Question 1

Suppose society is operating at point A on the production possibilities frontier (PPF) shown in the first image. If the economy moves from point A to point D, what is the opportunity cost of gaining 30 additional toothbrushes?

Accepted Answer

20 toasters

Question 2

On the PPF shown in the first image, what is the opportunity cost of producing 15 more toasters by moving from point D to point C?

Accepted Answer

10 toothbrushes

Question 3

When a production possibilities frontier is linear, what does this indicate about the opportunity cost of producing goods?

Accepted Answer

Resources are perfectly shiftable from the production of one good to another.

Question 4

Refer to the second image. If Paul divides his time equally between corn and wheat, how much of each can he produce?

Accepted Answer

3 bushels of wheat and 3 bushels of corn

Question 5

According to the second image, what is the opportunity cost of 1 bushel of wheat for Cliff?

Accepted Answer

$$\frac{2}{3}$$ bushel of corn

Question 6

Suppose both Paul and Cliff divide their time equally between wheat and corn, and do not trade. What is the total production of wheat and corn?

Accepted Answer

7 bushels of wheat and 7 bushels of corn

Question 7

If Cliff and Paul specialize according to comparative advantage, what happens to total production of corn?

Accepted Answer

It increases by 3 bushels.

Question 8

If Cliff and Paul specialize and trade 3 bushels of wheat for 3 bushels of corn, what can Cliff now consume?

Accepted Answer

4 bushels of wheat and 3 bushels of corn

Question 9

Which of the following is true for Cliff and Paul regarding absolute advantage?

Accepted Answer

Paul has an absolute advantage in both wheat and corn.

Question 10

Which of the following is true for Cliff and Paul regarding comparative advantage?

Accepted Answer

Paul has a comparative advantage in wheat and Cliff in corn.

Question 11

Refer to the third image. What are the equilibrium price and quantity in this market?

Accepted Answer

$$10, 50$$

Question 12

According to the third image, if the price is currently $14, what will occur in the market?

Accepted Answer

There will be a surplus of 20 units and price will tend to fall.

Question 13

According to the third image, if the price is currently $8, what are the quantity supplied and quantity demanded?

Accepted Answer

Quantity supplied is 40 and quantity demanded is 60.

Question 14

Suppose the government sets a price ceiling below the equilibrium price in the third image. What will be the likely result?

Accepted Answer

A shortage will occur.

Question 15

Refer to the fourth image. If the price of crossing the bridge is $6.00, what is the consumer surplus?

Accepted Answer

$$46$$

Question 16

Which of the following is NOT a result of government-imposed rent controls?

Accepted Answer

Higher quality housing

Question 17

Suppose the demand for nachos increases. What will happen to producer surplus in the market for nachos?

Accepted Answer

It increases.

Question 18

An economically efficient situation is one in which:

Accepted Answer

Total economic surplus is maximized.

Question 19

Suppose the incomes of buyers in a market for a normal good decline and there is also a reduction in input prices. What would we expect to occur in this market?

Accepted Answer

The equilibrium price would decrease, but the impact on the amount sold in the market would be ambiguous.

Microeconomics Exam 1 Review – Step-by-Step Guidance

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