Question 1

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

Accepted Answer

The highest-valued alternative that must be given up to engage in an activity.

Question 2

Suppose you are deciding between attending a $$100 concert or working a job that pays 15/$$hour for 8 hours. What is the opportunity cost of attending the concert?

Accepted Answer

$120

Question 3

Which of the following statements is a positive statement?

Accepted Answer

The unemployment rate in the country is 5%.

Question 4

If the price of a substitute good increases, what happens to the demand curve for the original good?

Accepted Answer

It shifts to the right.

Question 5

Suppose the demand for a product is given by $$Q_d = 100 - 2P$$ and the supply is $$Q_s = -20 + 3P. $$What is the equilibrium price $$P^*$$?

Accepted Answer

$$P^* = 24$$

Question 6

Which of the following would cause a movement along the demand curve for ice cream?

Accepted Answer

A decrease in the price of ice cream.

Question 7

If a $$5$$ per unit tax is imposed on sellers and the price paid by consumers rises from $$18 to$$ $$20$$, what percentage of the tax is paid by consumers?

Accepted Answer

$$40\%$$

Question 8

Which of the following best describes a binding price ceiling?

Accepted Answer

A maximum price set below equilibrium.

Question 9

Suppose Anna and Beth can both mow lawns and wash dishes. Anna can mow 3 lawns or wash 4 dishes in an hour. Beth can mow 3 lawns or wash 6 dishes in an hour. Who has the comparative advantage in mowing lawns?

Accepted Answer

Anna, because she has a lower opportunity cost in mowing lawns.

Question 10

If the price elasticity of demand for a good is $$E_d = -0.5$$, which of the following is true?

Accepted Answer

Demand is relatively inelastic.

Question 11

A government imposes a binding minimum wage above the equilibrium wage. What is the most likely result in the labor market?

Accepted Answer

A surplus of workers (unemployment).

Question 12

If the cross-price elasticity of demand between two goods is negative, what does this imply?

Accepted Answer

The goods are complements.

Question 13

Suppose the price of a 1-day tennis pass increases from $$7 to$$ $$15$$, and sales fall from $$12,000 to$$ $$7,000. $$Using the percentage change formula, what is the price elasticity of demand?

Accepted Answer

$$E_d = -0.58$$

Question 14

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

Accepted Answer

The cost of production for suppliers.

Question 15

If a good has an income elasticity of demand $$E_I \u003e 1$$, what type of good is it?

Accepted Answer

Luxury good

Question 16

A tax is imposed on a market with perfectly inelastic demand. Who bears the full burden of the tax?

Accepted Answer

Consumers

Question 17

Which of the following best describes the concept of deadweight loss (DWL)?

Accepted Answer

The loss in total surplus that results from a market distortion such as a tax.

Question 18

If the government sets a price ceiling on gasoline below the equilibrium price, what is the most likely outcome?

Accepted Answer

A shortage of gasoline.

Question 19

Which of the following is an example of a normative statement?

Accepted Answer

Government intervention in markets is bad.

Question 20

Suppose the supply of a good is perfectly inelastic. If a tax is imposed, what happens to the equilibrium quantity?

Accepted Answer

It remains unchanged.

Microeconomics: Foundations, Demand & Supply, Elasticity, and Market Interventions

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