Q: Which formula represents the income elasticity of demand?

$$\text{Percentage change in quantity demanded} \div \text{Percentage change in income}$$

Q: What is the formula for calculating the price elasticity of demand?

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

Question 1

Which of the following is NOT considered 'land' as a factor of production?

Accepted Answer

A factory

Question 2

What does the term 'marginal' refer to in the context of marginal analysis?

Accepted Answer

The additional or extra amount of a good or service.

Question 3

Why is it significant that households own the factors of production in the circular flow diagram?

Accepted Answer

It enables households to receive income from selling resources.

Question 4

Why is it assumed that people are rational in economic models?

Accepted Answer

Question 5

Which of the following best describes causation?

Accepted Answer

A relationship where one event triggers another.

Question 6

If moving from 2 to 3 units of good A results in a decrease from 10 to 7 units of good B, what is the marginal opportunity cost of the third unit of good A?

Accepted Answer

3 units of good B

Question 7

How does a technological advance in the pizza industry affect the PPF for pizza and robots?

Accepted Answer

The PPF shifts outward only for pizza, while the maximum production of robots remains unchanged.

Question 8

According to the law of supply, what happens to the quantity supplied of a good when its price increases?

Accepted Answer

The quantity supplied increases.

Question 9

What does the demand curve represent in a perfectly competitive market?

Accepted Answer

The relationship between the price of a good and the quantity demanded.

Question 10

If the price changes from $$20 to 25$$, what is the percentage change in price using the midpoint method?

Accepted Answer

22.2\%

Question 11

Which formula represents the income elasticity of demand?

Accepted Answer

$$	ext{Percentage change in quantity demanded} \div 	ext{Percentage change in income}$$

Question 12

What is the formula for calculating the price elasticity of demand?

Accepted Answer

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

Question 13

What is a price ceiling?

Accepted Answer

A legal maximum price that can be charged for a good or service.

Question 14

What is the axis price for the demand curve $$Q_d = 4000 - 200P$$?

Accepted Answer

$$P = 40$$

Question 15

What is economic surplus?

Accepted Answer

The sum of consumer surplus and producer surplus.

Question 16

What is consumer surplus?

Accepted Answer

The difference between the maximum price a consumer is willing to pay and the actual market price.

Question 17

What does an indifference curve represent in microeconomics?

Accepted Answer

The level of consumer satisfaction or utility from different consumption bundles.

Question 18

What is the formula for calculating total revenue?

Accepted Answer

Price multiplied by quantity sold

Question 19

If a firm has a budget of $$50,000 and the price of labor is 5$$,000 per unit, what is the maximum number of labor units the firm can afford?

Accepted Answer

20 units

Question 20

A firm is considering expanding its factory size in the long run. How does this decision affect its choice among short run average total cost curves?

Accepted Answer

The firm can select a new short run average total cost curve that minimizes costs for the desired output level.

Microeconomics Fundamentals: Key Concepts and Applications

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