Question 1

Suppose a country can produce either 10 units of wine or 20 units of cheese per day. Another country can produce either 8 units of wine or 16 units of cheese per day. Which statement is correct regarding comparative advantage?

Accepted Answer

Question 2

If the production possibility frontier (PPF) for a country is bowed outward from the origin, what does this indicate about opportunity costs?

Accepted Answer

Opportunity cost increases as more of one good is produced.

Question 3

Which of the following would cause a movement along the demand curve for coffee, rather than a shift of the demand curve?

Accepted Answer

A decrease in the price of coffee.

Question 4

Suppose the government sets a binding price ceiling on gasoline below the equilibrium price. What is the most likely outcome?

Accepted Answer

A shortage of gasoline will occur.

Question 5

If the price of a good increases and total revenue decreases, what can you conclude about the price elasticity of demand for this good?

Accepted Answer

Demand is elastic.

Question 6

Which of the following best describes consumer surplus in a market?

Accepted Answer

The area below the demand curve and above the price line.

Question 7

A binding price floor is imposed in the wheat market. What will be the result?

Accepted Answer

A surplus of wheat.

Question 8

If the cross-price elasticity of demand between two goods is negative, which of the following is true?

Accepted Answer

The goods are complements.

Question 9

Suppose the price elasticity of supply for a product is $$ \frac{\%\Delta Q_s}{\%\Delta P} = 0 . $$What does this imply about the supply curve?

Accepted Answer

The supply curve is perfectly inelastic.

Question 10

Which of the following would most likely increase the price elasticity of demand for a product?

Accepted Answer

There are many close substitutes available.

Question 11

If the income elasticity of demand for a good is negative, what type of good is it?

Accepted Answer

An inferior good.

Question 12

Which of the following events would cause the supply curve for smartphones to shift to the right?

Accepted Answer

A decrease in the cost of microchips used in smartphones.

Question 13

Suppose the government imposes a price ceiling on apartments that is above the equilibrium price. What will be the effect?

Accepted Answer

The price ceiling will have no effect.

Question 14

If a technological innovation reduces the cost of producing electric cars, what is the likely effect on the equilibrium price and quantity in the electric car market?

Accepted Answer

Equilibrium price falls and equilibrium quantity rises.

Question 15

Which of the following statements about deadweight loss (DWL) is correct?

Accepted Answer

DWL is the loss of total surplus due to underproduction, overproduction, or price controls.

Question 16

A decrease in the price of a complement to good X will have what effect on the demand for good X?

Accepted Answer

Demand for good X will increase.

Question 17

If the market price is above the equilibrium price, what will happen in a competitive market?

Accepted Answer

There will be excess supply, and price will fall.

Question 18

Which of the following is NOT a determinant of the price elasticity of demand?

Accepted Answer

The cost of inputs used to produce the good.

Question 19

Suppose the cross-price elasticity of demand between two goods is $$ \frac{\%\Delta Q_y}{\%\Delta P_x} = 1.2 . $$What does this indicate?

Accepted Answer

The goods are substitutes.

Question 20

A new tax is imposed on sellers of a product. Which of the following is most likely to occur in the market?

Accepted Answer

The supply curve shifts to the left.

Microeconomics Exam 1 Study Guide: Chapters 2–5

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