Question 1

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

Accepted Answer

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

Question 2

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

Accepted Answer

A shortage of bread, as quantity demanded exceeds quantity supplied.

Question 3

If the price of coffee increases and, as a result, the demand for tea increases, what is the relationship between coffee and tea?

Accepted Answer

They are substitutes.

Question 4

A perfectly competitive market is characterized by which of the following?

Accepted Answer

Many buyers and sellers, with no individual able to influence the market price.

Question 5

Given the demand equation $$Q_d = 100 - 2P$$, what is the quantity demanded when the price is $$P = 30$$?

Accepted Answer

$$Q_d = 60$$

Question 6

If the price elasticity of demand for a product is $$PED = 0.5$$, which of the following statements is true?

Accepted Answer

Demand is inelastic, and consumers are not very responsive to price changes.

Question 7

A decrease in the price of smartphones leads to an increase in the demand for smartphone cases. What does this indicate about the relationship between smartphones and smartphone cases?

Accepted Answer

They are complementary goods.

Question 8

Suppose the supply curve for a good shifts to the right. Which of the following could explain this shift?

Accepted Answer

A decrease in the cost of production.

Question 9

If the market price is set above the equilibrium price, what will occur in the market?

Accepted Answer

A surplus, as quantity supplied exceeds quantity demanded.

Question 10

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

Accepted Answer

$$\15$

Question 11

If the price of a normal good increases, what happens to the quantity demanded and the demand curve?

Accepted Answer

Quantity demanded decreases; movement occurs along the demand curve.

Question 12

Suppose the price of Good B increases by 10%, and as a result, the quantity demanded of Good A increases by 5%. What is the cross-price elasticity of demand, and what does it indicate?

Accepted Answer

$$0.5$$, indicating that Goods A and B are substitutes.

Question 13

Which of the following best describes economic efficiency?

Accepted Answer

Resources are used in such a way that no one can be made better off without making someone else worse off.

Question 14

A firm faces the following supply equation: $$Q_s = 4P - 20. $$What is the quantity supplied when the price is $$P = 10$$?

Accepted Answer

$$Q_s = 60$$

Question 15

If a good has a perfectly inelastic demand curve, what will happen to the quantity demanded if the price increases?

Accepted Answer

Quantity demanded will remain unchanged.

Question 16

Suppose the price of a good increases from $$\10$ to $$\$$12$$, and the quantity demanded decreases from $$100$$ units to $$80$$ units. Using the midpoint formula, what is the price elasticity of demand?

Accepted Answer

$$PED = 2.0$$

Question 17

Which of the following is an example of a market failure?

Accepted Answer

A factory pollutes a river, harming people downstream.

Question 18

If the price elasticity of supply is $$PES = 1.5$$, how will producers respond to a 10% increase in price?

Accepted Answer

Quantity supplied will increase by 15%.

Question 19

A country experiences a recession. Which of the following is most likely to occur?

Accepted Answer

Lower spending, lower income, layoffs, and higher unemployment.

Question 20

If a price floor is set above the equilibrium price in the wheat market, what will be the result?

Accepted Answer

A surplus of wheat.

Microeconomics: Foundations, Markets, and Elasticity – Study Notes

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