Question 1

Which of the following best describes the concept of 'scarcity' in economics?

Accepted Answer

Scarcity refers to the condition where resources are limited relative to our wants for them.

Question 2

Which of the following is an example of an explicit cost for a college student?

Accepted Answer

The tuition paid for classes.

Question 3

Suppose the price of jelly (a complement to peanut butter) decreases. What happens to the demand for peanut butter?

Accepted Answer

The demand for peanut butter increases.

Question 4

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

Accepted Answer

Quantity demanded decreases.

Question 5

Which of the following would cause a shift to the right in the supply curve for cars?

Accepted Answer

A technological improvement in car manufacturing.

Question 6

Given the demand function $$Q_d = 130 - 3P$$ and the supply function $$Q_s = 10 + 5P$$, what is the equilibrium price ($$P_e$$)?

Accepted Answer

$$P_e = 15$$

Question 7

If a good has a price elasticity of demand $$E_d = 0$$, which of the following is true?

Accepted Answer

A change in price causes no change in quantity demanded.

Question 8

Which of the following is NOT a determinant of the price elasticity of demand?

Accepted Answer

The cost of inputs used in production.

Question 9

If the cross-price elasticity of demand between hot dogs and potato chips is $$E_{xy} = -0.51$$, what does this indicate?

Accepted Answer

Hot dogs and potato chips are complements.

Question 10

A decrease in the price of pizza will have what effect on the market for pizza?

Accepted Answer

Quantity supplied decreases and quantity demanded increases.

Question 11

Suppose the price of gas (a complement to SUVs) falls. What happens to the equilibrium price and quantity of SUVs?

Accepted Answer

Equilibrium price rises and equilibrium quantity rises.

Question 12

If the price elasticity of demand for a product is $$E_d = 1.5$$ and the price increases by 10%, what happens to total revenue?

Accepted Answer

Total revenue decreases.

Question 13

Which of the following best describes an inferior good?

Accepted Answer

A good for which demand decreases as income increases.

Question 14

If $$Q_s = 2 + 2P$$ and $$Q_d = 20 - 4P$$, what is the equilibrium quantity ($$Q_e$$)?

Accepted Answer

$$Q_e = 8$$

Question 15

Which of the following would NOT shift the demand curve for a good?

Accepted Answer

A change in the price of the good itself.

Question 16

If the government imposes a tax on the production of a good, what is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the left.

Question 17

Which of the following is true about price rationing?

Accepted Answer

It allocates goods to those willing to pay at least the equilibrium price.

Question 18

If the price elasticity of demand for a good is greater than 1, which of the following is true?

Accepted Answer

Demand is elastic.

Question 19

Which of the following is an example of an implicit (opportunity) cost?

Accepted Answer

The salary you give up to attend college.

Question 20

If the income elasticity of demand for a good is negative, what type of good is it?

Accepted Answer

Inferior good.

Microeconomics Fundamentals: Introduction, Market Model, and Demand & Supply

Study Guide - Practice Questions