Question 1

Which of the following best describes the concept of opportunity cost as illustrated by the Production Possibilities Frontier (PPF)?

Accepted Answer

The cost of producing one more unit of a good, measured in terms of the amount of another good that must be forgone.

Question 2

Suppose the demand for electric cars increases due to rising gasoline prices. Which of the following best explains what happens to the equilibrium price and quantity of electric cars?

Accepted Answer

Equilibrium price and quantity both increase.

Question 3

Which of the following is an example of a shift in the supply curve, rather than a movement along the supply curve?

Accepted Answer

A technological advancement reduces production costs for smartphones.

Question 4

If the price elasticity of demand for a product is $$\varepsilon = -2$$, what will happen to total revenue if the price increases by 10%?

Accepted Answer

Total revenue will decrease.

Question 5

Which of the following best distinguishes microeconomics from macroeconomics?

Accepted Answer

Microeconomics studies individual markets and decision-makers, while macroeconomics studies the economy as a whole.

Question 6

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

Accepted Answer

An increase in the income of consumers, assuming coffee is a normal good.

Question 7

If the cross-price elasticity of demand between two goods is positive, what does this indicate?

Accepted Answer

The goods are substitutes.

Question 8

Which of the following best describes a normal good?

Accepted Answer

A good for which demand increases as consumer income increases.

Question 9

Suppose a new law requires all workers to have additional training, increasing their skills. Which concept does this best illustrate?

Accepted Answer

Human capital.

Question 10

If the supply curve for wheat shifts to the left due to drought, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity decreases.

Question 11

Which of the following is NOT a factor that would cause the demand curve for a product to shift?

Accepted Answer

A change in the price of the product itself.

Question 12

If the income elasticity of demand for organic food is $$\varepsilon = 1.5$$, what does this imply?

Accepted Answer

Organic food is a luxury good.

Question 13

Which of the following scenarios best illustrates a movement along the demand curve for movie tickets?

Accepted Answer

The price of movie tickets decreases, leading to more tickets sold.

Question 14

If the price elasticity of supply for a product is $$\varepsilon = 0.2$$, what does this indicate about the supply?

Accepted Answer

Supply is inelastic.

Question 15

Which of the following best describes the trade-offs represented by movements along the PPF curve?

Accepted Answer

Producing more of one good requires producing less of another due to limited resources.

Question 16

Which of the following would cause the supply curve for laptops to shift to the right?

Accepted Answer

A decrease in the cost of computer chips.

Question 17

If the price of peanut butter increases, what is likely to happen to the demand for jelly, assuming they are complementary goods?

Accepted Answer

Demand for jelly will decrease.

Question 18

Which of the following best describes the difference between individual demand and market demand?

Accepted Answer

Market demand is the sum of all individual demands for a product at each price.

Question 19

Suppose the price of apples rises and the quantity demanded falls. Which concept does this illustrate?

Accepted Answer

A movement along the demand curve.

Question 20

If the price elasticity of demand for a product is $$\varepsilon = 0$$, what does this imply about consumer behavior?

Accepted Answer

Consumers will buy the same quantity regardless of price changes.

Core Microeconomics Concepts: Study Guide

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