Question 1

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

Accepted Answer

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

Question 2

A country can produce either 10 units of wine or 20 units of cheese with all its resources. What is the opportunity cost of producing 1 unit of wine?

Accepted Answer

$$2$$ units of cheese$

Question 3

Which of the following statements about the law of increasing opportunity costs is correct?

Accepted Answer

As more of a good is produced, the opportunity cost of producing an additional unit increases.

Question 4

Suppose the demand for public transportation increases due to a rise in gasoline prices. Which of the following best explains this change?

Accepted Answer

Public transportation and gasoline are substitutes, so an increase in the price of gasoline increases demand for public transportation.

Question 5

If a government sets a price ceiling below the equilibrium price for rental apartments, what is the most likely outcome?

Accepted Answer

A shortage of rental apartments.

Question 6

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

Accepted Answer

A homeowner planting a garden that beautifies the neighborhood.

Question 7

A market is considered allocatively efficient when:

Accepted Answer

Resources are distributed so that no one can be made better off without making someone else worse off.

Question 8

Suppose the price elasticity of demand for a product is $$-2.5. If $$the price increases by $$10\%$$, what will happen to the quantity demanded?

Accepted Answer

It will decrease by $$25\%.$$

Question 9

Which of the following best describes the 'tragedy of the commons'?

Accepted Answer

A situation where common resources are overused because individuals do not bear the full cost of their actions.

Question 10

If a good is non-excludable and non-rivalrous, it is best classified as:

Accepted Answer

A public good.

Question 11

A country has an absolute advantage in producing a good if:

Accepted Answer

It can produce more of the good using the same amount of resources as another country.

Question 12

Which of the following is most likely to cause a shift in the supply curve for wheat to the right?

Accepted Answer

An improvement in agricultural technology.

Question 13

If the cross-price elasticity of demand between two goods is positive, the goods are:

Accepted Answer

Substitutes.

Question 14

Suppose a government imposes a per-unit tax on sellers. Who bears the greater burden of the tax if demand is perfectly inelastic?

Accepted Answer

Buyers bear the entire burden.

Question 15

Which of the following is an example of the substitution effect?

Accepted Answer

A consumer buys more chicken when the price of beef rises.

Question 16

If a good has an income elasticity of demand of $$-0.8$$, it is considered:

Accepted Answer

An inferior good.

Question 17

Which of the following best describes the circular flow model?

Accepted Answer

It shows how goods and services are produced by firms and consumed by households, with money flowing in the opposite direction.

Question 18

A firm is producing at a point inside its production possibilities frontier (PPF). What does this indicate?

Accepted Answer

The firm is not using all its resources efficiently.

Question 19

Suppose a consumer faces the following utility from consuming apples and oranges. The marginal utility per dollar spent on apples is higher than that for oranges. What should the consumer do to maximize utility?

Accepted Answer

Buy more apples and fewer oranges.

Question 20

Which of the following is a characteristic of a competitive market?

Accepted Answer

There are many buyers and sellers, and no single buyer or seller can influence the price.

Microeconomics Foundations and Core Concepts: Structured Study Notes

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