Question 1

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

Accepted Answer

The value of the next best alternative that is given up when making a choice.

Question 2

Suppose a new technology reduces the cost of producing electric cars. According to the supply shifters, what is the most likely effect on the supply curve for electric cars?

Accepted Answer

The supply curve will shift to the right.

Question 3

If the price of salsa decreases, what is the expected effect on the demand for chips, assuming they are complements?

Accepted Answer

The demand for chips will increase.

Question 4

A competitive market is characterized by which of the following?

Accepted Answer

Many buyers and sellers, none of whom can influence the price.

Question 5

Which of the following scenarios best illustrates the substitution effect?

Accepted Answer

A consumer buys more oranges when the price of apples increases.

Question 6

Suppose the market price for a concert ticket is $$100, but you would have been willing to pay 150. $$What is your consumer surplus?

Accepted Answer

$50

Question 7

If the price elasticity of demand (PED) for a product is calculated using the midpoint method as $$PED = 0.5$$, how would you describe the demand for this product?

Accepted Answer

Inelastic

Question 8

A price ceiling is set below the equilibrium price in the market for rental apartments. What is the most likely outcome?

Accepted Answer

A shortage of apartments

Question 9

Which of the following is NOT a likely consequence of a binding price ceiling?

Accepted Answer

Producers will supply more of the good.

Question 10

If the cross-price elasticity of demand between two goods is positive, what does this indicate about the relationship between the goods?

Accepted Answer

They are substitutes.

Question 11

Suppose the demand for a good increases as consumer income rises. Which type of good is this?

Accepted Answer

Normal good

Question 12

A firm is willing to sell a product for $$20, but the market price is 35. $$What is the producer surplus for this unit?

Accepted Answer

$15

Question 13

If the price of gasoline increases and the quantity demanded decreases only slightly, what can be said about the price elasticity of demand for gasoline?

Accepted Answer

It is inelastic.

Question 14

Which of the following would cause a movement along the demand curve for ice cream, rather than a shift of the demand curve?

Accepted Answer

A decrease in the price of ice cream.

Question 15

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

Accepted Answer

A surplus of wheat

Question 16

If the income elasticity of demand for a good is $$1.5$$, how is this good classified?

Accepted Answer

Luxury (superior) good

Question 17

A decrease in the price of an input used to make bread will have what effect on the supply of bread?

Accepted Answer

Supply will increase.

Question 18

Which formula correctly represents the midpoint method for calculating price elasticity of demand (PED)?

Accepted Answer

$$PED = \frac{Q_2$ - Q_1$}{(Q_2$ + Q_1$)/2} \div \frac{P_2$ - P_1$}{(P_2$ + P_1$)/2}$$

Question 19

If the demand and supply equations for a market are $$Q_d = 100 - 2P$$ and $$Q_s = 4P$$, what is the equilibrium price?

Accepted Answer

$$P = 20$$

Question 20

A new study reveals that eating avocados improves health, causing a change in consumer tastes. What is the likely effect on the demand curve for avocados?

Accepted Answer

The demand curve will shift to the right.

Microeconomics Study Guide: Foundations, Markets, and Elasticity

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