Q: Which formula correctly calculates consumer surplus?

$\text{Consumer Surplus} = \text{Willingness to Pay} - \text{Market Price}$

Question 1

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

Accepted Answer

The value of the next best alternative forgone when making a decision.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn with its available resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$2$ units of corn

Question 3

Which of the following statements about the law of diminishing marginal utility is correct?

Accepted Answer

Marginal utility decreases as more units of a good are consumed.

Question 4

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 5

If the government imposes a price ceiling below the equilibrium price, what is the likely result?

Accepted Answer

A shortage of the good.

Question 6

Which formula correctly calculates consumer surplus?

Accepted Answer

$	ext{Consumer Surplus} = 	ext{Willingness to Pay} - 	ext{Market Price}$

Question 7

A country has a comparative advantage in producing a good if:

Accepted Answer

It can produce the good at a lower opportunity cost than other countries.

Question 8

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

Accepted Answer

A homeowner planting trees that provide shade for neighbors.

Question 9

If the marginal cost ($MC$) of producing a good is less than the marginal benefit ($MB$), what should a rational producer do?

Accepted Answer

Increase production.

Question 10

Which of the following best describes the 'invisible hand' as proposed by Adam Smith?

Accepted Answer

Individuals pursuing their own interests unintentionally benefit society as a whole.

Question 11

Suppose the demand for a product increases while supply remains constant. What will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price and quantity will both increase.

Question 12

Which equation represents the marginal cost ($MC$) of production?

Accepted Answer

$MC = \frac{\Delta TC}{\Delta Q}$

Question 13

A public good is characterized by which two properties?

Accepted Answer

Non-rivalry and non-excludability

Question 14

Which of the following is most likely to cause a deadweight loss in a market?

Accepted Answer

A tax imposed on a good.

Question 15

If a market experiences a shortage, what will typically happen to the price?

Accepted Answer

Price will increase.

Question 16

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

Accepted Answer

A sandwich

Question 17

Suppose a tax is imposed on a good. Which formula represents the deadweight loss ($DWL$) caused by the tax?

Accepted Answer

$DWL = \frac{1}{2} 	imes (Q_{before} - Q_{after}) 	imes (P_{after} - P_{before})$

Question 18

Which of the following best explains the 'tragedy of the commons'?

Accepted Answer

Common resources are overused because individuals act in their own self-interest.

Question 19

If the price elasticity of demand for a product is $-2$, what does this imply?

Accepted Answer

Demand is elastic; quantity demanded changes significantly with price.

Question 20

Which of the following is a normative economic statement?

Accepted Answer

"The government should increase the minimum wage."

Microeconomics Core Concepts and Principles: Structured Study Notes

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