Question 1

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

Accepted Answer

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

Question 2

Suppose a country can produce either 10 cars or 20 computers with its available resources. What is the opportunity cost of producing one car?

Accepted Answer

$$2$$ computers

Question 3

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

Accepted Answer

Raising taxes will decrease consumer spending.

Question 4

If the price of a normal good increases, what happens to the quantity demanded, according to the law of demand?

Accepted Answer

Quantity demanded decreases.

Question 5

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

Accepted Answer

An increase in consumer income, assuming electric cars are a normal good.

Question 6

If two countries specialize according to their comparative advantage and trade, what is the result?

Accepted Answer

Both countries can consume outside their individual production possibility frontiers.

Question 7

Suppose the price elasticity of demand for a product is $$-2. If $$the price increases by $$10\%$$, what happens to the quantity demanded?

Accepted Answer

It decreases by $$20\%.$$

Question 8

Which of the following best describes Adam Smith’s ‘invisible hand’?

Accepted Answer

Individuals pursuing their own self-interest unintentionally benefit society as a whole.

Question 9

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

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases.

Question 10

A price ceiling set below the equilibrium price will likely result in:

Accepted Answer

A shortage of the good.

Question 11

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

Accepted Answer

The goods are substitutes.

Question 12

Suppose the government imposes a tax on sellers. What is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the left.

Question 13

Which formula is used to calculate the price elasticity of demand using the midpoint method?

Accepted Answer

$$\frac{(Q_2$ - Q_1$)}{(Q_2$ + Q_1$)/2} \div \frac{(P_2$ - P_1$)}{(P_2$ + P_1$)/2}$$

Question 14

A binding price floor will create which of the following in a market?

Accepted Answer

A surplus

Question 15

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

Accepted Answer

Public transportation for someone who buys less of it as their income rises

Question 16

If the government sets a price ceiling above the equilibrium price, what will be the result?

Accepted Answer

No effect on the market

Question 17

Which of the following best explains deadweight loss?

Accepted Answer

The loss of economic efficiency when the equilibrium outcome is not achieved.

Question 18

Suppose the government imposes a tax on a good with perfectly inelastic demand. Who bears the entire burden of the tax?

Accepted Answer

Consumers

Question 19

Which of the following is NOT a determinant of supply?

Accepted Answer

Consumer income

Question 20

If a 10% increase in income leads to a 15% increase in the quantity demanded of a good, what is the income elasticity of demand for this good?

Accepted Answer

$$1.5$$

Microeconomics Course Syllabus and Topic Overview

Study Guide - Practice Questions