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

$$\\text{Price Elasticity of Demand} = \\frac{\\% \\text{ change in quantity demanded}}{\\% \\text{ change in price}}$$

Q: Which of the following equations represents the profit ($$\\pi) of a $$firm?

$$\\pi = \\text{Total Revenue} - \\text{Total Cost}$$

Question 1

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

Accepted Answer

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

Question 2

Suppose a bakery can produce either 100 loaves of bread or 50 cakes in a day. What is the opportunity cost of producing one cake?

Accepted Answer

$$2$$ loaves of bread

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 equilibrium quantity will increase.

Question 4

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

Accepted Answer

$$\text{Price Elasticity of Demand} = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}$$

Question 5

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

Accepted Answer

A shortage of apartments will occur.

Question 6

Which of the following statements about comparative advantage is correct?

Accepted Answer

A country has a comparative advantage if it can produce a good at a lower opportunity cost than another country.

Question 7

Suppose the market demand for coffee is given by $$Q_d = 100 - 2P$$ and the market supply is $$Q_s = 20 + 3P. $$What is the equilibrium price?

Accepted Answer

$$P = 16$$

Question 8

If a firm experiences increasing marginal costs as it increases output, which of the following is most likely true?

Accepted Answer

The firm is experiencing diminishing marginal returns.

Question 9

Which of the following best describes a perfectly competitive market?

Accepted Answer

A market with many buyers and sellers, where no single buyer or seller can influence the price.

Question 10

A monopolist faces the following demand curve: $$P = 100 - 2Q. $$Its marginal cost is constant at $$MC = 20. $$What is the profit-maximizing quantity?

Accepted Answer

$$Q = 20$$

Question 11

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

Accepted Answer

A homeowner planting a garden that beautifies the neighborhood.

Question 12

If the cross-price elasticity of demand between two goods is positive, what does this imply about the relationship between the goods?

Accepted Answer

They are substitutes.

Question 13

Suppose the government imposes a tax on sellers of gasoline. What is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the left.

Question 14

Which of the following equations represents the profit ($$\pi) of a $$firm?

Accepted Answer

$$\pi = \text{Total Revenue} - \text{Total Cost}$$

Question 15

A firm in a perfectly competitive market faces a market price of $$P = 10. $$Its marginal cost is $$MC = 8 at $$its current output. What should the firm do to maximize profit?

Accepted Answer

Increase output.

Question 16

Which of the following best explains why monopolistic competition leads to excess capacity in the long run?

Accepted Answer

Firms produce less than the output that minimizes average total cost.

Question 17

If a country can produce either 10 units of wheat or 20 units of corn with the same resources, what is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

$$2$$ units of corn

Question 18

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

Accepted Answer

A change in the price of the product.

Question 19

Suppose the government provides a subsidy to consumers of electric cars. What is the likely effect on the market for electric cars?

Accepted Answer

The demand curve shifts to the right.

Question 20

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

Accepted Answer

As a person consumes more of a good, the additional satisfaction from each additional unit decreases.

Principles of Microeconomics: Course Overview and Key Topics

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