Q: Suppose the price of bread increases from $$2 to 3 $$per loaf, and as a result, the quantity demanded falls from 100 to 80 loaves per week. What is the price elasticity of demand for bread over this range?

$$\text{Elasticity} = \frac{(80-100)/((80+100)/2)}{(3-2)/((3+2)/2)} = \frac{-20/90}{1/2.5} = -0.56$$

Question 1

Which of the following best describes the primary economic agents in a microeconomic system?

Accepted Answer

Households, businesses, and the government

Question 2

Suppose the price of bread increases from $$2 to 3 $$per loaf, and as a result, the quantity demanded falls from 100 to 80 loaves per week. What is the price elasticity of demand for bread over this range?

Accepted Answer

$$	ext{Elasticity} = \frac{(80-100)/((80+100)/2)}{(3-2)/((3+2)/2)} = \frac{-20/90}{1/2.5} = -0.56$$

Question 3

A business is deciding whether to produce more of a good. Which concept should it use to determine if producing one more unit is beneficial?

Accepted Answer

Marginal cost

Question 4

If the demand for a product is perfectly inelastic, what will happen to the quantity demanded if the price increases?

Accepted Answer

Quantity demanded will remain unchanged

Question 5

Which of the following is an example of a real-world opportunity cost?

Accepted Answer

The enjoyment you would have received from a movie you skipped to attend a concert

Question 6

A firm’s total revenue is $$\5000$ and its total cost is $$\$$4000. $$What is the firm’s profit?

Accepted Answer

$$\1000$

Question 7

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

Accepted Answer

The more slices of pizza you eat, the less satisfaction you get from each additional slice

Question 8

If a business faces a downward-sloping demand curve, what does this imply about its market power?

Accepted Answer

It has some control over the price it charges

Question 9

Suppose a government imposes a price ceiling below the equilibrium price for gasoline. What is the most likely outcome?

Accepted Answer

A shortage of gasoline

Question 10

Which of the following equations correctly represents the profit-maximizing condition for a perfectly competitive firm?

Accepted Answer

$$MR = MC$$

Question 11

A bakery can produce 100 loaves of bread per day with 2 workers and 150 loaves with 3 workers. What is the marginal product of the third worker?

Accepted Answer

$$MP = 150 - 100 = 50$$

Question 12

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

Accepted Answer

The goods are substitutes

Question 13

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Barriers to entry

Question 14

A consumer spends all their income on two goods, X and Y. The marginal utility per dollar spent on X is greater than that on Y. What should the consumer do to maximize utility?

Accepted Answer

Buy more of X and less of Y

Question 15

If a firm’s average total cost is decreasing as output increases, what can be inferred about marginal cost?

Accepted Answer

Marginal cost is below average total cost

Question 16

Suppose a new technology reduces the cost of producing smartphones. What is the likely effect on the supply curve for smartphones?

Accepted Answer

The supply curve shifts to the right

Question 17

Which of the following best describes a public good?

Accepted Answer

A good that is non-rival and non-excludable

Question 18

If the government imposes a tax on sellers, what is the immediate effect on the supply curve?

Accepted Answer

The supply curve shifts to the left

Question 19

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied

Question 20

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

Accepted Answer

A homeowner plants a garden that beautifies the neighborhood

Fundamental Concepts in Microeconomics: Households, Businesses, and Markets

Study Guide - Practice Questions

Study Guide - Flashcards