Q: Suppose you are deciding between two apartments: Apartment A costs $1,000 per month and is 30 minutes from work, while Apartment B costs $1,100 per month and is 10 minutes from work. If your time is valued at $20 per hour and you commute 20 days per month, what is the opportunity cost of choosing Apartment A over Apartment B?

$20 \times (30-10) \times 20 = $400 per month

Question 1

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

Accepted Answer

The value of the next best alternative that must be given up to obtain something.

Question 2

Suppose you are deciding between two apartments: Apartment A costs $1,000 per month and is 30 minutes from work, while Apartment B costs $1,100 per month and is 10 minutes from work. If your time is valued at $20 per hour and you commute 20 days per month, what is the opportunity cost of choosing Apartment A over Apartment B?

Accepted Answer

$20 	imes (30-10) 	imes 20 = $400 per month

Question 3

Which of the following statements is an example of positive economics?

Accepted Answer

"Raising the minimum wage will increase unemployment among teenagers."

Question 4

A market is considered perfectly competitive if:

Accepted Answer

All goods are identical, there are many buyers and sellers, and no one can influence the market price.

Question 5

If the price of a substitute good increases, what is the likely effect on the demand curve for the original good?

Accepted Answer

The demand curve for the original good shifts to the right.

Question 6

Which of the following is NOT a core principle of economics as described in the study materials?

Accepted Answer

Maximization of profit for all firms

Question 7

Suppose a new technology reduces the cost of producing electric cars. What is the likely effect on the supply curve for electric cars?

Accepted Answer

The supply curve shifts to the right.

Question 8

Which of the following best illustrates the law of demand?

Accepted Answer

As the price of coffee increases, the quantity demanded of coffee decreases.

Question 9

A budget constraint can be described mathematically as:

Accepted Answer

$P_x x + P_y y \leq I$

Question 10

If a study finds that people who gamble are less healthy, but it turns out that poor health causes people to gamble more, this is an example of:

Accepted Answer

Reverse causality

Question 11

Which of the following would cause a movement along the supply curve for laptops?

Accepted Answer

An increase in the market price of laptops

Question 12

Suppose the market for oranges is in equilibrium. If a disease destroys half the orange crop, what is the most likely immediate effect?

Accepted Answer

The supply curve shifts to the left, causing a shortage.

Question 13

Which of the following is an example of an inferior good?

Accepted Answer

Instant noodles, because demand decreases as income rises.

Question 14

If the marginal benefit of buying a new phone is $600 and the marginal cost is $700, what should a rational consumer do?

Accepted Answer

Do not buy the phone, because the marginal cost exceeds the marginal benefit.

Question 15

Which of the following best describes equilibrium in a market?

Accepted Answer

When the quantity demanded equals the quantity supplied and no one wants to change their behavior.

Question 16

A shift in the demand curve for a product can be caused by all of the following EXCEPT:

Accepted Answer

A change in the product's own price.

Question 17

Which of the following is an example of omitted variable bias?

Accepted Answer

Ignoring the effect of education when studying the relationship between income and health.

Question 18

If the supply of a good increases while demand remains unchanged, what will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price will fall and equilibrium quantity will rise.

Question 19

Which of the following is a characteristic of a perfectly competitive market?

Accepted Answer

All participants have perfect information about prices and quality.

Question 20

Suppose a new study finds a positive correlation between ice cream sales and drowning incidents. Which of the following best explains this relationship?

Accepted Answer

A third variable, such as hot weather, increases both ice cream sales and swimming activity.

Microeconomics: Core Principles, Models, and Market Behavior

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