Question 1

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

Accepted Answer

The value of the next best alternative that is forgone when a choice is made.

Question 2

Suppose a country can produce either 40 units of wheat or 20 units of corn with its available resources. What is the opportunity cost of producing 1 unit of corn?

Accepted Answer

$$2$$ units of wheat

Question 3

Refer to the first image (PPF with toasters and toothbrushes). What is the opportunity cost to the economy of getting 30 additional toothbrushes by moving from point A to point D?

Accepted Answer

$$20$$ toasters

Question 4

Refer to the first image (PPF with toasters and toothbrushes). What is the opportunity cost of getting 15 additional toasters by moving from point D to point C?

Accepted Answer

$$20$$ toothbrushes

Question 5

When a production possibilities frontier is linear, it shows that:

Accepted Answer

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

Question 6

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

Accepted Answer

A shortage will develop.

Question 7

Which of the following statements about comparative advantage is correct?

Accepted Answer

A country should specialize in the production of goods for which it has the lowest opportunity cost.

Question 8

If the demand for a normal good increases as consumer incomes rise, which of the following is true?

Accepted Answer

The good is a normal good.

Question 9

Refer to the third image (supply and demand graph). If the price in this market is currently $14, what will occur?

Accepted Answer

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

Question 10

Suppose the government imposes a minimum wage above the equilibrium wage in the labor market. What is the most likely outcome?

Accepted Answer

A surplus of workers (unemployment).

Question 11

Which of the following will definitely cause equilibrium quantity to fall?

Accepted Answer

Demand and supply both decrease.

Question 12

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

Accepted Answer

It increases.

Question 13

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

Accepted Answer

Higher quality housing.

Question 14

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

Accepted Answer

$$46$$

Question 15

Which of the following best describes economic efficiency?

Accepted Answer

Total economic surplus is maximized.

Question 16

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.

Question 17

If the price of batteries rises, what is the likely effect on the demand for flashlights (which require batteries to operate)?

Accepted Answer

Decrease the demand for flashlights.

Question 18

Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils rises, consumers experience an increase in income, writing in ink becomes fashionable, people expect the price of pens to rise in the near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers increase?

Accepted Answer

Price will rise.

Question 19

Suppose a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 2 radios or 4 televisions per year. Each nation has 100 workers. If Radioland trades 100 radios to Teeveeland in exchange for 100 televisions each year, and each country completely specializes, what is the maximum consumption of new radios and televisions per year for Radioland?

Accepted Answer

100 televisions and 200 radios

Microeconomics Exam 1 Review – Step-by-Step Guidance

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