Question 1

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

Accepted Answer

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

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn using all its resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$$ 2 $$ units of corn

Question 3

If the price of a normal good increases, what happens to the quantity demanded, assuming all other factors remain constant?

Accepted Answer

It decreases.

Question 4

Which of the following statements about competitive markets is correct?

Accepted Answer

A competitive market is one where no single buyer or seller can influence the price.

Question 5

A decrease in supply, with demand remaining constant, will result in:

Accepted Answer

A higher equilibrium price and lower equilibrium quantity.

Question 6

If the price elasticity of demand for a product is $$ -2 $$, what does this imply?

Accepted Answer

A 1% increase in price leads to a 2% decrease in quantity demanded.

Question 7

Which of the following is NOT a factor of production?

Accepted Answer

Money

Question 8

Suppose the cross elasticity of demand between two goods is $$ +0.8 . $$What does this indicate?

Accepted Answer

The goods are substitutes.

Question 9

If a market is in equilibrium, which of the following must be true?

Accepted Answer

Quantity demanded equals quantity supplied.

Question 10

A firm faces the following marginal cost schedule: $$ MC = 10 $$ for the first unit, $$ MC = 12 $$ for the second unit, and $$ MC = 15 $$ for the third unit. If the market price is $$ 12 $$, how many units should the firm produce to maximize profit?

Accepted Answer

2 units

Question 11

Which of the following best describes allocative efficiency?

Accepted Answer

Resources are used so that marginal benefit equals marginal cost.

Question 12

If the income elasticity of demand for a good is $$ -0.5 $$, what type of good is it?

Accepted Answer

Inferior good

Question 13

Which of the following would cause a movement along the supply curve for apples?

Accepted Answer

A change in the price of apples

Question 14

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

Accepted Answer

A shortage of the good

Question 15

Which of the following is an example of a deadweight loss?

Accepted Answer

The loss in total surplus due to a tax imposed on a good

Question 16

If the marginal benefit of consuming an additional unit of a good is less than the marginal cost, what should a rational consumer do?

Accepted Answer

Decrease consumption

Question 17

Which of the following is true about the law of demand?

Accepted Answer

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

Question 18

A market for electric cars is experiencing technological change that lowers production costs. What is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the right.

Question 19

If a good has a perfectly elastic demand, what does its demand curve look like?

Accepted Answer

A horizontal line

Question 20

Which of the following allocation methods is most likely to be used for distributing tickets to a popular concert with limited seating?

Accepted Answer

First-come, first-served

Microeconomics Fundamentals: Key Concepts, Terms, and Applications

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