Question 1

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

Accepted Answer

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

Question 2

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

Accepted Answer

$$2$$ units of corn

Question 3

Which of the following statements about the Production Possibilities Frontier (PPF) is correct?

Accepted Answer

Points on the PPF represent efficient use of resources.

Question 4

If the PPF is bowed outward, what does this indicate about opportunity costs?

Accepted Answer

Opportunity costs increase as more of a good is produced.

Question 5

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

Accepted Answer

An increase in consumer income, assuming pizza is a normal good.

Question 6

Suppose the market for coffee is in equilibrium. If a frost destroys half of the coffee crop, what will happen to the equilibrium price and quantity?

Accepted Answer

Price will increase, quantity will decrease.

Question 7

If the price of a good is above the equilibrium price, what will result?

Accepted Answer

A surplus will occur.

Question 8

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

Accepted Answer

Raising taxes will increase government revenue.

Question 9

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

Accepted Answer

The goods are substitutes.

Question 10

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 11

Which of the following best explains why the supply curve is upward sloping?

Accepted Answer

As price increases, producers are willing to supply more because marginal cost increases.

Question 12

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

Accepted Answer

A shortage.

Question 13

If the government imposes a tax on sellers, what happens to the supply curve?

Accepted Answer

It shifts to the left.

Question 14

Suppose the government sets a binding price floor in the wheat market. What is the likely result?

Accepted Answer

A surplus of wheat.

Question 15

Which of the following is NOT a determinant of demand?

Accepted Answer

Technology.

Question 16

If a good is inferior, what happens to its demand when consumer income increases?

Accepted Answer

Demand decreases.

Question 17

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases.

Question 18

Suppose the government imposes a quota that limits the quantity of a good below equilibrium. What is the likely effect?

Accepted Answer

A shortage will develop.

Question 19

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

Accepted Answer

An inferior good.

Question 20

Which of the following is true about consumer surplus?

Accepted Answer

It is the area below the demand curve and above the price.

Microeconomics Exam 1 Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards