Question 1

Suppose the government imposes a price ceiling on rental apartments that is below the equilibrium price. What is the most likely outcome in the market for apartments?

Accepted Answer

A shortage of apartments, as quantity demanded exceeds quantity supplied.

Question 2

If the demand for a product increases while the supply remains constant, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases and equilibrium quantity increases.

Question 3

Which of the following best describes consumer surplus?

Accepted Answer

The difference between the price consumers are willing to pay and the price they actually pay.

Question 4

A tax is imposed on sellers of gasoline. Which of the following statements is correct regarding the tax incidence?

Accepted Answer

The burden of the tax is shared between buyers and sellers depending on the elasticities of supply and demand.

Question 5

Deadweight loss from a tax is best described as:

Accepted Answer

The reduction in total surplus that results because the tax discourages mutually beneficial trades.

Question 6

If the supply of a good increases, holding demand constant, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases and equilibrium quantity increases.

Question 7

Which formula correctly represents the calculation of opportunity cost?

Accepted Answer

$Opportunity\ Cost = Value\ of\ Next\ Best\ Alternative$

Question 8

Suppose a country can produce either 10 units of wheat or 20 units of corn with its resources. What is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

$2$ units of corn$

Question 9

Which of the following best describes comparative advantage?

Accepted Answer

The ability to produce a good at a lower opportunity cost than another country.

Question 10

If a price floor is set above the equilibrium price, what is the likely result?

Accepted Answer

A surplus, as quantity supplied exceeds quantity demanded.

Question 11

Which equation represents the equilibrium condition in a market?

Accepted Answer

$Q_d = Q_s$

Question 12

A tax of $t$ per unit is imposed on a good. If the demand curve is perfectly inelastic, who bears the entire burden of the tax?

Accepted Answer

The buyers.

Question 13

Which of the following is NOT a determinant of demand?

Accepted Answer

Technology used in production.

Question 14

If the government imposes a tax on a good, what happens to the supply curve?

Accepted Answer

It shifts to the left.

Question 15

Which formula correctly calculates total surplus in a market?

Accepted Answer

$Total\ Surplus = Consumer\ Surplus + Producer\ Surplus$

Question 16

Suppose the government imposes a $10$ per unit tax on sellers. The price paid by buyers increases by $6$, and the price received by sellers decreases by $4$. What is the tax incidence on buyers?

Accepted Answer

$6$

Question 17

Which of the following best describes the impact of a tax on market efficiency?

Accepted Answer

It creates deadweight loss by reducing the number of mutually beneficial trades.

Question 18

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

Accepted Answer

Demand for the original good increases.

Question 19

Which of the following is true about terms of trade between two countries?

Accepted Answer

Both countries can benefit if they specialize according to comparative advantage and trade at a price between their opportunity costs.

Question 20

Which of the following would cause a movement along the demand curve rather than a shift of the demand curve?

Accepted Answer

A change in the price of the good itself.

Macroeconomics Study Guide: Demand, Supply, Market Equilibrium, and Trade

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