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 decision.

Question 2

Suppose a consumer faces a budget constraint represented by $$5x + 10y = 100. If $$the consumer spends all their income on good x, how many units of x can they buy?

Accepted Answer

$$20$$

Question 3

Which of the following statements is an example of positive economics?

Accepted Answer

"Increasing the minimum wage will lead to higher unemployment among teenagers."

Question 4

If the price of a good increases and the quantity demanded decreases, this is an illustration of:

Accepted Answer

The law of demand.

Question 5

A production possibilities curve (PPC) that is bowed outward indicates:

Accepted Answer

Increasing opportunity costs.

Question 6

Which of the following is NOT a factor of production?

Accepted Answer

Money

Question 7

Suppose the demand for a product is given by $$Q_d = 100 - 2P. If $$the price increases from $$20 to$$ $$30$$, what is the change in quantity demanded?

Accepted Answer

$$-20$$

Question 8

Which of the following would cause a shift in the supply curve for wheat?

Accepted Answer

A technological improvement in wheat farming.

Question 9

If a market is experiencing a shortage, which of the following is most likely to occur?

Accepted Answer

The price will increase.

Question 10

Which of the following best illustrates the concept of comparative advantage?

Accepted Answer

A country produces a good at a lower opportunity cost than another country.

Question 11

A public good is characterized by which two properties?

Accepted Answer

Non-rivalry and non-excludability.

Question 12

Suppose the price elasticity of demand for a product is $$E_d = -2. If $$the price increases by 10%, what is the expected percentage change in quantity demanded?

Accepted Answer

$$-20\%$$

Question 13

Which of the following is an example of a negative externality?

Accepted Answer

A factory polluting a river used by local residents.

Question 14

If a market is allocatively efficient, which of the following is true?

Accepted Answer

Resources are used to produce the goods most desired by society.

Question 15

Which of the following best describes the free rider problem?

Accepted Answer

Individuals benefit from a good without paying for it.

Question 16

Suppose a firm faces the following marginal cost and marginal benefit: $$MC = 10$$, $$MB = 15. $$According to the economic decision rule, what should the firm do?

Accepted Answer

Increase production.

Question 17

Which of the following is most likely to result from information asymmetry in a used car market?

Accepted Answer

Sellers with high-quality cars exit the market.

Question 18

If the supply curve shifts to the right while demand remains constant, what happens to equilibrium price and quantity?

Accepted Answer

Price decreases, quantity increases.

Question 19

Which of the following is a characteristic of a command economic system?

Accepted Answer

Resource allocation is decided by central planners.

Question 20

Suppose the total revenue from selling a product increases when the price decreases. What does this indicate about the price elasticity of demand?

Accepted Answer

Demand is elastic.

Microeconomics Midterm Exam Study Guide: Key Concepts and Models

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