Question 1

Which of the following best describes the focus of microeconomics?

Accepted Answer

The study of how individual households and firms make decisions and interact in markets.

Question 2

Suppose a student is deciding whether to study for an additional hour for their microeconomics exam. The benefit of the extra hour is a higher expected grade, while the cost is one hour less of sleep. This decision is an example of:

Accepted Answer

Marginal analysis

Question 3

If two countries specialize according to their comparative advantage and trade, which of the following is true?

Accepted Answer

Both countries can consume outside their individual production possibilities frontiers.

Question 4

Which of the following statements is a normative statement?

Accepted Answer

"The government should increase the minimum wage to improve living standards."

Question 5

A movement along the demand curve for pizza occurs when:

Accepted Answer

The price of pizza changes.

Question 6

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

Accepted Answer

A shortage of bread.

Question 7

Which of the following would cause a rightward shift in the supply curve for smartphones?

Accepted Answer

A technological improvement in smartphone manufacturing.

Question 8

If the equilibrium price in a market is $10 and the government sets a price floor at $15, what will happen?

Accepted Answer

A surplus will occur because quantity supplied exceeds quantity demanded.

Question 9

Which of the following best explains why market failure can occur?

Accepted Answer

Markets fail to allocate resources efficiently due to externalities, public goods, or market power.

Question 10

A consumer is willing to pay $50 for a concert ticket, but the market price is $30. What is the consumer surplus for this ticket?

Accepted Answer

$20

Question 11

Suppose the production possibilities frontier (PPF) for a country is bowed outward. What does this imply about opportunity costs?

Accepted Answer

Opportunity costs increase as more of one good is produced.

Question 12

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

Accepted Answer

Demand increases.

Question 13

Which of the following is an example of opportunity cost?

Accepted Answer

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

Question 14

Suppose the government sets a quota on the number of taxi licenses in a city, and the quota is below the market equilibrium quantity. What is the quota rent?

Accepted Answer

The difference between the demand price and the supply price at the quota quantity.

Question 15

Which of the following best describes the circular flow model?

Accepted Answer

It shows the flow of goods, services, and money between households and firms.

Question 16

If the government increases the minimum wage above the equilibrium wage, which of the following is a likely consequence?

Accepted Answer

Some workers may be hired illegally at wages below the minimum.

Question 17

Which of the following is NOT a determinant of supply?

Accepted Answer

Consumer tastes and preferences.

Question 18

If the price of a substitute good increases, what happens to the demand for the original good?

Accepted Answer

Demand for the original good increases.

Question 19

Suppose a market is in equilibrium. If the government imposes a tax on sellers, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases and equilibrium quantity decreases.

Question 20

Which of the following best explains why economic models are important in microeconomics?

Accepted Answer

They simplify complex real-world phenomena to help us understand and predict economic behavior.

Microeconomics Exam I Study Guide: Principles, Models, and Market Analysis

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