Micro Unit 2- Practice Questions #2

This video tutorial covers various microeconomic concepts, focusing on elasticity, demand, and supply. It explains the law of demand, types of elasticity, and the impact of price changes on total revenue. The tutorial also delves into welfare economics, consumer surplus, and the effects of taxes on market equilibrium. Additionally, it discusses consumer choice and utility, providing examples and practice questions to reinforce understanding.

What does elasticity of demand measure?

• The change in price due to a change in quantity

• The sensitivity of quantity demanded to a change in price

• The supply curve's response to price changes

• The total revenue generated by a product

If a price decrease leads to a larger percentage increase in quantity demanded, the demand is considered:

• Inelastic

• Unit elastic

• Perfectly inelastic

• Elastic

What does a negative cross-price elasticity of demand indicate?

• The goods are unrelated

• The goods are inferior

• The goods are complements

• The goods are substitutes

Which of the following is true for perfectly inelastic supply?

• Supply is highly responsive to price changes

• Supply remains constant regardless of price

• Supply decreases with price

• Supply increases with price

In welfare economics, what is consumer surplus?

• The total cost of production

• The difference between what consumers are willing to pay and what they actually pay

• The total revenue from sales

• The equilibrium price in the market

What happens to consumer surplus when the price of a good decreases?

• It remains the same

• It increases

• It decreases

• It becomes negative

How does a per unit excise tax affect consumers when demand is inelastic?

• Consumers pay a smaller portion of the tax

• Consumers pay a larger portion of the tax

• Producers absorb the entire tax

• The tax has no effect on consumers

What is the effect of a tax on the supply curve?

• It shifts the supply curve to the left

• It makes the supply curve steeper

• It shifts the supply curve to the right

• It makes the supply curve flatter

What is deadweight loss in the context of taxation?

• The increase in consumer surplus

• The total tax revenue collected

• The loss of consumer and producer surplus not gained by the government

• The loss of tax revenue

What does diminishing marginal utility imply?

• Each additional unit consumed provides more satisfaction

• Each additional unit consumed provides less satisfaction

• Total utility decreases with each unit consumed

• Total utility remains constant with each unit consumed