Q: Suppose the price of a product decreases from $18 to $10, and the quantity demanded increases from 1,000 to 1,500 units. What is the change in consumer surplus?

$0.5 \times 500 \times (18-10) = $2,000$

Q: What is the formula for Marginal Utility per Dollar spent?

$\text{Marginal Utility} \div \text{Price}$

Question 1

Suppose the price of a product decreases from $18 to $10, and the quantity demanded increases from 1,000 to 1,500 units. What is the change in consumer surplus?

Accepted Answer

$0.5 	imes 500 	imes (18-10) = $2,000$

Question 2

Which of the following best describes the Law of Diminishing Marginal Utility?

Accepted Answer

As consumption increases, the satisfaction derived from each additional unit decreases.

Question 3

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

Accepted Answer

A shortage of apartments as demand exceeds supply.

Question 4

If the price elasticity of demand (PED) for a product is exactly 1, what does this imply about total revenue when price changes?

Accepted Answer

Total revenue remains unchanged when price changes.

Question 5

Which of the following is NOT a determinant of price elasticity of supply (PES)?

Accepted Answer

Consumer preferences

Question 6

A consumer is willing to pay $20 for a concert ticket but buys it for $12. What is the consumer surplus?

Accepted Answer

$8

Question 7

Which scenario best illustrates the substitution effect?

Accepted Answer

A consumer switches from buying beef to chicken when the price of beef rises.

Question 8

If a product has many close substitutes, what can be said about its price elasticity of demand?

Accepted Answer

It is likely to be elastic.

Question 9

Which of the following would most likely result in deadweight loss?

Accepted Answer

A monopoly setting prices above equilibrium

Question 10

What is the formula for Marginal Utility per Dollar spent?

Accepted Answer

$	ext{Marginal Utility} \div 	ext{Price}$

Question 11

A firm faces elastic demand for its product. If it increases the price, what happens to its total revenue?

Accepted Answer

Total revenue decreases.

Question 12

Which of the following best describes economic efficiency in a market?

Accepted Answer

When the marginal benefit to consumers equals the marginal cost of production.

Question 13

If the price elasticity of supply (PES) is less than 1, supply is considered:

Accepted Answer

Inelastic

Question 14

Which of the following is an example of a nonmonetary sunk cost?

Accepted Answer

The time and emotional effort invested in a project

Question 15

A price floor is set above the equilibrium price in a market. What is the likely result?

Accepted Answer

A surplus as supply exceeds demand

Question 16

Which of the following would increase the price elasticity of supply for a product?

Accepted Answer

Easy reallocation of labor and raw materials

Question 17

If a consumer's income increases and they buy more of a good, that good is classified as:

Accepted Answer

A normal good

Question 18

Which of the following is true about total economic surplus?

Accepted Answer

It is the sum of consumer surplus and producer surplus.

Question 19

If a product is a necessity and has few substitutes, its price elasticity of demand is likely to be:

Accepted Answer

Inelastic

Question 20

Which of the following best explains why luxury goods tend to have higher price elasticity of demand than necessities?

Accepted Answer

Consumers can easily postpone purchasing luxury goods.

Microeconomics Study Notes: Surplus, Efficiency, Elasticity, and Consumer Choice

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