Question 1

Suppose a student is deciding whether to attend a concert or study for an exam. The concert ticket costs $$50, and the student values the concert at 80. If $$the student chooses to attend the concert, they will miss out on earning $40 from a part-time job. What is the opportunity cost of attending the concert?

Accepted Answer

$90, the sum of the ticket cost and forgone income.

Question 2

Which of the following best describes the Marginal Principle in decision-making?

Accepted Answer

Take action if the marginal benefit exceeds the marginal cost: $$MB \u003e MC.$$

Question 3

A production possibility frontier (PPF) is bowed outward due to:

Accepted Answer

Increasing opportunity costs as more of one good is produced.

Question 4

If a market is in equilibrium, which of the following must be true?

Accepted Answer

$$QD = QS$$

Question 5

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

Accepted Answer

An increase in the number of buyers interested in electric cars.

Question 6

A firm in a perfectly competitive market will continue to produce output as long as:

Accepted Answer

Price is greater than or equal to marginal cost: $$P \geq MC.$$

Question 7

If the price of a complement-in-production increases, what is likely to happen to the supply of the main good?

Accepted Answer

Supply of the main good increases.

Question 8

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

Accepted Answer

The non-refundable deposit you paid for a concert ticket.

Question 9

If the marginal benefit of consuming an additional slice of pizza is $$MB = 3$$ and the price per slice is $$P = 2$$, what should a rational consumer do?

Accepted Answer

Buy more pizza because $$MB \u003e P.$$

Question 10

Which of the following best illustrates the concept of diminishing marginal benefit?

Accepted Answer

The more slices of cake you eat, the less additional satisfaction you get from each extra slice.

Question 11

If a new technology reduces the cost of producing smartphones, what will happen in the market for smartphones?

Accepted Answer

The supply curve will shift to the right.

Question 12

Which of the following is NOT an assumption of perfect competition?

Accepted Answer

Firms are price makers.

Question 13

If the price of a substitute good increases, what is likely to happen to the demand for the original good?

Accepted Answer

Demand for the original good increases.

Question 14

A market is experiencing a shortage. What will happen to the price and quantity in the market as it moves toward equilibrium?

Accepted Answer

Price will rise and quantity will increase.

Question 15

Which of the following would NOT shift the supply curve for wheat?

Accepted Answer

A change in the price of wheat.

Question 16

If a new study shows that eating avocados improves health, what is likely to happen in the avocado market?

Accepted Answer

Demand increases, leading to a higher equilibrium price and quantity.

Question 17

Which of the following best describes the difference between a change in quantity demanded and a change in demand?

Accepted Answer

A change in quantity demanded is caused by a change in price; a change in demand is caused by non-price factors.

Question 18

If the opportunity cost of producing one more unit of good X is 2 units of good Y, what is the slope of the PPF when good X is on the horizontal axis?

Accepted Answer

$$-2$$

Question 19

Which of the following is an example of the interdependence principle in action?

Accepted Answer

A company delays launching a new product because it expects a competitor to release a similar product soon.

Question 20

If the market for laptops is in equilibrium and the number of sellers increases, what will happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price will fall and equilibrium quantity will rise.

Microeconomics Exam 1 Study Guide: Chapters 1-4

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