Question 1

Which of the following best describes opportunity cost?

Accepted Answer

The value of the next best alternative foregone 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

If Country A has a lower opportunity cost of producing cars than Country B, which country has the comparative advantage in cars?

Accepted Answer

Country A

Question 4

Which of the following is NOT a reason why gains from trade occur?

Accepted Answer

Absolute advantage in all goods

Question 5

The law of demand states that, ceteris paribus:

Accepted Answer

As the price of a good increases, the quantity demanded decreases.

Question 6

A rightward shift in the demand curve for coffee could be caused by:

Accepted Answer

An increase in consumer income (assuming coffee is a normal good)

Question 7

Market equilibrium occurs when:

Accepted Answer

Quantity demanded equals quantity supplied

Question 8

If the price of a good is above the equilibrium price, what will likely happen?

Accepted Answer

A surplus will occur

Question 9

Suppose the price elasticity of demand for a product is $$-2. If $$the firm increases its price by $$10\%$$, what will happen to the quantity demanded?

Accepted Answer

It will decrease by $$20\%$$

Question 10

A business faces elastic demand for its product. To increase total revenue, the firm should:

Accepted Answer

Decrease the price

Question 11

Which of the following best illustrates the concept of scarcity?

Accepted Answer

A student must choose between studying for an exam or going to a concert.

Question 12

If two countries specialize according to their comparative advantage and trade, what is the likely outcome?

Accepted Answer

Both countries can consume beyond their production possibilities frontiers.

Question 13

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

Accepted Answer

A decrease in the price of pizza

Question 14

Suppose the government imposes a price ceiling below the equilibrium price. What is the most likely result?

Accepted Answer

A shortage of the good

Question 15

If the cross-price elasticity of demand between two goods is positive, the goods are:

Accepted Answer

Substitutes

Question 16

A firm faces the following demand curve: $$Q = 100 - 2P. $$What is the price when quantity demanded is $$60$$?

Accepted Answer

$$P = 20$$

Question 17

Which of the following is an example of a real-world price signal?

Accepted Answer

A sudden increase in the price of oil leads to more investment in renewable energy.

Question 18

If the income elasticity of demand for a good is negative, the good is:

Accepted Answer

An inferior good

Question 19

Suppose the supply of a product increases while demand remains unchanged. What will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases

Question 20

A business is considering raising the price of its product. If demand is inelastic, what will happen to total revenue?

Accepted Answer

Total revenue will increase

Microeconomics: Core Concepts and Applications – Study Guide

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