$$ \frac{\text{Percentage Change in Quantity Demanded}}{\text{Percentage Change in Price}} $$

Question 1

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

Accepted Answer

The value of the next best alternative foregone when making a decision.

Question 2

If the demand for a product increases while the supply remains constant, what will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price will increase and equilibrium quantity will increase.

Question 3

A consumer maximizes utility when:

Accepted Answer

The marginal utility per dollar spent is equal across all goods.

Question 4

Which formula correctly represents the price elasticity of demand?

Accepted Answer

$$ \frac{	ext{Percentage Change in Quantity Demanded}}{	ext{Percentage Change in Price}} $$

Question 5

Suppose a firm faces diminishing marginal productivity. What happens to the marginal product of labor as more workers are hired?

Accepted Answer

Marginal product of labor decreases after a certain point.

Question 6

Which of the following is NOT a determinant of demand?

Accepted Answer

Technology used in production

Question 7

A firm in a perfectly competitive market maximizes profit by producing the quantity where:

Accepted Answer

$$ MR = MC $$

Question 8

If the price elasticity of demand for a product is greater than 1, the demand is:

Accepted Answer

Elastic

Question 9

Which market structure is characterized by a single seller, unique product, and barriers to entry?

Accepted Answer

Monopoly

Question 10

Government intervention to correct market failure due to externalities may include:

Accepted Answer

Imposing taxes or subsidies

Question 11

If a firm’s total revenue is less than its total cost, the firm is:

Accepted Answer

Incurring a loss

Question 12

Which equation represents the law of diminishing marginal utility?

Accepted Answer

$$ MU_{n+1} \u003c MU_n $$

Question 13

A public good is defined by which two characteristics?

Accepted Answer

Non-rivalry and non-excludability

Question 14

If the supply curve shifts to the right due to technological improvement, what happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases.

Question 15

Which formula is used to calculate average total cost (ATC)?

Accepted Answer

$$ ATC = \frac{TC}{Q} $$

Question 16

In the short run, a firm should continue to operate if:

Accepted Answer

Total revenue covers variable costs.

Question 17

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

Accepted Answer

A homeowner planting trees that provide shade to neighbors.

Question 18

Which equation represents the marginal cost (MC)?

Accepted Answer

$$ MC = \frac{\Delta TC}{\Delta Q} $$

Question 19

In international trade, comparative advantage is achieved when:

Accepted Answer

A country produces goods for which it has the lowest opportunity cost.

Question 20

Which of the following best describes the law of supply?

Accepted Answer

As price increases, quantity supplied increases.

Principles of Microeconomics: Course Syllabus and Study Guide

Study Guide - Practice Questions