Question 1

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

Accepted Answer

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

Question 2

Suppose a country can produce either 10 units of wheat or 20 units of corn with the same resources. What is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

$$2$$ units of corn

Question 3

If the price of a normal good increases, what is the most likely effect on the quantity demanded, ceteris paribus?

Accepted Answer

Quantity demanded will decrease.

Question 4

Which of the following is NOT a determinant of demand?

Accepted Answer

Technology

Question 5

A market is in equilibrium when:

Accepted Answer

Quantity supplied equals quantity demanded.

Question 6

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

Accepted Answer

Substitutes

Question 7

Suppose the demand for a product is given by $$Q_d = 100 - 2P$$ and the supply is given by $$Q_s = 20 + 3P. $$What is the equilibrium price?

Accepted Answer

$$P = 16$$

Question 8

Which of the following statements about price ceilings is correct?

Accepted Answer

A price ceiling set above equilibrium price has no effect.

Question 9

If a government imposes a tax on sellers, what happens to the supply curve?

Accepted Answer

It shifts to the left.

Question 10

Which of the following best describes a public good?

Accepted Answer

A good that is non-excludable and non-rival in consumption.

Question 11

Suppose the price elasticity of demand for a product is $$-0.5. If $$the price increases by $$10\%$$, what happens to the quantity demanded?

Accepted Answer

It decreases by $$5\%.$$

Question 12

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

Accepted Answer

Vaccination against infectious diseases

Question 13

A firm in perfect competition will maximize profit by producing the quantity where:

Accepted Answer

$$MC = MR$$

Question 14

If a monopolist faces the demand curve $$P = 100 - Q$$ and has constant marginal cost of $$MC = 20$$, what is the profit-maximizing quantity?

Accepted Answer

$$Q = 40$$

Question 15

Which of the following is true about the Nash equilibrium in a prisoner's dilemma game?

Accepted Answer

Both players defect.

Question 16

If the marginal cost of producing a good is less than the price, a profit-maximizing firm should:

Accepted Answer

Increase output.

Question 17

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

Accepted Answer

A technological improvement in car manufacturing.

Question 18

Suppose a firm’s total cost function is $$TC = 100 + 5Q + Q^2$. What is the marginal cost when Q = 3$?

Accepted Answer

$$MC = 13$$

Question 19

Which of the following is an example of a barrier to entry in a market?

Accepted Answer

Government licensing requirements

Question 20

If a firm in a perfectly competitive market is earning zero economic profit, which of the following must be true?

Accepted Answer

$$P = ATC$$

Microeconomics Fundamentals: Scarcity, Opportunity Cost, and the Production Possibilities Frontier

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