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

$$\varepsilon_D = \frac{\Delta Q}{\text{average } Q} \div \frac{\Delta P}{\text{average } P}$$

Question 1

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

Accepted Answer

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

Question 2

According to the circular flow diagram, which of the following flows from households to firms through the goods market?

Accepted Answer

Expenditure on goods and services

Question 3

If the price of a substitute good increases, what is the expected effect on the demand for the original good?

Accepted Answer

Demand for the original good increases.

Question 4

Which equation correctly represents the price elasticity of demand using the midpoint formula?

Accepted Answer

$$\varepsilon_D = \frac{\Delta Q}{	ext{average } Q} \div \frac{\Delta P}{	ext{average } P}$$

Question 5

A rightward shift of the demand curve, as shown in the diagrams, could be caused by which of the following?

Accepted Answer

An increase in population

Question 6

If the supply curve for a good is perfectly inelastic, what does this imply about the elasticity of supply?

Accepted Answer

$$|\varepsilon_S| = 0$$

Question 7

Suppose the demand for a product is given by $$P = 30 - \frac{Q_D}{6}$$ and the supply is $$P = \frac{20}{6} + \frac{Q_S}{6}. $$What is the equilibrium price?

Accepted Answer

$$13.33$$

Question 8

Which of the following is a normative statement?

Accepted Answer

The government ought to increase the minimum wage.

Question 9

If the cross elasticity of demand between two goods is negative, what does this indicate?

Accepted Answer

The goods are complements.

Question 10

Which of the following best describes allocative efficiency?

Accepted Answer

When marginal benefit equals marginal cost.

Question 11

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

Accepted Answer

Increase demand for the original good.

Question 12

If a good has an income elasticity of demand $$\varepsilon_M \u003c 0$$, how is the good classified?

Accepted Answer

Inferior good

Question 13

Which of the following is NOT a factor of production?

Accepted Answer

Money

Question 14

If the price of a good increases and total revenue decreases, what can be said about the price elasticity of demand for the good?

Accepted Answer

Demand is elastic.

Question 15

Which allocation method is most likely used when a scarce resource is distributed to those who arrive first?

Accepted Answer

First-come, first-served

Question 16

A supply curve that is horizontal indicates which type of elasticity?

Accepted Answer

Perfectly elastic supply

Question 17

Which of the following would cause a leftward shift in the supply curve for a good?

Accepted Answer

An increase in the price of a substitute in production

Question 18

If the demand for a good is perfectly inelastic, what happens to the quantity demanded when the price increases?

Accepted Answer

Quantity demanded remains the same.

Question 19

Which of the following best describes producer surplus?

Accepted Answer

The area above the supply curve and below the market price.

Question 20

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied.

Microeconomics Study Guide: Foundations, Demand & Supply, and Elasticity

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