Micro Economics Unit 3&4

What does elasticity of demand measure?

• How much supply changes in response to price

• How much demand changes in response to price

• How much price changes in response to supply

• How much quantity demanded changes in response to income

What is the formula for price elasticity of demand?

• Percentage change in price / Percentage change in quantity demanded

• Percentage change in income / Percentage change in quantity demanded

• Percentage change in quantity demanded / Percentage change in price

• Percentage change in quantity demanded / Percentage change in supply

In the midpoint method of calculating elasticity, what is the formula for percentage change in price?

• End value – Start value / Midpoint x 100%

• Start value – End value / Midpoint x 100%

• End value – Start value / Start value x 100%

• End value – Start value / End value x 100%

What is the value of price elasticity for perfectly inelastic demand?

• 0

• 1

• Greater than 1

• Infinity

Which of the following is a feature of elastic demand?

• A small change in price leads to a large change in quantity demanded

• A small change in price leads to a small change in quantity demanded

• Quantity demanded remains unchanged regardless of price changes

• Price and quantity demanded are unrelated

Which of the following is an example of inelastic demand?

• Luxury cars

• Designer clothes

• Basic necessities like food and water

• Electronics

What does the production function represent?

• The relationship between capital and labor

• The relationship between inputs used and outputs produced

• The relationship between price and demand

• The relationship between elasticity and quantity supplied

An isoquant curve shows:

• Combinations of inputs that produce the same cost

• Combinations of inputs that produce the same output

• Combinations of inputs that maximize profit

• Combinations of inputs that minimize output

Returns to scale refer to:

• The increase in output when only labor is increased

• The increase in output when all inputs are increased proportionately

• The decrease in output when labor is reduced

• The reduction in output due to diminishing returns

Increasing returns to scale occurs when:

• Output increases less than the increase in inputs

• Output increases in proportion to inputs

• Output increases more than the increase in inputs

• Output decreases as inputs increase