Q: Which of the following equations correctly represents the price elasticity of demand?

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

Question 1

Suppose Country A can produce either 10 units of wheat or 20 units of corn with the same resources, while Country B can produce either 8 units of wheat or 16 units of corn. According to the theory of comparative advantage, which statement is correct?

Question 2

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

Accepted Answer

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

Question 3

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

Accepted Answer

Both equilibrium price and quantity will increase.

Question 4

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

Accepted Answer

A shortage of rental apartments.

Question 5

Suppose the government imposes a per-unit tax on sellers. Which of the following is true regarding the effect on the supply curve?

Accepted Answer

The supply curve shifts to the left by the amount of the tax.

Question 6

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

Accepted Answer

A person getting vaccinated, reducing disease spread.

Question 7

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

Accepted Answer

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

Question 8

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

Accepted Answer

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

Question 9

Which of the following is a characteristic of a public good?

Accepted Answer

It is non-excludable and non-rival in consumption.

Question 10

Suppose the government sets a minimum wage above the equilibrium wage. What is the most likely result in the labor market?

Accepted Answer

A surplus of workers (unemployment).

Question 11

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

Accepted Answer

Quantity supplied equals quantity demanded.

Question 12

Which of the following best describes a deadweight loss?

Accepted Answer

A loss of economic efficiency when the equilibrium outcome is not achieved.

Question 13

A negative externality in production will result in which of the following outcomes if left unregulated?

Accepted Answer

The market will produce more than the socially optimal quantity.

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 supply of a good is perfectly inelastic. If a tax is imposed on this good, who bears the entire burden of the tax?

Accepted Answer

Producers bear the entire burden.

Question 16

Which of the following is NOT a reason for government intervention in a market?

Accepted Answer

To ensure efficient allocation of resources in all cases.

Question 17

If the government wants to increase total revenue from a tax, it should impose the tax on a good with which type of demand?

Accepted Answer

Inelastic demand.

Question 18

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases.

Question 19

A bakery finds that when it increases the price of its bread from $\$2$ to $\$2.20$, the quantity demanded falls from $1000$ to $900$ loaves per week. What is the price elasticity of demand (using the midpoint formula)?

Accepted Answer

$E_d = -1.05$

Question 20

Which of the following is most likely to cause a movement along the demand curve for coffee?

Accepted Answer

An increase in the price of coffee.

Microeconomics Course Syllabus: Key Topics and Chapter Guide

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