Question 1

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

Accepted Answer

The highest-valued alternative that must be given up to obtain something else.

Question 2

Suppose a country can produce either 10 units of Good A or 20 units of Good B with its available resources. What is the opportunity cost of producing 1 unit of Good A?

Accepted Answer

$$2$$ units of Good B

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 price of a substitute good increases, what is the likely effect on the demand for the original good?

Accepted Answer

The demand for the original good will increase.

Question 5

A rational choice is one that:

Accepted Answer

Maximizes the benefit while minimizing the cost, given available resources.

Question 6

Suppose the price of Good X rises from $$10 to 12$$, and the quantity demanded falls from 100 units to 80 units. What is the price elasticity of demand (PED)?

Accepted Answer

$$PED = \frac{(80-100)/100}{(12-10)/10} = \frac{-0.2}{0.2} = -1$$

Question 7

Which of the following would cause a movement along the demand curve for a product, rather than a shift of the demand curve?

Accepted Answer

A change in the price of the product.

Question 8

If a firm can produce more of a good with the same amount of resources compared to another firm, it is said to have:

Accepted Answer

Absolute advantage

Question 9

Which of the following best explains why the PPF is typically bowed outward?

Accepted Answer

Opportunity costs increase as more of one good is produced.

Question 10

If the supply of a good is perfectly inelastic, what happens to the quantity supplied when the price increases?

Accepted Answer

The quantity supplied does not change.

Question 11

A market is in equilibrium when:

Accepted Answer

The quantity demanded equals the quantity supplied.

Question 12

If a technological advancement allows firms to produce more output with the same resources, what is the likely effect on the PPF?

Accepted Answer

The PPF shifts outward.

Question 13

Which of the following is an example of a 'how much' decision made at the margin?

Accepted Answer

Deciding how many hours to study for an exam.

Question 14

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

Accepted Answer

Substitutes

Question 15

Suppose a bakery can produce either 100 loaves of bread or 50 cakes per day. What is the opportunity cost of producing 1 cake?

Accepted Answer

$$2$$ loaves of bread

Question 16

If demand for a product is inelastic and the price increases, what happens to total revenue?

Accepted Answer

Total revenue increases.

Question 17

Which of the following would NOT cause a shift in the supply curve for smartphones?

Accepted Answer

A decrease in the price of smartphones.

Question 18

A good is considered inferior if:

Accepted Answer

Its demand decreases as income increases.

Question 19

If a country specializes in producing the good for which it has a comparative advantage and then trades, what is the likely outcome?

Accepted Answer

Both countries can consume beyond their individual PPFs.

Question 20

Which of the following best illustrates the law of supply?

Accepted Answer

As the price of laptops increases, the quantity supplied of laptops increases.

Microeconomics: Foundations, Production Possibilities, Demand & Supply, and Elasticity

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