Question 1

Suppose the government sets a price ceiling below the equilibrium price for gasoline. Which of the following is the most likely immediate result in the gasoline market?

Accepted Answer

A shortage of gasoline, as the quantity demanded exceeds the quantity supplied.

Question 2

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

Accepted Answer

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

Question 3

A country can produce either 10 units of wine or 20 units of cheese with the same resources. What is the opportunity cost of producing 1 unit of wine?

Accepted Answer

$$2$$ units of cheese$

Question 4

Which of the following statements about a perfectly competitive market is correct?

Accepted Answer

There are many buyers and sellers, and no single participant can affect the market price.

Question 5

If the demand for a normal good increases as consumer income rises, which of the following is true?

Accepted Answer

The good is a normal good.

Question 6

Suppose the government imposes a tariff on imported steel. Which of the following is a likely effect?

Accepted Answer

Producer surplus for domestic steel producers increases, but consumer surplus decreases.

Question 7

Which of the following best illustrates the law of demand?

Accepted Answer

As the price of coffee increases, the quantity demanded of coffee decreases, ceteris paribus.

Question 8

Which of the following is an example of a public good?

Accepted Answer

A city park that is open to everyone without exclusion

Question 9

If the supply curve for a product shifts to the right, which of the following is most likely to occur, assuming demand remains unchanged?

Accepted Answer

The equilibrium price will decrease and the equilibrium quantity will increase.

Question 10

Which of the following best describes deadweight loss?

Accepted Answer

The loss in total surplus that occurs when a market is not in equilibrium.

Question 11

Suppose a city government sets a minimum wage above the equilibrium wage. What is the most likely result in the labor market?

Accepted Answer

A surplus of labor, as the quantity of labor supplied exceeds the quantity demanded.

Question 12

Which of the following is true about comparative advantage?

Accepted Answer

A country has a comparative advantage in producing a good if it can produce it at a lower opportunity cost than other countries.

Question 13

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

Accepted Answer

A homeowner planting a garden that beautifies the neighborhood.

Question 14

If the government wants to correct a negative externality, which policy is most likely to improve market efficiency?

Accepted Answer

Imposing a tax equal to the external cost per unit produced.

Question 15

Which of the following best describes a 'free rider' problem?

Accepted Answer

When individuals benefit from a good without paying for it, as with public goods.

Question 16

Suppose the market for apples is in equilibrium. If the price of oranges (a substitute) decreases, what is the most likely effect on the apple market?

Accepted Answer

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

Question 17

Which of the following equations correctly represents market equilibrium?

Accepted Answer

$$Q_d = Q_s$$

Question 18

A black market is most likely to arise under which of the following conditions?

Accepted Answer

When the government imposes a price ceiling below equilibrium.

Question 19

Which of the following best describes a common resource?

Accepted Answer

It is rival but non-excludable.

Question 20

Suppose a country is in autarky and then opens up to free trade. If the world price is lower than the domestic price, what will happen in the domestic market?

Accepted Answer

The country will become an importer of the good.

Macroeconomics Foundations: Supply & Demand, Market Efficiency, and International Trade

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