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 can either work for $$15/hour or attend a concert that costs 50. If $$you choose to attend the concert and value the experience at $80, what is your opportunity cost?

Accepted Answer

$65

Question 3

Which of the following statements is a positive statement?

Accepted Answer

Raising taxes on cigarettes will reduce smoking rates.

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

A binding price ceiling is set below the equilibrium price. What is the likely result in the market?

Accepted Answer

A shortage

Question 6

Which of the following goods is most likely to have a perfectly inelastic demand curve?

Accepted Answer

Emergency hospital care

Question 7

Suppose the price of a good increases by 10% and the quantity demanded decreases by 5%. What is the price elasticity of demand (using the percentage formula)?

Accepted Answer

$$ED = \frac{-5\%}{10\%} = -0.5$$

Question 8

If a good has an income elasticity of demand $$EI = -0.8$$, how is this good classified?

Accepted Answer

Inferior good

Question 9

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

Accepted Answer

An increase in the price of pizza

Question 10

Suppose the government imposes a per-unit tax on sellers in a competitive market. Who bears the greater tax incidence if demand is more inelastic than supply?

Accepted Answer

Buyers

Question 11

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

Accepted Answer

The goods are substitutes.

Question 12

A production possibility frontier (PPF) is bowed outward (concave to the origin) because:

Accepted Answer

The opportunity cost of producing a good increases as more of it is produced.

Question 13

Suppose Anna can mow 6 lawns or wash 8 dishes in a day, and Beth can mow 6 lawns or wash 12 dishes. Who has the comparative advantage in mowing lawns?

Accepted Answer

Anna

Question 14

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

Accepted Answer

Number of sellers in the market

Question 15

If a price floor is set above the equilibrium price in the labor market, what is the likely result?

Accepted Answer

Unemployment (surplus of workers)

Question 16

Which of the following best describes consumer surplus?

Accepted Answer

The difference between what a consumer is willing to pay and what they actually pay.

Question 17

Suppose the price of gasoline rises sharply overnight. In the short run, the price elasticity of demand for gasoline is likely to be:

Accepted Answer

Relatively inelastic

Question 18

If the government imposes a binding price ceiling on a good, which of the following is a likely unintended consequence?

Accepted Answer

A black market for the good

Question 19

Which of the following equations correctly represents the price elasticity of supply?

Accepted Answer

$$ES = \frac{\%\Delta QS}{\%\Delta P}$$

Question 20

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

Accepted Answer

Buyers

Microeconomics Foundations: Scarcity, Choice, Opportunity Cost, Supply & Demand, Elasticity, and Market Interventions

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