Question 1

Which of the following best describes opportunity cost?

Accepted Answer

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

Question 2

Suppose a government imposes a price ceiling below the equilibrium price in the market for gasoline. Which of the following is most likely to occur?

Accepted Answer

A shortage of gasoline.

Question 3

If the demand for a normal good increases due to a rise in consumer income, what will happen to the equilibrium price and quantity, ceteris paribus?

Accepted Answer

Equilibrium price increases, equilibrium quantity increases.

Question 4

Which of the following is an example of a positive externality?

Accepted Answer

Vaccination that reduces the spread of disease.

Question 5

A market is considered allocatively efficient when:

Accepted Answer

The sum of consumer and producer surplus is maximized.

Question 6

Suppose the supply curve for wheat shifts to the left due to a drought. What is the most likely effect on equilibrium price and quantity?

Accepted Answer

Equilibrium price increases, equilibrium quantity decreases.

Question 7

If the price of coffee increases, what is likely to happen to the demand for tea, assuming they are substitutes?

Accepted Answer

The demand for tea will increase.

Question 8

Which of the following statements is an example of normative analysis?

Accepted Answer

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

Question 9

Given the demand equation $$Q_d = 100 - 2P$$ and the supply equation $$Q_s = 4P$$, what is the equilibrium price?

Accepted Answer

$$P = 10$$

Question 10

If a new technology reduces the cost of producing smartphones, what will happen to the supply curve and equilibrium in the smartphone market, ceteris paribus?

Accepted Answer

Supply curve shifts right; equilibrium price falls.

Question 11

A consumer is willing to pay $$\50$ for a concert ticket, but the market price is $$\$$35. $$What is the consumer surplus for this consumer?

Accepted Answer

$$\15$

Question 12

Which of the following best describes the law of supply?

Accepted Answer

As the price of a good increases, the quantity supplied increases.

Question 13

If the area under the demand curve and above the market price for a good is $$40$$ square units, what does this area represent?

Accepted Answer

Consumer surplus

Question 14

Suppose the market for apples is in equilibrium. A disease destroys a large portion of the apple crop, and at the same time, consumer income rises (apples are a normal good). What can we say about the new equilibrium quantity?

Accepted Answer

It may increase, decrease, or stay the same depending on the magnitude of the shifts.

Question 15

Which of the following is NOT an assumption made in economic models?

Accepted Answer

People always act in the interest of society as a whole.

Question 16

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

Accepted Answer

Demand decreases.

Question 17

A market is in equilibrium at price $$P^*$$ and quantity $$Q^*. If a $$price floor is set above $$P^*$$, what will result?

Accepted Answer

A surplus equal to $$Q_s - Q_d at $$the floor price.

Question 18

Which of the following best describes productive efficiency?

Accepted Answer

Goods are produced at the lowest possible cost.

Question 19

If the area of a triangle under the supply curve and above the market price is $$25$$ square units, what does this area represent?

Accepted Answer

Producer surplus

Question 20

Suppose a tax is imposed on a good, causing the quantity traded to fall below the equilibrium quantity. What is the area between the new quantity and the equilibrium quantity called?

Accepted Answer

Deadweight loss

Microeconomics Exam One Study Guide: Chapters 1, 3, and 4

Study Guide - Practice Questions

Study Guide - Flashcards