Question 1

Which of the following best describes the concept of scarcity in economics?

Accepted Answer

Scarcity means that resources are limited and cannot satisfy all human wants.

Question 2

Which of the following is NOT one of the three key economic ideas?

Accepted Answer

All resources are renewable.

Question 3

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

Accepted Answer

2 units of corn

Question 4

If a point lies inside the production possibility frontier (PPF), what does this indicate?

Accepted Answer

Some resources are not being fully utilized.

Question 5

Country A can produce 10 cars or 20 computers. Country B can produce 8 cars or 16 computers. Which country has the comparative advantage in producing cars?

Accepted Answer

Neither, because their opportunity costs are the same.

Question 6

If technological improvement occurs in the production of good X, what happens to the PPF?

Accepted Answer

The PPF shifts outward, especially along the axis for good X.

Question 7

Which of the following would cause a movement along the demand curve for pizza, rather than a shift of the curve?

Accepted Answer

A decrease in the price of pizza.

Question 8

If the price of coffee increases and the demand for tea increases, what is the relationship between coffee and tea?

Accepted Answer

They are substitute goods.

Question 9

Suppose the price elasticity of demand for a product is $|E_d| = 0.5$. If the price increases by 10%, what happens to total revenue?

Accepted Answer

Total revenue increases.

Question 10

Using the midpoint formula, calculate the price elasticity of demand if the price of a good rises from $\$10$ to $\$12$ and quantity demanded falls from 100 to 80 units.

Accepted Answer

$E_d = 1.11$

Question 11

Which of the following is most likely to have an inelastic demand?

Accepted Answer

Insulin for diabetics

Question 12

If the cross-price elasticity of demand between two goods is $-0.8$, what does this indicate?

Accepted Answer

The goods are complements.

Question 13

Which determinant is generally considered the most important in influencing the price elasticity of demand for a good?

Accepted Answer

The availability of close substitutes

Question 14

If a decrease in consumer income leads to an increase in demand for ramen noodles, ramen noodles are:

Accepted Answer

An inferior good

Question 15

Suppose the demand for a product increases while supply remains unchanged. What will happen in the market?

Accepted Answer

The equilibrium price and quantity will both increase.

Question 16

A linear PPF implies:

Accepted Answer

Constant opportunity costs

Question 17

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

Accepted Answer

Both countries can consume outside their individual PPFs.

Question 18

Which of the following would shift the demand curve for smartphones to the right?

Accepted Answer

An increase in consumer income (assuming smartphones are a normal good)

Question 19

If the income elasticity of demand for a good is $1.5$, what type of good is it?

Accepted Answer

Normal good and a luxury

Question 20

A market is experiencing a shortage. Which of the following is true?

Accepted Answer

Quantity demanded exceeds quantity supplied.

Microeconomics Exam 1 Review: Foundations, PPF, Demand & Supply, and Elasticity

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