Question 1

Which of the following is NOT considered a 'factor of production' in economics?

Accepted Answer

the espresso drink you purchase

Question 2

Refer to the production possibilities graph for textbooks and laptop computers. If the school board can purchase 20,000 textbooks or 2,000 laptops with a $500,000 budget, what is the opportunity cost of one additional laptop computer?

Accepted Answer

10 textbooks

Question 3

Refer to the production possibilities graph for textbooks and laptop computers. Which of the following combinations of textbooks and laptops is unaffordable, given the school board's budget of $500,000?

Accepted Answer

D

Question 4

What is the price of a laptop computer in the school board's example, given a $500,000 budget and a maximum of 2,000 laptops?

Accepted Answer

$250

Question 5

What is an inferior good?

Accepted Answer

a good for which demand varies inversely with household income

Question 6

Consider butter and margarine, which are substitutes. When the price of butter falls, the demand curve for margarine is likely to:

Accepted Answer

shift to the left

Question 7

Suppose that some resource $$X is $$necessary to produce some good $$Y. If $$the price of $$X$$ falls, what happens?

Accepted Answer

the supply curve of good $$Y$$ shifts to the right

Question 8

Suppose that supply for some good increases and that simultaneously the demand for the same good decreases. The result would be:

Accepted Answer

a decrease in $$P$$ and an indeterminate change in $$Q$$

Question 9

Suppose that in Montreal in December 2018, 10,000 ski helmets were sold at a price of $$60 each. In December 2019, 20,000 ski helmets were sold at a price of 80 $$each. One possible explanation for the change is that, ceteris paribus, from 2018 to 2019 the ________ curve for ski helmets shifted to the ________.

Accepted Answer

demand; right

Question 10

If the price elasticity of demand is $$1.2$$, then a $$10\%$$ increase in price results in a:

Accepted Answer

$$12\%$$ decrease in quantity demanded

Question 11

If two goods, $$X$$ and $$Y$$, have a positive cross elasticity of demand, then we know that they:

Accepted Answer

are substitutes

Question 12

If a price ceiling is in place and if the demand curve for the product shifts rightward, one consequence would be:

Accepted Answer

the quantity exchanged would decrease

Question 13

If a price floor is in place and if the demand curve for the product shifts rightward, one consequence would be:

Accepted Answer

the excess demand would decrease

Question 14

A school board is considering purchasing a mix of textbooks and laptops. If the opportunity cost of one laptop is 10 textbooks, what is the equation for the production possibilities frontier (PPF) given a budget of $500,000, maximum 20,000 textbooks, and maximum 2,000 laptops?

Accepted Answer

$$T = 20,000 - 10L$$

Question 15

If the price of textbooks is $$25$$ and the price of laptops is $$250$$, what is the maximum number of textbooks the school board can buy with a $500,000 budget?

Accepted Answer

$$20,000$$

Question 16

If the school board decides to buy 1,000 laptops, how many textbooks can they afford with the remaining budget, assuming the prices are $$250$$ per laptop and $$25$$ per textbook?

Accepted Answer

$$10,000$$

Question 17

If the demand for an inferior good decreases as income rises, which of the following is most likely an example of an inferior good?

Accepted Answer

public transportation

Question 18

A price ceiling is set below the equilibrium price for a product. If the demand for the product increases, what is the likely effect on the market?

Accepted Answer

excess demand increases

Question 19

If the cross-price elasticity of demand between two goods is negative, what does this imply about their relationship?

Accepted Answer

They are complements.

Question 20

Suppose the price elasticity of demand for a product is $$0.8. If $$the price increases by $$5\%$$, what is the expected percentage change in quantity demanded?

Accepted Answer

$$4\%$$ decrease

Microeconomics Practice: Production Possibilities, Opportunity Cost, and Market Concepts

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