Question 1

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

Accepted Answer

The value of the next best alternative forgone when a choice is made.

Question 2

Suppose a country can produce either 10 units of wheat or 20 units of corn with the same resources. What is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

$$2$$ units of corn$

Question 3

Which of the following statements is an example of positive economics?

Accepted Answer

Raising taxes will decrease consumer spending.

Question 4

A production possibilities curve (PPC) that is bowed outward illustrates which economic concept?

Accepted Answer

Increasing opportunity costs

Question 5

If the price of a good increases and the quantity demanded decreases, this is an illustration of:

Accepted Answer

The law of demand

Question 6

Which of the following would cause a rightward shift in the demand curve for electric cars?

Accepted Answer

An increase in consumer income, assuming electric cars are normal goods

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

A binding price ceiling set below the equilibrium price will most likely result in:

Accepted Answer

A shortage of the good

Question 9

Which of the following is a characteristic of a public good?

Accepted Answer

It is non-excludable and non-rival in consumption.

Question 10

If two goods have a cross-price elasticity of demand greater than zero, the goods are:

Accepted Answer

Substitutes

Question 11

A perfectly competitive firm maximizes profit by producing the quantity where:

Accepted Answer

$$MR = MC$$

Question 12

Which of the following best describes the difference between accounting profit and economic profit?

Accepted Answer

Economic profit subtracts both explicit and implicit costs from total revenue.

Question 13

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

Accepted Answer

The cost of inputs used in production

Question 14

Suppose a firm faces the following costs: Total Fixed Cost = $$100$$, Total Variable Cost = $$200$$, and it produces $$10$$ units. What is the Average Total Cost (ATC)?

Accepted Answer

$$ATC = \frac{100 + 200}{10} = 30$$

Question 15

Which of the following is true about a natural monopoly?

Accepted Answer

It arises when one firm can supply the entire market at a lower cost than two or more firms.

Question 16

In the long run, a monopolistically competitive firm will:

Accepted Answer

Earn zero economic profit due to free entry and exit.

Question 17

Which of the following best describes the Prisoners' Dilemma in game theory?

Accepted Answer

Both players may end up worse off by pursuing their own self-interest rather than cooperating.

Question 18

If the exchange rate between the U.S. dollar and the euro changes from $$1 = 0.9$$ euro to $$1 = 1.1$$ euro, which of the following has occurred?

Accepted Answer

The dollar has appreciated against the euro.

Question 19

A firm in a perfectly competitive labor market will hire workers up to the point where:

Accepted Answer

$$MRP_L = MFC_L$$

Question 20

Which of the following is a weakness of the infant industry argument for protectionism?

Accepted Answer

It is difficult to determine which industries will become competitive and when to remove protection.

Comprehensive Study Guide: Principles of Microeconomics (ECON 2302)

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