Question 1

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

Accepted Answer

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

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn using all its 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 Production Possibilities Frontier (PPF) is correct?

Accepted Answer

Points on the PPF represent maximum possible output combinations.

Question 4

A market is defined as:

Accepted Answer

Any place where buyers and sellers come together to trade.

Question 5

If the price of a normal good increases, what is the expected effect on the quantity demanded, ceteris paribus?

Accepted Answer

Quantity demanded will decrease.

Question 6

Which of the following would cause a rightward shift in the demand curve for electric cars?

Accepted Answer

An increase in consumer preference for environmentally friendly vehicles.

Question 7

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

Accepted Answer

A shortage of rental apartments.

Question 8

The law of supply states that, ceteris paribus:

Accepted Answer

As the price of a good increases, the quantity supplied increases.

Question 9

Which of the following is an example of a sunk cost?

Accepted Answer

A non-refundable payment made last year for equipment.

Question 10

If a firm’s marginal cost (MC) is given by $ MC = \frac{\Delta TC}{\Delta Q} $, what does this formula represent?

Accepted Answer

The change in total cost divided by the change in output.

Question 11

A perfectly competitive firm maximizes profit by producing the output level where:

Accepted Answer

$ MR = MC $

Question 12

Which of the following is NOT an assumption of the theory of monopoly?

Accepted Answer

The product has close substitutes.

Question 13

If the price elasticity of demand for a product is $ E_d = 0.5 $, how would you classify the demand?

Accepted Answer

Inelastic

Question 14

Which of the following best explains why the demand curve slopes downward?

Accepted Answer

As price decreases, consumers are willing to buy more due to diminishing marginal utility.

Question 15

Suppose a consumer is maximizing utility by purchasing two goods, X and Y. The last unit of X provides 10 utils and costs $2, while the last unit of Y provides 20 utils and costs $4. Is the consumer maximizing utility?

Accepted Answer

No, because the marginal utility per dollar spent is not equal for both goods.

Question 16

Which of the following would increase the supply of smartphones?

Accepted Answer

A technological advancement that reduces production costs.

Question 17

In the long run, under perfect competition, economic profit:

Accepted Answer

Is zero due to entry and exit of firms.

Question 18

Which of the following is an example of comparative advantage in international trade?

Accepted Answer

A country produces a good at a lower opportunity cost than another country.

Question 19

If a monopolist faces a downward-sloping demand curve, what must it do to sell additional units?

Accepted Answer

Decrease the price.

Question 20

Which formula correctly calculates total revenue for a firm?

Accepted Answer

$ TR = Price 	imes Quantity $

Microeconomics Core Concepts: Study Notes and Review

Study Guide - Practice Questions

Study Guide - Flashcards