Question 1

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

Accepted Answer

A student spends an hour studying for an exam instead of watching a movie, giving up the enjoyment of the movie.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn with its available resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$$\frac{2}{1}$$ units of corn$

Question 3

Which of the following statements is a normative economic statement?

Accepted Answer

The government should increase the minimum wage to help low-income workers.

Question 4

A point inside the production possibilities frontier (PPF) represents:

Accepted Answer

An inefficient use of resources.

Question 5

If the PPF for two goods is bowed outward (concave to the origin), this implies:

Accepted Answer

Increasing marginal opportunity costs.

Question 6

Which of the following would NOT shift the production possibilities frontier (PPF) outward?

Accepted Answer

A decrease in the labor force.

Question 7

Country A can produce 10 cars or 20 computers with its resources. Country B can produce 8 cars or 16 computers. Which country has the comparative advantage in producing cars?

Accepted Answer

Neither; both have the same opportunity cost.

Question 8

According to Adam Smith’s ‘invisible hand’ principle, which of the following best describes how markets allocate resources?

Accepted Answer

Individuals pursuing their own self-interest unintentionally benefit society as a whole.

Question 9

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

Accepted Answer

Raising taxes on gasoline will reduce gasoline consumption.

Question 10

If the price of coffee increases, what is the most likely effect on the quantity demanded of coffee, according to the law of demand?

Accepted Answer

The quantity demanded will decrease.

Question 11

Which of the following would cause a rightward shift in the market demand curve for electric cars?

Accepted Answer

An increase in consumer income, assuming electric cars are normal goods.

Question 12

Suppose the market for apples is in equilibrium. If a disease destroys a large portion of the apple crop, what will happen in the short run?

Accepted Answer

There will be a shortage, causing the price to rise.

Question 13

Which of the following best describes the difference between a change in demand and a change in quantity demanded?

Accepted Answer

A change in demand is caused by non-price factors; a change in quantity demanded is caused by a change in the good’s own price.

Question 14

If the supply of a good increases while demand remains unchanged, what will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price will decrease and equilibrium quantity will increase.

Question 15

Which of the following is NOT a characteristic of a market economy?

Accepted Answer

Centralized allocation of resources by government planners.

Question 16

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

Accepted Answer

A shortage of rental apartments.

Question 17

Which of the following best explains why trade can make both parties better off, even if one party is more productive in both goods?

Accepted Answer

Each party specializes in the good for which they have a comparative advantage.

Question 18

Which of the following is an example of a factor that would shift the supply curve for wheat to the left?

Accepted Answer

An increase in the cost of fertilizer.

Question 19

Which of the following best describes the knowledge problem as discussed by Friedrich Hayek?

Accepted Answer

Central planners cannot possess all the information needed to allocate resources efficiently.

Question 20

Suppose the demand for a product increases and the supply decreases simultaneously. What will happen to the equilibrium price?

Accepted Answer

Equilibrium price will increase.

Principles of Microeconomics: Exam 1 Study Guide

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