Question 1

Which of the following best describes the concept of 'scarcity' in microeconomics?

Accepted Answer

Scarcity means that resources are limited and cannot satisfy all human wants.

Question 2

Which of the following is NOT one of the three fundamental economic questions every society must answer?

Accepted Answer

When will the goods and services be consumed?

Question 3

Which of the following best distinguishes microeconomics from macroeconomics?

Accepted Answer

Microeconomics studies individual markets and decision-makers, while macroeconomics focuses on the economy as a whole.

Question 4

Which of the following pairs correctly matches a factor of production with its corresponding type of income?

Accepted Answer

Labor — Wages

Question 5

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

Accepted Answer

The quantity demanded of coffee will decrease.

Question 6

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

Accepted Answer

An increase in consumer income, assuming electric cars are normal goods.

Question 7

In the circular flow model, which of the following best describes the flow of goods and services?

Accepted Answer

From firms to households through the product market.

Question 8

Which of the following statements correctly differentiates between 'quantity supplied' and 'supply'?

Accepted Answer

'Quantity supplied' refers to a specific amount at a given price, while 'supply' refers to the entire relationship between price and quantity supplied.

Question 9

A production possibilities curve (PPC) is bowed outward from the origin. What does this shape indicate about opportunity costs?

Accepted Answer

Opportunity costs increase as more of one good is produced.

Question 10

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 11

Country A can produce $$30$$ tons of steel or $$60$$ tons of aluminum. Country B can produce $$20$$ tons of steel or $$40$$ tons of aluminum. Which country has the absolute advantage in producing steel, and which has the comparative advantage?

Accepted Answer

Country A has the absolute advantage in steel; both countries have the same opportunity cost, so neither has a comparative advantage.

Question 12

How are benefits typically measured in microeconomics?

Accepted Answer

By the maximum amount a person is willing to pay for a good or service.

Question 13

If the market price is above the equilibrium price, what will result in the market?

Accepted Answer

A surplus will occur, causing downward pressure on price.

Question 14

Suppose the demand for a product increases while the supply remains unchanged. What will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price and quantity will both increase.

Question 15

Which of the following is an example of a demand shifter?

Accepted Answer

A change in consumer tastes and preferences.

Question 16

If the price of a substitute good increases, what is likely to happen to the demand for the original good?

Accepted Answer

The demand for the original good will increase.

Question 17

Which of the following best describes the functional distribution of income?

Accepted Answer

The division of income among the factors of production: wages, rent, interest, and profit.

Question 18

A bakery can produce either $$100$$ loaves of bread or $$50$$ cakes per day. If the bakery decides to produce $$1$$ more cake, what is the opportunity cost in terms of loaves of bread?

Accepted Answer

$$2$$ loaves of bread

Question 19

If a new technology reduces the cost of producing smartphones, what is the likely effect on the supply curve for smartphones?

Accepted Answer

The supply curve will shift to the right.

Question 20

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

Accepted Answer

A country specializes in producing goods for which it has the lowest opportunity cost, even if it is not the most efficient producer.

Microeconomics Review: Chapters 1–4 Study Guide

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