Question 1

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

Accepted Answer

The highest valued alternative that must be given up to engage in an activity.

Question 2

Suppose you can either work for 8 hours at $$15/hour or attend a concert that costs 50. If $$you choose the concert, what is your opportunity cost?

Accepted Answer

$120, the wages you forgo.

Question 3

Which of the following statements is a positive statement?

Accepted Answer

The Nintendo Switch sold more consoles than the Playstation 4.

Question 4

If the price of a substitute good increases, what happens to the demand curve for the original good?

Accepted Answer

It shifts to the right.

Question 5

Given the following demand and supply equations: $$QD = 90 - 2P$$ and $$QS = -30 + P$$, what is the equilibrium price?

Accepted Answer

$$P = 40$$

Question 6

Which of the following would cause a movement along the supply curve for ice cream?

Accepted Answer

A decrease in the price of ice cream.

Question 7

If a $$5 per-unit tax is imposed on the supply side, and the price consumers pay rises from 18 to$$ $20, what percentage of the tax is paid by consumers?

Accepted Answer

$$40\%$$

Question 8

Refer to the first image. What area represents consumer surplus (CS) in a competitive market equilibrium?

Accepted Answer

The area above the price and below the demand curve.

Question 9

Which of the following best explains why a binding price ceiling can lead to a black market?

Accepted Answer

It sets the price below equilibrium, causing a shortage.

Question 10

Suppose the price of gasoline doubles overnight. In the short run, the price elasticity of demand for gasoline is likely to be:

Accepted Answer

Relatively inelastic, because consumers cannot quickly change their behavior.

Question 11

If the income elasticity of demand for a good is $$E_I = -0.5$$, what type of good is it?

Accepted Answer

Inferior good

Question 12

If the cross-price elasticity of demand between two goods is $$E_C = 1.2$$, what does this imply?

Accepted Answer

The goods are substitutes.

Question 13

Refer to the third image. What does the area labeled 'DWL' represent after a tax is imposed?

Accepted Answer

The deadweight loss, or the lost surplus due to the tax.

Question 14

Which of the following is NOT a determinant of price elasticity of demand?

Accepted Answer

Number of producers in the market

Question 15

Suppose a minimum wage is set above the equilibrium wage in a labor market. What is the likely result?

Accepted Answer

Unemployment (more workers than jobs).

Question 16

If the price elasticity of supply for a good is $$E_S = 0$$, what does this imply about the supply curve?

Accepted Answer

It is perfectly inelastic.

Question 17

A country has a comparative advantage in producing a good if:

Accepted Answer

It can produce the good at a lower opportunity cost than other countries.

Question 18

Which of the following would cause the supply curve for pizza to shift to the left?

Accepted Answer

An increase in the wage paid to pizza workers.

Question 19

If a market is in equilibrium, which of the following is true?

Accepted Answer

Quantity demanded equals quantity supplied.

Question 20

Which of the following is an example of a binding price floor?

Accepted Answer

A minimum wage set above the equilibrium wage.

Microeconomics Study Guide: Foundations, Scarcity, Demand & Supply, Elasticity, and Market Applications

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