Question 1

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

Accepted Answer

The value of the next best alternative that is forgone when making a decision.

Question 2

Suppose the price of coffee increases. According to the substitution effect, what is most likely to happen to the demand for tea, a substitute good?

Accepted Answer

The demand for tea will increase.

Question 3

A new technology reduces the cost of producing electric cars. Which of the following best describes the effect on the supply curve for electric cars?

Accepted Answer

The supply curve shifts to the right.

Question 4

If the price elasticity of demand (PED) for a product is calculated as $$PED = 0.5$$, which of the following statements is correct?

Accepted Answer

The product is inelastic.

Question 5

A government sets a price ceiling on rental apartments below the equilibrium price. Which of the following is a likely consequence?

Accepted Answer

A shortage of apartments.

Question 6

If the market price for a laptop is $$\800$, but a consumer is willing to pay $$\$$1,000$$, what is the consumer surplus for this transaction?

Accepted Answer

$$\200$

Question 7

Which of the following would cause a movement along the demand curve for ice cream, rather than a shift of the demand curve?

Accepted Answer

A decrease in the price of ice cream.

Question 8

Suppose the price of beef increases, and as a result, the supply of leather (a complement in production) also increases. Which supply shifter does this illustrate?

Accepted Answer

Change in the price of a complement in production.

Question 9

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

Accepted Answer

They are substitutes.

Question 10

A bakery finds that when the price of bread rises from $$\2$ to $$\$$2.20$$, the quantity demanded falls from $$1,000 to$$ $$900$$ loaves per week. Using the midpoint method, what is the price elasticity of demand (PED)?

Accepted Answer

$$PED = 1.05$$

Question 11

Which of the following is an example of an inferior good?

Accepted Answer

Public transportation, whose demand decreases as income rises.

Question 12

If a product has a perfectly inelastic demand curve, what does this imply about the price elasticity of demand?

Accepted Answer

$$PED = 0$$

Question 13

A new Black Friday sale is announced for next month. How will this affect the current demand for the product on sale, according to the expectations demand shifter?

Accepted Answer

Current demand will decrease.

Question 14

Which of the following best describes producer surplus?

Accepted Answer

The difference between the price a producer is willing to accept and the actual market price.

Question 15

If the government imposes a price floor above the equilibrium price in the wheat market, what is the most likely result?

Accepted Answer

A surplus of wheat.

Question 16

Which of the following is NOT a reason why price ceilings can lead to inefficiency?

Accepted Answer

They ensure efficient allocation to consumers.

Question 17

Suppose the demand and supply for a product are given by $$Q_D = 100 - 2P$$ and $$Q_S = 4P. $$What is the equilibrium price?

Accepted Answer

$$P = 20$$

Question 18

If a good has an income elasticity of demand greater than 1, what type of good is it?

Accepted Answer

Luxury or superior good

Question 19

A company increases the price of its product from $$\10$ to $$\$$12$$, and as a result, the quantity sold decreases from $$500 to$$ $$400$$ units. What is the total revenue before and after the price change, and what does this indicate about the elasticity of demand?

Accepted Answer

Before: $$\5$$,000$$, After: $$\$$4,800$$; demand is elastic.

Question 20

Which of the following best illustrates the concept of specialization in a real-world context?

Accepted Answer

A doctor focuses exclusively on pediatric medicine, while another specializes in cardiology.

Microeconomics Study Guide: Market Fundamentals, Demand & Supply, Surplus, Elasticity, and Price Controls

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