Question 1

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

Accepted Answer

The highest valued alternative that must be given up to engage in an activity.

Question 2

Suppose Italy offers paid family leave to new mothers, resulting in an increase in birthrate. This is an example of:

Accepted Answer

Economic incentives

Question 3

A production possibilities frontier (PPF) shows:

Accepted Answer

Maximum attainable combinations of two goods that may be produced with available resources.

Question 4

If the price of coffee at Starbucks rises, what is the likely effect on the demand for bagels, assuming they are complements?

Accepted Answer

The demand for bagels will decrease.

Question 5

Which of the following is NOT scarce according to the economic definition?

Accepted Answer

None of the above

Question 6

What does increasing marginal opportunity cost mean?

Accepted Answer

Increasing the production of a good requires larger and larger decreases in the production of another good.

Question 7

Suppose the demand for McDonald's Big Mac hamburgers increases after a $1.00 off coupon is distributed. This will cause:

Accepted Answer

The quantity demanded of McDonald's Big Mac hamburgers to increase.

Question 8

At a price of $3.50, there is a shortage of 8 units in the market. What does this imply about the market equilibrium?

Accepted Answer

The market price is below equilibrium and quantity demanded exceeds quantity supplied.

Question 9

Which of the following is an example of a microeconomic issue?

Accepted Answer

The effect of higher cigarette taxes on the quantity of cigarettes sold.

Question 10

Which of the following is NOT a step that economists use in developing useful economic models?

Accepted Answer

Make a value judgment about the merits of the hypothesis.

Question 11

Suppose the US can produce 2 units of food or 1 unit of clothing, and Japan can produce 3 units of food or 9 units of clothing. Who has the absolute advantage in producing clothing?

Accepted Answer

Japan

Question 12

What is the law of demand?

Accepted Answer

The quantity demanded of a product is inversely related to its price.

Question 13

Which of the following statements about comparative advantage is correct?

Accepted Answer

A country has a comparative advantage if it has a lower opportunity cost of producing that good.

Question 14

Which of the following best describes equity in economics?

Accepted Answer

The fair distribution of economic benefits.

Question 15

If Oscar Myer hot dogs and Wonder hot dog buns are complements, what happens if the price of Oscar Myer hot dogs decreases?

Accepted Answer

Demand for Wonder hot dog buns increases.

Question 16

Which of the following is the basis for trade between two countries?

Accepted Answer

Comparative advantage

Question 17

Which of the following is an example of positive analysis?

Accepted Answer

Rising paper prices will increase textbook prices.

Question 18

If a country can produce more of a good or service than competitors using the same resources, it has:

Accepted Answer

Absolute advantage

Question 19

Which of the following best describes the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics examines individual markets while macroeconomics examines the economy as a whole.

Question 20

Suppose a country can produce either 10 units of wheat or 5 units of rice in a day. What is the opportunity cost of producing 1 unit of rice?

Accepted Answer

$2$ units of wheat

Microeconomics Exam 1 Study Guide: Principles, Models, and Applications

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