Question 1

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

Accepted Answer

$$2$$ units of corn$

Question 2

Which of the following best describes a positive economic statement?

Accepted Answer

Raising the minimum wage will increase unemployment among teenagers.

Question 3

If the price of a normal good increases, what is the most likely effect on the quantity demanded, ceteris paribus?

Accepted Answer

Quantity demanded decreases.

Question 4

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 5

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

Accepted Answer

A shortage will occur.

Question 6

If the cross-price elasticity of demand between two goods is positive, what does this imply?

Accepted Answer

The goods are substitutes.

Question 7

Which of the following would make the demand for a product more elastic?

Accepted Answer

The product has many close substitutes.

Question 8

Suppose the price elasticity of demand for a good is $$|E_d| = 0.5. If $$the price increases by 10%, what happens to the quantity demanded?

Accepted Answer

It decreases by 5%.

Question 9

A price floor set above the equilibrium price will:

Accepted Answer

Cause a surplus.

Question 10

If the supply curve is perfectly inelastic, what is the value of the price elasticity of supply?

Accepted Answer

$$E_s = 0$$

Question 11

Which of the following best describes consumer surplus?

Accepted Answer

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

Question 12

If a non-binding price ceiling is imposed, what is the effect on the market?

Accepted Answer

There is no effect; the market remains at equilibrium.

Question 13

Suppose the government imposes a price floor on milk that is above the equilibrium price. What is the deadweight loss associated with this policy?

Accepted Answer

The loss of total surplus due to the reduction in quantity traded below the equilibrium level.

Question 14

Which of the following is an example of a normative economic statement?

Accepted Answer

The government should provide free healthcare to all citizens.

Question 15

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

Accepted Answer

An inferior good.

Question 16

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

Accepted Answer

Equilibrium price falls and equilibrium quantity rises.

Question 17

A perfectly competitive market is characterized by which of the following?

Accepted Answer

Many buyers and sellers, identical products, and free entry and exit.

Question 18

If the price elasticity of supply is $$E_s = 2$$, and the price increases by 5%, what is the percentage change in quantity supplied?

Accepted Answer

$$10\%$$

Question 19

Which of the following would shift the demand curve for electric cars to the right?

Accepted Answer

An increase in the price of gasoline.

Question 20

If the government imposes a binding price ceiling on a life-saving drug, what is a likely real-world consequence?

Accepted Answer

A shortage of the drug, leading to long waiting lists or black markets.

Microeconomics Exam Study Guide: Core Concepts and Applications

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