Answer

A shortage of the good.

Question 12

Suppose the demand for a product is given by $Q_d = 100 - 2P$ and the supply is $Q_s = 4P$. What is the equilibrium price?

Accepted Answer

$P = 20$

Question 13

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

Accepted Answer

A homeowner planting a garden that beautifies the neighborhood.

Question 14

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 15

Which of the following best describes the law of diminishing marginal returns?

Accepted Answer

As more units of a variable input are added to fixed inputs, the additional output from each new unit will eventually decrease.

Question 16

A firm faces the following total revenue (TR) and total cost (TC) functions: $TR = 50Q$, $TC = 10 + 30Q$. What is the profit-maximizing output and profit?

Accepted Answer

$Q$ can be any positive value, Profit per unit = $20Q - 10$

Question 17

Which of the following is most likely to cause a shift in the supply curve for smartphones to the right?

Accepted Answer

A technological advancement in smartphone production.

Question 18

If the government wants to correct a negative externality, which policy is most appropriate?

Accepted Answer

Impose a tax equal to the external cost.

Question 19

Which of the following best describes a public good?

Accepted Answer

A good that is non-excludable and non-rival in consumption.

Question 20

Suppose a country imposes a tariff on imported steel. Which of the following is a likely consequence?

Accepted Answer

Domestic consumers will pay higher prices for steel.

Microeconomics Course Syllabus and Study Guide

Study Guide - Practice Questions

Study Guide - Flashcards