Q: Which formula correctly calculates consumer surplus?

$ \text{Consumer Surplus} = \text{Willingness to Pay} - \text{Price Paid} $

Question 1

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

Accepted Answer

The value of the next best alternative forgone when making a decision.

Question 2

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

Accepted Answer

$ 2 $ units of corn

Question 3

Which of the following is NOT a condition for a perfectly competitive market?

Accepted Answer

Barriers to entry

Question 4

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

Accepted Answer

Demand for the original good will increase.

Question 5

A production possibilities frontier (PPF) that is bowed outward indicates:

Accepted Answer

Increasing opportunity costs.

Question 6

Which of the following best illustrates allocative efficiency?

Accepted Answer

Goods and services are produced according to consumer preferences.

Question 7

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

Accepted Answer

A shortage of the good.

Question 8

If a technological advancement reduces the cost of production for smartphones, what happens to the supply curve?

Accepted Answer

It shifts to the right.

Question 9

Which formula correctly calculates consumer surplus?

Accepted Answer

$ 	ext{Consumer Surplus} = 	ext{Willingness to Pay} - 	ext{Price Paid} $

Question 10

A tax is imposed on sellers in a market. Which of the following is true regarding tax incidence?

Accepted Answer

The burden of the tax is shared between buyers and sellers depending on the elasticities of supply and demand.

Question 11

If the demand for a product is perfectly inelastic, who bears the entire burden of a per-unit tax imposed on the product?

Accepted Answer

Consumers

Question 12

Which of the following is an example of a positive economic statement?

Accepted Answer

"Increasing the minimum wage will lead to higher unemployment among teenagers."

Question 13

Suppose a market is initially in equilibrium. If both demand and supply increase simultaneously, what happens to the equilibrium quantity and price?

Accepted Answer

Equilibrium quantity increases, but the effect on price is ambiguous.

Question 14

Which of the following best describes productive efficiency?

Accepted Answer

Producing goods and services at the lowest possible cost.

Question 15

A country can produce 100 units of cars or 200 units of computers. Another country can produce 50 units of cars or 150 units of computers. Which country has the comparative advantage in producing computers?

Accepted Answer

The second country

Question 16

If the marginal benefit of a good is less than its marginal cost, what should a rational consumer do?

Accepted Answer

Decrease consumption of the good.

Question 17

Which of the following events would shift the supply curve for apples to the left?

Accepted Answer

A drought that destroys apple crops.

Question 18

Suppose the government sets a price floor above the equilibrium price for milk. What is the likely result?

Accepted Answer

A surplus of milk.

Question 19

Which equation represents the deadweight loss from a tax in a market?

Accepted Answer

$ 	ext{Deadweight Loss} = \frac{1}{2} 	imes (Q_{	ext{before tax}} - Q_{	ext{after tax}}) 	imes 	ext{Tax} $

Microeconomics Midterm 1 Study Guide: Foundations, Markets, Efficiency, and Government Intervention

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