Question 1

Suppose the price of coffee increases. According to the law of demand, what is most likely to happen to the quantity demanded of coffee, ceteris paribus?

Accepted Answer

The quantity demanded will decrease.

Question 2

Which of the following best describes a budget constraint?

Accepted Answer

It shows the combinations of goods a consumer can afford given their income and the prices of goods.

Question 3

If the opportunity cost of producing 1 unit of good X is 2 units of good Y, what does this mean?

Accepted Answer

Producing 1 unit of X requires sacrificing 2 units of Y.

Question 4

A positive correlation between two variables means:

Accepted Answer

As one variable increases, the other increases.

Question 5

Which of the following is an example of a shift in the demand curve?

Accepted Answer

An increase in consumer income for a normal good.

Question 6

Suppose the supply of oranges increases due to improved farming technology. What is the likely effect on the equilibrium price and quantity of oranges?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases.

Question 7

If both supply and demand for a product increase simultaneously, what can you say about the change in equilibrium quantity?

Accepted Answer

Equilibrium quantity will definitely increase.

Question 8

Given the demand function $$Q_d = 100 - 2P$$, what is the quantity demanded when the price $$P is$$ $$30$$?

Accepted Answer

$$Q_d = 60$$

Question 9

Which of the following best describes perfect competition?

Accepted Answer

A market with many buyers and sellers, identical products, and no barriers to entry.

Question 10

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 11

Suppose the cross-price elasticity of demand between tea and coffee is $$0.5. $$What does this indicate?

Accepted Answer

Tea and coffee are substitutes.

Question 12

A consumer is choosing between apples and bananas. If the marginal benefit per dollar spent is higher for apples than for bananas, what should the consumer do to maximize utility?

Accepted Answer

Buy more apples and less bananas.

Question 13

Given the supply function $$Q_s = 20 + 3P$$, what is the quantity supplied when the price $$P is$$ $$10$$?

Accepted Answer

$$Q_s = 50$$

Question 14

If the income elasticity of demand for a good is $$-0.8$$, what type of good is it?

Accepted Answer

Inferior good

Question 15

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

Accepted Answer

A shortage will occur.

Question 16

If the total revenue from selling a product increases when the price decreases, what does this imply about the price elasticity of demand?

Accepted Answer

Demand is elastic.

Question 17

A table shows the total benefit from consuming different quantities of a good. How do you calculate the marginal benefit of the third unit?

Accepted Answer

Subtract the total benefit of the second unit from the total benefit of the third unit.

Question 18

Suppose you are given the following demand and supply equations: $$Q_d = 80 - 4P$$ and $$Q_s = 20 + 2P. $$What is the equilibrium price?

Accepted Answer

$$P = 8$$

Question 19

Which of the following statements about opportunity cost is correct?

Accepted Answer

It is the value of the next best alternative forgone.

Question 20

A graph shows the relationship between the price of a good and the quantity demanded. What does a movement along the demand curve represent?

Accepted Answer

A change in the quantity demanded due to a change in price.

Microeconomics Midterm Exam Study Guide: Concepts, Calculations, and Applications

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