Question 1

Which of the following best describes the ceteris paribus assumption in economic modeling?

Accepted Answer

It assumes that only one variable changes while all others are held constant.

Question 2

Suppose the marginal benefit (MB) of eating a third handful of Skittles is $$2, and the marginal cost (MC) is 1.50. $$According to marginal decision-making, what should you do?

Accepted Answer

Eat the third handful, because $$MB \u003e MC$$

Question 3

A rational decision maker will:

Accepted Answer

Weigh all available information and choose actions where $$MB \geq MC.$$

Question 4

If the price of gasoline rises sharply, which of the following is the most likely response according to the law of demand?

Accepted Answer

The quantity demanded of gasoline will decrease.

Question 5

Which of the following scenarios would cause a rightward shift in the demand curve for normal goods?

Accepted Answer

An increase in consumer incomes.

Question 6

If the supply curve for oranges shifts to the left, which of the following could be a possible cause?

Accepted Answer

An ice storm that destroys part of the orange crop.

Question 7

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

Accepted Answer

A shortage of bread.

Question 8

Which of the following best describes the effect of a per-unit excise tax imposed on producers in a competitive market?

Accepted Answer

The supply curve shifts upward by the amount of the tax.

Question 9

If a country can produce more of both goods than another country using the same resources, it is said to have:

Accepted Answer

Absolute advantage in both goods.

Question 10

Given the following production possibilities: Portugal can produce 100 sheets of cloth or 150 kegs of wine per year; England can produce 90 sheets of cloth or 60 kegs of wine per year. What is the opportunity cost of producing 1 sheet of cloth in Portugal?

Accepted Answer

$$1.5$$ kegs of wine

Question 11

If the U.S. government imposes a tariff on imported ethanol, what is the most likely effect on the domestic market?

Accepted Answer

Domestic price increases and imports decrease.

Question 12

Which of the following is NOT a source of comparative advantage for a country?

Accepted Answer

High domestic consumer surplus

Question 13

A price floor set above the equilibrium price in the milk market will:

Accepted Answer

Cause a surplus of milk.

Question 14

Which of the following statements about deadweight loss (DWL) is correct?

Accepted Answer

DWL arises when market output is not at the equilibrium quantity.

Question 15

If the marginal benefit (MB) of the 5th apple is $$1.00 and the price is 1.25$$, what should a rational consumer do?

Accepted Answer

Not buy the 5th apple.

Question 16

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

Accepted Answer

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

Question 17

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

Accepted Answer

The minimum wage should be increased.

Question 18

Suppose the government imposes a quota on sugar imports. What is the most likely effect?

Accepted Answer

Domestic price increases and imports decrease.

Question 19

Which of the following best describes allocative efficiency?

Accepted Answer

The consumption of goods maximizes overall well-being.

Question 20

If the price of a substitute good falls, what happens to the demand for the original good?

Accepted Answer

The demand for the original good decreases.

Core Principles and Models in Microeconomics: Foundations, Trade, and Market Analysis

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