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 taking a bus or a plane from Tucson to San Diego. The bus costs $$100 and takes 16 hours round trip, while the plane costs 200 $$and takes 6 hours. If you value your time at $8 per hour, what is the opportunity cost of taking the bus?

Accepted Answer

$228

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 good increases and the quantity demanded decreases, this is an example of:

Accepted Answer

A movement along the demand curve.

Question 5

Suppose the demand for roses is given by $$Q_d = 90 - 2p$$ and the supply is $$Q_s = -30 + p. $$What is the equilibrium price ($$p^*) $$and quantity ($$Q^*$$)?

Accepted Answer

$$p^* = 40, Q^* = 10$$

Question 6

Which of the following would cause a rightward shift in the supply curve for ice cream shakes?

Accepted Answer

A decrease in the cost of whipped cream used in shakes.

Question 7

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

Accepted Answer

Demand is relatively inelastic.

Question 8

Suppose the price of chicken increases and, as a result, people purchase less rice. What does this imply about the cross-price elasticity between chicken and rice?

Accepted Answer

$$E_c \u003c 0$$, chicken and rice are complements.

Question 9

A price ceiling is binding if:

Accepted Answer

It is set below the equilibrium price.

Question 10

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

Accepted Answer

Producing a good at a lower opportunity cost than another producer.

Question 11

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

Accepted Answer

$$40\%$$

Question 12

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

Accepted Answer

The cost of production for suppliers.

Question 13

Suppose a government imposes a price ceiling on toilet paper at $$10$$ cents per roll, below the equilibrium price. Which of the following is a likely outcome?

Accepted Answer

A shortage of toilet paper.

Question 14

If the income elasticity of demand for a good is $$E_i = 1.5$$, which of the following is true?

Accepted Answer

The good is a luxury.

Question 15

Which of the following best explains why the production possibility frontier (PPF) is typically bowed outward (concave to the origin)?

Accepted Answer

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

Question 16

If a good has a perfectly inelastic supply, what is the value of its price elasticity of supply ($$E_s$$)?

Accepted Answer

$$E_s = 0$$

Question 17

Which of the following scenarios would most likely result in deadweight loss?

Accepted Answer

A per-unit tax imposed on a good in a competitive market.

Question 18

Suppose the government wants to maximize tax revenue with minimal deadweight loss. Which type of good should it tax?

Accepted Answer

A good with relatively inelastic demand.

Question 19

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 20

Which of the following best describes the concept of consumer surplus?

Accepted Answer

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

Microeconomics Study Guide: Scope, Method, Scarcity, Choice, Supply & Demand, Elasticity, and Market Applications

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