Question 1

Which of the following best defines opportunity cost?

Accepted Answer

The value of the next best alternative foregone when a choice is made.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn with its available resources. What is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

$$2$$ units of corn

Question 3

Which of the following statements is a positive economic statement?

Accepted Answer

Raising taxes will increase government revenue.

Question 4

A production possibilities frontier (PPF) is bowed outward from the origin. What does this shape indicate?

Accepted Answer

There are increasing opportunity costs as more of one good is produced.

Question 5

If a technological advancement increases the productivity of producing capital goods but not consumer goods, how will the PPF shift?

Accepted Answer

The PPF will shift outward more along the capital goods axis.

Question 6

Which of the following best describes the law of increasing opportunity costs?

Accepted Answer

As more of a good is produced, the opportunity cost of producing an additional unit increases.

Question 7

Suppose the demand for frozen foods increases due to a rise in the number of working households. What is the most likely effect on the equilibrium price and quantity of frozen foods?

Accepted Answer

Both equilibrium price and quantity increase.

Question 8

Which of the following would cause a movement along the demand curve for pizza, rather than a shift of the demand curve?

Accepted Answer

A decrease in the price of pizza.

Question 9

If the government sets a price ceiling below the equilibrium price for gasoline, what is the most likely outcome?

Accepted Answer

A shortage of gasoline.

Question 10

Which of the following best explains why the supply curve for most goods is upward sloping?

Accepted Answer

As the price increases, producers are willing to supply more because it becomes more profitable.

Question 11

Suppose the government imposes a price floor above the equilibrium price in the market for milk. What will be the result?

Accepted Answer

A surplus of milk.

Question 12

Which of the following is NOT a determinant of demand?

Accepted Answer

Technology used in production

Question 13

If the supply of a good increases while demand remains constant, what will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases.

Question 14

Which of the following best describes consumer surplus?

Accepted Answer

The difference between the price consumers are willing to pay and the price they actually pay.

Question 15

Suppose the government increases the minimum wage above the equilibrium wage. What is the most likely effect in the labor market?

Accepted Answer

A surplus of labor (unemployment).

Question 16

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

Accepted Answer

A technological improvement in electric car manufacturing.

Question 17

If the price of a substitute good increases, what is the expected effect on the demand for the original good?

Accepted Answer

Demand for the original good will increase.

Question 18

Which of the following best describes the difference between a change in quantity supplied and a change in supply?

Accepted Answer

A change in quantity supplied is caused by a change in price, while a change in supply is caused by non-price factors.

Question 19

Suppose a new health study reveals that eating frozen foods is unhealthy, leading to a decrease in demand. What will happen to the equilibrium price and quantity of frozen foods?

Accepted Answer

Equilibrium price decreases, equilibrium quantity decreases.

Question 20

Which of the following is an example of a normative economic statement?

Accepted Answer

The government should reduce unemployment.

Microeconomics Study Guide: Core Concepts, Demand & Supply, and Market Equilibrium

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