Question 1

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

Accepted Answer

The value of the next best alternative that must be given up to obtain something.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn using all its resources. What is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

$$\frac{2}{1}$$ units of corn

Question 3

A rational decision-maker will choose to undertake an action if:

Accepted Answer

The marginal benefit is greater than the marginal cost.

Question 4

Which of the following shifts the production possibilities frontier (PPF) outward?

Accepted Answer

The development of new technology.

Question 5

If the price of a substitute good increases, what is the likely effect on the demand for the original good?

Accepted Answer

Demand for the original good increases.

Question 6

Which of the following is an example of a capital good?

Accepted Answer

A computer used by a business for accounting.

Question 7

Suppose the price elasticity of demand for a product is $$1.5. If $$the price increases by $$10\%$$, what happens to the quantity demanded?

Accepted Answer

It decreases by $$15\%.$$

Question 8

Which of the following statements about the law of supply is correct?

Accepted Answer

As the price of a good rises, the quantity supplied increases.

Question 9

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 10

If a good is classified as a normal good, what happens to its demand when consumer incomes increase?

Accepted Answer

Demand increases.

Question 11

Which of the following best illustrates the concept of comparative advantage?

Accepted Answer

A person can produce a good at a lower opportunity cost than another person.

Question 12

If the cross elasticity of demand between two goods is negative, the goods are:

Accepted Answer

Complements.

Question 13

A supply curve shifts to the right when:

Accepted Answer

Productivity increases.

Question 14

Suppose the price elasticity of supply for a product is $$0.5. If $$the price increases by $$20\%$$, what is the percentage change in quantity supplied?

Accepted Answer

$$10\%$$ increase

Question 15

Which of the following is NOT a factor of production?

Accepted Answer

Money

Question 16

If a firm is producing at a point inside its production possibilities frontier (PPF), this means:

Accepted Answer

It is not using all resources efficiently.

Question 17

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

Accepted Answer

A decrease in the price of coffee.

Question 18

If the total revenue from selling a product decreases when its price increases, the demand for the product is:

Accepted Answer

Elastic.

Question 19

Which of the following best describes a 'free lunch' in economics?

Accepted Answer

A situation where you get something without giving up anything else.

Question 20

A decrease in the expected future price of a good will likely:

Accepted Answer

Decrease current demand for the good.

Microeconomics Study Guide: Scarcity, Economic Problem, Demand & Supply, Elasticity

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