Question 1

In the context of the Production Possibilities Frontier (PPF), which of the following best explains why the PPF is typically bowed outward from the origin?

Accepted Answer

Because opportunity cost increases as more of one good is produced.

Question 2

Suppose Canada can produce either 100 units of wheat or 50 units of cars with the same resources, while Mexico can produce either 80 units of wheat or 40 units of cars. Which country has the comparative advantage in producing cars?

Accepted Answer

Mexico, because it has a lower opportunity cost for cars.

Question 3

If the price of smartphones increases due to a supply chain issue, what is the most likely effect on the quantity demanded and supplied, assuming demand is unchanged?

Accepted Answer

Quantity demanded decreases and quantity supplied increases.

Question 4

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

Accepted Answer

Canada could have milder tax rates if wealthier Canadians paid more taxes.

Question 5

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

Accepted Answer

A shortage of apartments.

Question 6

If the marginal benefit of consuming an additional unit of a good is less than its marginal cost, what should a rational consumer do?

Accepted Answer

Decrease consumption of the good.

Question 7

Suppose the cross-price elasticity of demand between tea and coffee is $$+0.8. $$What does this indicate about the relationship between tea and coffee?

Accepted Answer

They are substitutes.

Question 8

A country can produce either 200 units of good A or 100 units of good B. The opportunity cost of producing one unit of good B is:

Accepted Answer

$$2$$ units of good A

Question 9

If the demand for a product is price inelastic, which of the following is true?

Accepted Answer

An increase in price will increase total revenue.

Question 10

Suppose the government imposes a tax on sellers of gasoline. Which of the following is most likely to occur?

Accepted Answer

The supply curve shifts to the left.

Question 11

If the price of good X falls and the demand for good Y increases, what can we conclude about the relationship between X and Y?

Accepted Answer

X and Y are complements.

Question 12

Which of the following best describes allocative efficiency?

Accepted Answer

When marginal benefit equals marginal cost.

Question 13

Suppose a country moves from a point inside its PPF to a point on the PPF. What does this movement represent?

Accepted Answer

An improvement in resource utilization.

Question 14

If the government subsidizes the production of electric cars, what is the likely effect on the market for electric cars?

Accepted Answer

The supply curve shifts to the right.

Question 15

A market is in equilibrium when:

Accepted Answer

Quantity supplied equals quantity demanded.

Question 16

If the price of a normal good increases, what happens to the quantity demanded, ceteris paribus?

Accepted Answer

It decreases.

Question 17

Suppose the government decides to build a new highway, using resources that could have been used to build schools. The concept illustrated here is:

Accepted Answer

Opportunity cost.

Question 18

If a country specializes in producing the good for which it has a comparative advantage and trades with another country, what is the likely outcome?

Accepted Answer

Both countries can consume beyond their own PPFs.

Question 19

Which of the following best describes the law of demand?

Accepted Answer

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

Question 20

Suppose the price elasticity of demand for a product is $$-2.5. If $$the price increases by $$10\%$$, what is the expected percentage change in quantity demanded?

Accepted Answer

$$-25\%$$

Introductory Microeconomics: Midterm Exam Study Guide

Study Guide - Practice Questions

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