Question 1

If Sam is producing at a point on his production possibilities frontier (PPF), what does this imply about his production choices?

Accepted Answer

He can increase the production of one good only by sacrificing the production of another good.

Question 2

Refer to the graph provided. When 2,000 bicycles are produced each month, what can be said about the marginal benefit and marginal cost?

Accepted Answer

The marginal benefit of the 2,000th bicycle is greater than the marginal cost of the 2,000th bicycle.

Question 3

For which one of the following is demand likely to be most price elastic?

Accepted Answer

Exotic vacations

Question 4

If Mr. Brown’s income increases by 12 percent and his quantity demanded of bus rides decreases by 24 percent, what is the income elasticity of demand for bus rides?

Accepted Answer

$$-2$$

Question 5

The price of a good will rise if:

Accepted Answer

There is a shortage of the good.

Question 6

Which of the following is a microeconomic topic?

Accepted Answer

The reasons why a consumer buys less honey.

Question 7

Suppose the cost of production rises and supply decreases by 100 units at each price in the market for car-seat heaters. If the original equilibrium price was $70, what is the new equilibrium price?

Accepted Answer

$$80$$

Question 8

If the cost of producing aspirin increases at the same time as doctors discover that taking one aspirin per day reduces the risk of heart attacks, what is the most likely outcome in the market for aspirin?

Accepted Answer

The supply of aspirin decreases and the demand for aspirin increases.

Question 9

The most anyone is willing to pay for another purse is $$30. Currently, the price of a purse is 40$$, and the cost of producing another purse is $50. What is the marginal benefit of a purse?

Accepted Answer

$$30$$

Question 10

X has an absolute advantage in producing administrative services when she:

Accepted Answer

Can produce more administrative services than anyone else, using the same quantity of inputs.

Question 11

Suppose the marginal cost (MC) and marginal benefit (MB) curves for bicycles are given by $$MC = 5 - Q$$ and $$MB = 1 + Q$$, where $$Q is in $$thousands of bicycles per month. What is the efficient quantity of bicycles produced per month?

Accepted Answer

$$Q = 2$$

Question 12

If the opportunity cost of producing 1 more bicycle is 2 scooters, and the opportunity cost of producing 1 more scooter is 0.5 bicycles, which of the following statements is true?

Accepted Answer

The opportunity cost of producing bicycles and scooters are reciprocals.

Question 13

If a new technology reduces the cost of producing scooters, what is the likely effect on the production possibilities frontier (PPF) for bicycles and scooters?

Accepted Answer

The PPF will shift outward, allowing more scooters to be produced for any given number of bicycles.

Question 14

If the price elasticity of demand for a product is $$-1.5$$, what does this imply about consumer responsiveness to price changes?

Accepted Answer

Consumers are relatively responsive to price changes; demand is elastic.

Question 15

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

Accepted Answer

A shortage of bread will occur.

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