Question 1

Suppose a country can produce either 10 units of Good A or 20 units of Good B with its available resources. What is the opportunity cost of producing 1 unit of Good A?

Accepted Answer

$$\frac{20}{10} = 2$$ units of Good B$

Question 2

A bowed-out production possibilities frontier (PPF) indicates which of the following?

Accepted Answer

Increasing opportunity cost as more of one good is produced

Question 3

If the price of a normal good increases, what is the expected effect on the quantity demanded, holding all else constant?

Accepted Answer

Quantity demanded decreases

Question 4

Which of the following would cause a movement along the supply curve for smartphones?

Accepted Answer

A decrease in the price of smartphones

Question 5

Suppose the government imposes a binding price ceiling below the equilibrium price for gasoline. What is the most likely immediate market outcome?

Accepted Answer

A shortage of gasoline

Question 6

If the marginal benefit (MB) of consuming one more slice of pizza is $$\3$ and the marginal cost (MC) is $$\$$2$$, what should a rational consumer do?

Accepted Answer

Consume the additional slice

Question 7

A country has a comparative advantage in producing wheat if:

Accepted Answer

It has a lower opportunity cost of producing wheat than other countries

Question 8

If the world price of steel is below the domestic equilibrium price and a country opens to trade, what will happen in the domestic market?

Accepted Answer

Domestic consumers will import steel, and domestic price will fall to the world price

Question 9

Which of the following best describes deadweight loss (DWL) from a tax?

Accepted Answer

The lost gains from trades that no longer occur due to the tax

Question 10

Suppose the demand for public transportation increases due to a rise in gasoline prices. What happens to the equilibrium price and quantity of public transportation rides?

Accepted Answer

Price increases, quantity increases

Question 11

A per-unit excise tax is imposed on sellers of a good. What is the effect on the market?

Accepted Answer

The supply curve shifts left (upward), equilibrium quantity falls, and a wedge is created between the price buyers pay and sellers receive

Question 12

If a country imposes a tariff on imported cars, which of the following is NOT a likely result?

Accepted Answer

An increase in consumer surplus

Question 13

Given the following points on a PPF: Point A (10 X, 20 Y) and Point B (15 X, 14 Y). What is the opportunity cost of increasing X from 10 to 15?

Accepted Answer

$$\frac{20 - 14}{15 - 10} = \frac{6}{5} = 1.2$$ units of Y per X$

Question 14

Which of the following would shift the demand curve for coffee to the right?

Accepted Answer

An increase in consumer income, assuming coffee is a normal good

Question 15

If both the demand and supply curves for a product shift to the right, what can be said about the new equilibrium quantity?

Accepted Answer

It will increase

Question 16

A binding price floor in the wheat market will most likely result in:

Accepted Answer

A surplus of wheat

Question 17

Which of the following is true regarding the incidence of a tax?

Accepted Answer

It depends on the relative elasticities of supply and demand, not on who is legally required to pay the tax

Question 18

If the government sets a nonbinding price ceiling above the equilibrium price for bread, what is the effect on the market?

Accepted Answer

No effect; the market remains at equilibrium

Question 19

Suppose the supply of laptops increases due to technological innovation. What is the expected effect on equilibrium price and quantity, all else equal?

Accepted Answer

Price decreases, quantity increases

Question 20

A country can produce 100 units of wine or 200 units of cheese. Another country can produce 80 units of wine or 160 units of cheese. Which country has the absolute advantage in cheese, and what is the opportunity cost of 1 unit of wine in the first country?

Accepted Answer

First country; $$\frac{200}{100} = 2$$ units of cheese per wine

Macroeconomics Exam Study Guide: Core Concepts, Models, and Applications

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