Q: Which formula correctly calculates opportunity cost on a production possibilities curve (PPC)?

$$ \frac{\text{Loss in Good Y}}{\text{Gain in Good X}} $$

Question 1

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases, ceteris paribus.

Question 2

Suppose the market for coffee is in equilibrium. If a frost destroys half the coffee crop, what is the most likely immediate effect?

Accepted Answer

The supply curve shifts left, causing price to rise and quantity to fall.

Question 3

Which equation represents the market equilibrium condition?

Accepted Answer

$$ Q_d = Q_s $$

Question 4

A seller faces the following costs: $$C = 2Q^2$ + 10Q + 100. $$What is the marginal cost (MC) function?

Accepted Answer

$$ MC = 4Q + 10 $$

Question 5

Which of the following is NOT a characteristic of a monopoly?

Accepted Answer

Perfect information

Question 6

If a firm is making a production decision, which cost should it consider to maximize profit?

Accepted Answer

Marginal cost and marginal revenue

Question 7

Which formula correctly calculates opportunity cost on a production possibilities curve (PPC)?

Accepted Answer

$$ \frac{	ext{Loss in Good Y}}{	ext{Gain in Good X}} $$

Question 8

Which of the following best describes a positive externality?

Accepted Answer

A benefit received by a third party not involved in the transaction.

Question 9

A country can produce either 10 cars or 20 computers. What is the opportunity cost of producing one car?

Accepted Answer

2 computers

Question 10

Which of the following is an example of the 'tragedy of the commons'?

Accepted Answer

Overfishing in a public lake leading to depletion of fish stocks.

Question 11

If a firm in a perfectly competitive market faces a market price of $$P = 20$$ and its marginal cost is $$MC = 20$$, what should the firm do to maximize profit?

Accepted Answer

Maintain current output

Question 12

Which of the following is true about comparative advantage?

Accepted Answer

A country has comparative advantage if it can produce a good at a lower opportunity cost than another country.

Question 13

Which formula represents profit maximization for a monopoly?

Accepted Answer

$$ MR = MC $$

Question 14

Which of the following is a public good?

Accepted Answer

National defense

Question 15

If the demand for a product increases and the supply remains unchanged, what happens to the equilibrium price and quantity?

Accepted Answer

Price increases, quantity increases

Question 16

Which of the following best explains price discrimination in monopoly?

Accepted Answer

Charging different prices to different consumers based on their willingness to pay.

Question 17

Which of the following is true about producer surplus?

Accepted Answer

It is the difference between the price received and the minimum price the producer is willing to accept.

Question 18

Which of the following is an efficient point on a production possibilities curve (PPC)?

Accepted Answer

A point on the PPC

Question 19

Which of the following is a solution to negative externalities?

Accepted Answer

Pigovian taxes

Question 20

If a firm’s total revenue is $$TR = 100Q$$ and its total cost is $$TC = 60Q + 200$$, what is the profit when $$Q = 10$$?

Accepted Answer

$$ 400 $$

Principles of Microeconomics: Final Exam Study Guide

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