Question 1

Suppose an economy can produce only two goods: computers and wheat. If the production possibility frontier (PPF) is bowed outward, what does this imply about the opportunity cost of producing computers as more computers are produced?

Accepted Answer

The opportunity cost of producing computers increases as more computers are produced.

Question 2

A student spends 3 hours and $$20 to go to a concert. If she had not gone to the concert, she would have worked at her job for 15 $$per hour. What is the opportunity cost of attending the concert?

Accepted Answer

$65

Question 3

If the price of coffee increases, which of the following best describes what happens in the market for coffee?

Accepted Answer

There is a movement up along the demand curve for coffee.

Question 4

Which of the following would cause a rightward shift in the supply curve for electric cars?

Accepted Answer

A technological improvement in battery production.

Question 5

If the price of tea (a substitute for coffee) decreases, what is likely to happen in the market for coffee?

Accepted Answer

The demand for coffee will decrease, shifting the demand curve to the left.

Question 6

Which of the following is an example of a movement along the supply curve?

Accepted Answer

An increase in the market price of the good.

Question 7

A government sets a price ceiling below the equilibrium price for rental apartments. What is the most likely outcome?

Accepted Answer

A shortage of rental apartments.

Question 8

If a government sets a minimum wage above the equilibrium wage, what is the likely effect in the labor market?

Accepted Answer

A surplus of workers (unemployment).

Question 9

If the price elasticity of demand for a product is $$-2$$, what does this imply about consumer responsiveness?

Accepted Answer

A 1% increase in price leads to a 2% decrease in quantity demanded.

Question 10

Which of the following goods is likely to have the most elastic demand?

Accepted Answer

A specific brand of breakfast cereal.

Question 11

Which of the following is the correct formula for average total cost (ATC)?

Accepted Answer

$$ ATC = \frac{TC}{Q} $$

Question 12

A firm’s marginal cost (MC) is given by $$ MC = \frac{\Delta TC}{\Delta Q} . If $$total cost increases from $$100 to$$ $$120$$ when output increases from $$10 to$$ $$12$$, what is the marginal cost?

Accepted Answer

$$ MC = 15 $$

Question 13

In perfect competition, a firm maximizes profit by producing the quantity where:

Accepted Answer

$$ MR = MC $$

Question 14

Which of the following best describes the short-run supply curve for a perfectly competitive firm?

Accepted Answer

The portion of the marginal cost curve above the average variable cost curve.

Question 15

If a perfectly competitive firm faces a market price below its average variable cost, what should it do in the short run?

Accepted Answer

Shut down production.

Question 16

Which of the following is true for a monopoly but not for a perfectly competitive firm?

Accepted Answer

The firm faces a downward-sloping demand curve.

Question 17

A regulated monopoly is required to set price equal to average total cost. What is the likely outcome?

Accepted Answer

The monopoly earns zero economic profit.

Question 18

Compared to perfect competition, a monopoly will:

Accepted Answer

Produce less output and charge a higher price.

Question 19

If the equilibrium wage in a labor market increases, which of the following could explain this change?

Accepted Answer

An increase in the demand for labor.

Question 20

Which of the following would cause a leftward shift in the labor supply curve?

Accepted Answer

A decrease in immigration.

Question 21

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

Accepted Answer

A factory emitting pollution into the air.

Question 22

Which policy can correct a negative externality?

Accepted Answer

A tax equal to the external cost imposed on producers.

Question 23

Country A can produce either 10 tons of steel or 20 tons of wheat with the same resources. Country B can produce either 8 tons of steel or 16 tons of wheat. Which country has the comparative advantage in steel?

Accepted Answer

Country B

Question 24

A country imposes a tariff on imported cars. What is the most likely short-run effect?

Accepted Answer

Domestic car production increases.

Question 25

Which of the following best describes the effect of a quota on imported sugar?

Accepted Answer

It limits the quantity of sugar imported, raising domestic prices.

Microeconomics Study Guide: Key Topics and Concepts

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