Question 1

Which of the following best describes the definition of economics?

Accepted Answer

The study of how people make choices under scarcity and the impact of those choices on society.

Question 2

Microeconomics is primarily concerned with:

Accepted Answer

Choices made by individuals and consumers, such as buying products.

Question 3

Which of the following is NOT one of the three key principles of economics?

Accepted Answer

Specialization

Question 4

Optimization in economics refers to a situation where:

Accepted Answer

People weigh costs and benefits when making a decision.

Question 5

The opportunity cost of an activity is best defined as:

Accepted Answer

The value of the next best alternative forgone.

Question 6

Suppose you are choosing between two apartments. Apartment A costs \$$1,200 per month and requires 25 hours of commuting per month. Apartment B costs \1$$,500 per month and requires 5 hours of commuting per month. If your opportunity cost of time is \$20 per hour, what is the total cost of each apartment?

Accepted Answer

Apartment A: \$$1,700; Apartment B: \1$$,600

Question 7

In a perfectly competitive market, sellers:

Accepted Answer

Cannot charge more than the market price and cannot pay less than the market price.

Question 8

Market demand is derived by:

Accepted Answer

Adding up the quantities that each buyer demands at each price.

Question 9

As a firm produces more units of a good, the cost of producing each additional unit typically:

Accepted Answer

Increases, due to diminishing returns.

Question 10

Suppose the government imposes a price ceiling of \$$8 in a market where the equilibrium price is \10. $$What will happen?

Accepted Answer

Quantity demanded will exceed quantity supplied, resulting in a shortage.

Question 11

Which of the following best explains why the supply curve shifts to the right after a technological improvement in the oil market?

Accepted Answer

Producers can supply more oil at every price level.

Question 12

If the marginal benefit of extra effort is typically decreasing as effort increases, what does this imply about the marginal cost and marginal benefit relationship?

Accepted Answer

The marginal cost of extra effort may be greater than the marginal benefit.

Question 13

Suppose a university wants to allocate dorm rooms efficiently to those who value them most. Which method is most efficient?

Accepted Answer

Auctioning the rooms to the highest bidders.

Question 14

Which of the following is a logical cause-and-effect relationship in economic analysis?

Accepted Answer

A logical cause-and-effect relationship.

Question 15

The supply curve represents:

Accepted Answer

The minimum price sellers are willing to accept to sell an extra unit of a good.

Question 16

Suppose the price of helium rises due to increased demand for party balloons. What happens to the price of party balloons?

Accepted Answer

It increases, because helium is an input.

Question 17

Which of the following equations correctly calculates the profit of a firm?

Accepted Answer

$$	ext{Profit} = 	ext{Total Revenue} - 	ext{Total Cost}$$

Question 18

If the average total cost (ATC) curve is U-shaped, what does this indicate about the firm's production?

Accepted Answer

The firm experiences economies of scale at low output and diseconomies of scale at high output.

Question 19

Given the demand function $$Q_d = 12 - 0.5P$$ and the supply function $$Q_s = -6 + 0.5P$$, what is the equilibrium price and quantity?

Accepted Answer

$$P^* = 18, Q^* = 3$$

Microeconomics Study Guide: Principles, Models, Optimization, and Market Equilibrium

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