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 the production possibility frontier (PPF) for a country shifts outward. Which of the following could explain this change?

Accepted Answer

A technological improvement that increases productivity.

Question 3

If the price of oil increases, what is the most likely effect on the supply curve for electricity generated by oil-burning utilities?

Accepted Answer

The supply curve shifts to the left, leading to a higher price for electricity.

Question 4

Which of the following statements is a positive economic statement?

Accepted Answer

There has been an increase in the rate of inflation.

Question 5

Jeanette is willing to pay $$100 for the first pair of shoes, 80 $$for the second, $$50 for the third, and 30 $$for the fourth. If the price of shoes is $50, how many pairs will she buy and what is her total consumer surplus?

Accepted Answer

3 pairs; $80

Question 6

Which of the following best illustrates the principle of diminishing returns?

Accepted Answer

Adding more workers to a fixed amount of machinery eventually increases output at a decreasing rate.

Question 7

If the price of a meal at Applebee's rises, what is the most likely effect on the demand for meals at Olive Garden, a substitute restaurant?

Accepted Answer

The demand for Olive Garden meals increases.

Question 8

Suppose Laurence can write 10 programs or make 6 sunglasses in a night, while Carrie Anne can write 5 programs or make 4 sunglasses. Who has the comparative advantage in making sunglasses?

Accepted Answer

Carrie Anne

Question 9

Which of the following would cause a leftward shift in the demand curve for meals at a local Applebee's?

Accepted Answer

A 10% discount coupon offered by Olive Garden in the local newspaper.

Question 10

Producer surplus for an individual seller is equal to:

Accepted Answer

The price of the good minus the marginal cost of producing the good.

Question 11

If an economy is operating on its production possibility frontier (PPF), which of the following is true?

Accepted Answer

The economy is using resources efficiently with no idle resources.

Question 12

Suppose the price of eggs decreases. What is the most likely immediate effect in the egg market?

Accepted Answer

An increase in the quantity of eggs demanded.

Question 13

Which of the following is a normative economic statement?

Accepted Answer

Government has grown too large and should be reduced.

Question 14

If the price of armchairs increases, what happens in the market for armchairs?

Accepted Answer

The quantity supplied increases.

Question 15

Which of the following would cause an increase in the supply of a good?

Accepted Answer

The number of sellers increases.

Question 16

Suppose the USA can produce 8 gallons of maple syrup or 4 pounds of pancakes per day, and Canada can produce 2 gallons of maple syrup or 3 pounds of pancakes per day. What is an acceptable trading price for 1 pound of pancakes?

Accepted Answer

$$1 	ext{ pound of pancakes for between } 0.5 	ext{ and } 2.67 	ext{ gallons of maple syrup}$$

Question 17

Which of the following best describes marginal analysis?

Accepted Answer

Considering the additional benefit and additional cost of one more unit of an activity.

Question 18

If you choose to attend college, which of the following should be included in your opportunity cost?

Accepted Answer

The income you would have earned if you worked instead of attending college.

Question 19

Suppose the market price of airline flights increases due to an increase in the number of business travelers. What has most likely happened in the market for flights?

Accepted Answer

Demand increased.

Question 20

If a country is experiencing a shortage of food after a natural disaster, which of the following policies would most likely help alleviate the shortage?

Accepted Answer

Increasing imports and reducing trade barriers for food.

Microeconomics Exam 1 Study Guidance – Scarcity, Opportunity Cost, Comparative Advantage, Supply & Demand

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