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 100 units of wheat or 200 units of corn using all its resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$2$ units of corn

Question 3

A production possibilities frontier (PPF) is bowed outward from the origin. What does this shape indicate about opportunity costs?

Accepted Answer

Opportunity costs increase as more of one good is produced.

Question 4

If the demand for electric cars increases due to a rise in gasoline prices, what will happen to the equilibrium price and quantity of electric cars, ceteris paribus?

Accepted Answer

Equilibrium price increases, equilibrium quantity increases.

Question 5

Which of the following is NOT an assumption of the perfectly competitive market model?

Accepted Answer

Products are differentiated.

Question 6

Suppose the government imposes a price ceiling below the equilibrium price on bread. What is the most likely outcome?

Accepted Answer

A shortage of bread.

Question 7

If the supply curve for a good shifts to the left while demand remains unchanged, what happens to equilibrium price and quantity?

Accepted Answer

Equilibrium price rises, equilibrium quantity falls.

Question 8

Which of the following best explains why the law of demand holds?

Accepted Answer

As price rises, the opportunity cost of buying the good increases, leading consumers to buy less.

Question 9

A tax is imposed on sellers of gasoline. Which of the following is most likely to occur?

Accepted Answer

The supply curve shifts to the left.

Question 10

Suppose the market for oranges is in equilibrium. A disease destroys a large portion of the orange crop. What happens to consumer surplus?

Accepted Answer

Consumer surplus decreases.

Question 11

If country A can produce both wheat and steel more efficiently than country B, but country B has a lower opportunity cost of producing steel, which country should specialize in steel according to the principle of comparative advantage?

Accepted Answer

Country B

Question 12

Which of the following equations represents the market equilibrium condition?

Accepted Answer

$Q_D = Q_S$

Question 13

Suppose the demand function for a good is $Q_D = 50 - 2P$ and the supply function is $Q_S = 10 + 3P$. What is the equilibrium price?

Accepted Answer

$P = 10$

Question 14

Which of the following best describes consumer surplus?

Accepted Answer

The difference between the price consumers are willing to pay and the price they actually pay.

Question 15

A government sets a minimum wage above the equilibrium wage. What is the likely result in the labor market?

Accepted Answer

A surplus of labor (unemployment).

Question 16

If a technological innovation reduces the cost of producing smartphones, what is the likely effect on the market for smartphones?

Accepted Answer

Supply increases, equilibrium price falls, equilibrium quantity rises.

Question 17

Which of the following is an example of a positive economic statement?

Accepted Answer

Raising taxes will reduce consumer spending.

Question 18

If the price elasticity of demand for a product is greater than 1, what does this imply?

Accepted Answer

Demand is elastic.

Question 19

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 20

Suppose the government imposes a tax on buyers of cigarettes. What is the immediate effect on the demand curve?

Accepted Answer

The demand curve shifts to the left.

Microeconomics Exam 1 Study Notes: Foundations, Trade-offs, Markets, and Efficiency

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