Question 1

Which of the following best distinguishes microeconomics from macroeconomics?

Accepted Answer

Microeconomics studies the behavior of individual markets and firms, while macroeconomics focuses on aggregate economic variables such as GDP and inflation.

Question 2

Suppose the demand for coffee is given by $$Q_d = 100 - 2P$$ and the supply is $$Q_s = 20 + 3P. $$What is the equilibrium price?

Accepted Answer

$$P = 16$$

Question 3

Which of the following statements is an example of a normative economic statement?

Accepted Answer

The government should increase taxes on the wealthy to reduce income inequality.

Question 4

If the price elasticity of demand for a product is $$-2$$, which of the following is true?

Accepted Answer

A 1% increase in price will decrease quantity demanded by 2%.

Question 5

A government imposes a price ceiling below the equilibrium price in the market for rental apartments. What is the most likely outcome?

Accepted Answer

A shortage of apartments.

Question 6

If the cross-price elasticity of demand between tea and coffee is positive, what does this imply?

Accepted Answer

Tea and coffee are substitutes.

Question 7

Suppose a consumer's budget constraint is $$100 = 5x + 10y$$, where $$x$$ and $$y$$ are quantities of goods $$X$$ and $$Y. If $$the price of $$Y$$ increases to $$20$$, what happens to the budget line?

Accepted Answer

The budget line becomes steeper, rotating inward around the $$X-$$intercept.

Question 8

Which of the following best describes the marginal rate of substitution (MRS) between two goods?

Accepted Answer

The rate at which a consumer is willing to give up one good for another while maintaining the same level of utility.

Question 9

A consumer's utility function is $$U(x, y) = x + y. $$What does this imply about the consumer's preferences?

Accepted Answer

The consumer views $$x$$ and $$y as $$perfect substitutes.

Question 10

If a good is considered an economic 'bad', how will its indifference curves be shaped?

Accepted Answer

They will slope upward to the right.

Question 11

Suppose the price of a durable good falls sharply during a recession. Which of the following best explains this phenomenon?

Accepted Answer

Durable goods have more elastic demand, so a decrease in income leads to a larger drop in demand and price.

Question 12

If a consumer maximizes utility by choosing quantities $$x$$ and $$y$$ such that $$\frac{MU_x}{P_x} = \frac{MU_y}{P_y}$$, what does this condition represent?

Accepted Answer

The equal marginal principle.

Question 13

A market for a noncompetitive good is characterized by:

Accepted Answer

Firms that have the ability to influence the market price.

Question 14

If the income elasticity of demand for a good is negative, which of the following is true?

Accepted Answer

The good is an inferior good.

Question 15

Suppose the nominal price of gasoline increased from $$\2.00$ to $$\$$2.50$$ per gallon over a year, while the overall price level (CPI) increased by 10%. What is the real price change?

Accepted Answer

The real price increased by 12.5%.

Question 16

Which of the following is NOT an assumption about consumer preferences in microeconomic theory?

Accepted Answer

Preferences are random.

Question 17

If the slope of a linear demand function $$Q = a - bP is$$ $$-2$$, what does this mean?

Accepted Answer

For every $$1$$ unit increase in price, quantity demanded decreases by $$2$$ units.

Question 18

A consumer faces the budget constraint $$M = P_x x + P_y y. If $$income $$M$$ doubles and prices remain constant, what happens to the budget line?

Accepted Answer

The budget line shifts outward parallel to the original.

Question 19

Which of the following is true about opportunity cost?

Accepted Answer

It is the value of the next best alternative forgone.

Question 20

If a consumer's indifference curves for goods $$X$$ and $$Y$$ are L-shaped, what does this imply?

Accepted Answer

The goods are perfect complements.

Microeconomics Study Guide: Preliminaries, Supply & Demand, and Consumer Behavior

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