Question 1

Which of the following best describes the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics focuses on individual consumers and firms, while macroeconomics examines the economy as a whole.

Question 2

Suppose a consumer faces the following marginal utility per dollar for two goods: $$MU_A/P_A = 10$$ and $$MU_B/P_B = 8. $$According to the principle of optimization at the margin, what should the consumer do?

Accepted Answer

Buy more of good A and less of good B.

Question 3

Which of the following is an example of opportunity cost?

Accepted Answer

The value of the next best alternative you give up when making a choice.

Question 4

If the price of coffee increases, what is most likely to happen to the demand for tea, assuming they are substitutes?

Accepted Answer

The demand for tea will increase.

Question 5

A perfectly competitive market is characterized by which of the following?

Accepted Answer

There are many buyers and sellers, and no single agent can influence the price.

Question 6

Which of the following best explains why the demand curve slopes downward?

Accepted Answer

As price decreases, the quantity demanded increases due to the substitution and income effects.

Question 7

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

Accepted Answer

A shortage of gasoline.

Question 8

If the supply curve for a good shifts to the right, which of the following is most likely to occur, ceteris paribus?

Accepted Answer

The equilibrium quantity will increase.

Question 9

Which of the following is NOT a determinant of demand?

Accepted Answer

Technology used in production.

Question 10

A consumer's willingness to pay for a good is best defined as:

Accepted Answer

The maximum price a consumer is willing to pay for a good or service.

Question 11

If the area under the demand curve and above the price is a triangle with a base of 10 units and a height of $5, what is the consumer surplus?

Accepted Answer

$$25$$

Question 12

Which of the following statements about correlation and causation is correct?

Accepted Answer

Correlation does not imply causation.

Question 13

Suppose a consumer has a budget of $$100 and faces prices P_A = 10$ and P_B = 20$. If the consumer spends all their money on good A, how many units can they buy?

Accepted Answer

$$10$$

Question 14

Which of the following would cause a movement along the supply curve for wheat?

Accepted Answer

A change in the price of wheat.

Question 15

If the marginal cost of producing an additional unit of a good is $$8$$ and the marginal benefit is $$10$$, what should a rational producer do?

Accepted Answer

Produce more units.

Question 16

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

Accepted Answer

As a consumer consumes more of a good, marginal utility decreases.

Question 17

If the price of a normal good increases, what happens to the quantity demanded?

Accepted Answer

It decreases.

Question 18

Which of the following is an example of a positive economic statement?

Accepted Answer

"An increase in the minimum wage will lead to higher unemployment among teenagers."

Question 19

Suppose the market for apples is in equilibrium. If a disease destroys a large portion of the apple crop, what is the most likely effect on the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity decreases.

Question 20

If a consumer's budget constraint shifts outward, which of the following must be true?

Accepted Answer

The consumer's income has increased or the prices of goods have decreased.

Microeconomics Midterm I Study Guide: Principles, Models, and Market Analysis

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