Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the best alternative forgone to obtain something else.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn with its available resources. If the country decides to produce 20 more units of wheat, it must give up 40 units of corn. What is the opportunity cost of producing one additional unit of wheat?

Accepted Answer

$$2$$ units of corn

Question 3

Which of the following statements is a normative statement?

Accepted Answer

The government should increase spending on healthcare.

Question 4

A market is in equilibrium when:

Accepted Answer

The quantity demanded equals the quantity supplied.

Question 5

If the price of bottled water increases and the quantity demanded decreases, this is an example of:

Accepted Answer

A movement along the demand curve.

Question 6

Which of the following would cause the demand curve for bottled water to shift to the right?

Accepted Answer

An increase in the price of a substitute good, such as Gatorade.

Question 7

Suppose the government imposes a price ceiling below the equilibrium price in the rental housing market. What is the most likely outcome?

Accepted Answer

A shortage of rental housing.

Question 8

If the cross elasticity of demand between pizza and soda is $$-0.2$$, what does this indicate about the relationship between the two goods?

Accepted Answer

They are complements.

Question 9

Which of the following best explains why the Production Possibility Frontier (PPF) is typically bowed outward?

Accepted Answer

Opportunity costs increase as more of one good is produced.

Question 10

A minimum wage set above the equilibrium wage will most likely result in:

Accepted Answer

Unemployment (a surplus of labor).

Question 11

If the price elasticity of demand for a product is $$0.5$$, what does this imply about the demand for the product?

Accepted Answer

Demand is inelastic.

Question 12

Which of the following is an example of allocative efficiency?

Accepted Answer

Resources are used to produce goods and services most highly valued by society.

Question 13

Suppose a tax is imposed on a good with perfectly inelastic demand. Who bears the entire burden of the tax?

Accepted Answer

Buyers.

Question 14

Which of the following allocation methods is most likely used when concert tickets are sold out and people camp overnight to buy them as soon as they go on sale?

Accepted Answer

First-come, first-served.

Question 15

If the government imposes a production quota below the equilibrium quantity, what is the likely effect on the market?

Accepted Answer

The price will rise and quantity will decrease.

Question 16

Which of the following best describes the 'invisible hand' as introduced by Adam Smith?

Accepted Answer

Self-interested actions of individuals can lead to efficient market outcomes.

Question 17

If a tax is imposed on a good and the supply is more elastic than demand, who bears a greater share of the tax burden?

Accepted Answer

Buyers.

Question 18

Which of the following is an example of a regressive tax?

Accepted Answer

A tax where the average tax rate decreases as income increases.

Question 19

If the marginal benefit of producing one more unit of a good is less than the marginal cost, what should happen to production to achieve efficiency?

Accepted Answer

Production should decrease.

Question 20

Which of the following is NOT a factor of production?

Accepted Answer

Money.

Microeconomics Study Guide: Principles, Models, Markets, and Policy Tools (Chapters 1–7)

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