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

Suppose a country can produce either 100 units of wheat or 200 units of corn with its available resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

2 units of corn

Question 3

If the price of apples increases, which of the following is most likely to occur, ceteris paribus?

Accepted Answer

The quantity demanded of apples decreases.

Question 4

Which of the following would cause a rightward shift in the supply curve for oranges?

Accepted Answer

An improvement in orange-picking technology.

Question 5

Suppose the equilibrium price of apples is $$1.50 per kg and the equilibrium quantity is 1200 kg per week. If the government imposes a price floor at 2.00 $$per kg, what is the likely result?

Accepted Answer

A surplus of apples.

Question 6

If the price elasticity of demand for a product is $$-2$$, what does this imply?

Accepted Answer

A 1% increase in price leads to a 2% decrease in quantity demanded.

Question 7

Which of the following statements about consumer surplus is correct?

Accepted Answer

Consumer surplus is the difference between the price consumers are willing to pay and the price they actually pay.

Question 8

Given the following marginal utilities and prices: $$MU_x = 20$$, $$P_x = 4$$; $$MU_y = 30$$, $$P_y = 6. $$According to the utility-maximizing rule, what should the consumer do?

Accepted Answer

Buy more of good x and less of good y.

Question 9

Suppose the marginal utility per dollar spent on wine is 19 and on quiche is 11. If both cost $10, what should the consumer do to maximize utility?

Accepted Answer

Buy more wine and less quiche.

Question 10

If a tax is imposed on sellers, which of the following is true regarding the new equilibrium?

Accepted Answer

The supply curve shifts leftward (upward).

Question 11

Suppose the government imposes a tax on apples, and as a result, the price buyers pay increases by $$0.30$$ and the price sellers receive decreases by $$0.20. $$What is the total tax per unit?

Accepted Answer

$$0.50$$

Question 12

Which of the following best describes the substitution effect?

Accepted Answer

The change in quantity demanded due to a change in the price of a good, making it more or less expensive relative to other goods.

Question 13

If the price of a normal good increases, what happens to the income effect?

Accepted Answer

The consumer feels poorer and buys less of the good.

Question 14

Suppose the marginal rate of substitution (MRS) between wine and quiche is $$2 at a $$certain consumption bundle. What does this mean?

Accepted Answer

The consumer is willing to give up 2 units of quiche for 1 more unit of wine.

Question 15

A point inside the production possibilities frontier (PPF) represents:

Accepted Answer

Inefficient use of resources.

Question 16

If two individuals specialize according to their comparative advantage and trade, which of the following is true?

Accepted Answer

Both individuals can consume outside their individual PPFs.

Question 17

Suppose the price of wine is $$10$$ per bottle and the price of quiche is $$10$$ per unit. If a consumer has $$100 to $$spend, which of the following combinations is affordable?

Accepted Answer

5 bottles of wine and 5 quiches

Question 18

If the government sets a price ceiling below the equilibrium price, what is the likely outcome?

Accepted Answer

A shortage will occur.

Question 19

Which of the following is true about the law of diminishing marginal utility?

Accepted Answer

As more of a good is consumed, marginal utility decreases.

Question 20

Suppose the government imposes a tax on apples, and the deadweight loss increases as the tax increases. This is because:

Accepted Answer

The tax reduces the quantity traded, causing a loss in total surplus.

Microeconomics Midterm 1 Study Guide: Chapters 1–6

Study Guide - Practice Questions

Study Guide - Flashcards