Question 1

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

Accepted Answer

The value of the next best alternative that is forgone when a choice is made.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn using all its resources. What is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

$2$ units of corn

Question 3

Which of the following statements is a positive statement?

Accepted Answer

"Raising taxes will reduce consumer spending."

Question 4

A production possibilities boundary (PPB) is bowed outward from the origin. What does this shape indicate?

Accepted Answer

There are increasing opportunity costs as more of one good is produced.

Question 5

If the price of a normal good increases, what is the expected effect on the quantity demanded, ceteris paribus?

Accepted Answer

Quantity demanded will decrease.

Question 6

Which of the following would cause a rightward shift in the demand curve for electric cars?

Accepted Answer

An increase in the price of gasoline (a substitute).

Question 7

Suppose the government imposes a new excise tax on the production of soft drinks. What is the likely effect on the supply curve for soft drinks?

Accepted Answer

The supply curve will shift to the left.

Question 8

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 9

Given the price elasticity of demand formula $	ext{Price elasticity of demand} = \frac{\%\ 	ext{change in } Q}{\%\ 	ext{change in } p}$, what does it mean if the absolute value of the elasticity is less than 1?

Accepted Answer

Demand is inelastic.

Question 10

A technological innovation reduces the amount of labor needed to produce smartphones. What is the likely effect on the supply curve for smartphones?

Accepted Answer

The supply curve shifts to the right.

Question 11

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

Accepted Answer

Quantity demanded equals quantity supplied.

Question 12

Suppose the price of coffee increases and, as a result, the demand for tea increases. What does this suggest about the relationship between coffee and tea?

Accepted Answer

They are substitutes.

Question 13

Which of the following is most likely to have an inelastic demand?

Accepted Answer

A life-saving medication

Question 14

If the price of wheat rises and farmers increase their wheat production, which concept does this illustrate?

Accepted Answer

Law of supply

Question 15

A decrease in the price of a complement good will have what effect on the demand for the related good?

Accepted Answer

Increase demand for the related good

Question 16

Which of the following would NOT cause a shift in the demand curve for laptops?

Accepted Answer

A decrease in the price of laptops

Question 17

If the price elasticity of supply for a product is $0.5$, how would you describe the supply?

Accepted Answer

Inelastic

Question 18

Suppose a new study shows that eating avocados significantly improves health, leading to a surge in consumer preference for avocados. What is the likely effect on the equilibrium price and quantity of avocados?

Accepted Answer

Equilibrium price increases, equilibrium quantity increases.

Question 19

Which of the following best explains why the demand for gasoline is more elastic in the long run than in the short run?

Accepted Answer

Consumers have more time to find alternatives and adjust their behavior.

Question 20

A bakery finds that when it raises the price of its bread by $10\%$, the quantity demanded falls by $5\%$. What is the price elasticity of demand, and how would you describe it?

Accepted Answer

$0.5$, inelastic

Microeconomics Study Guide: Scarcity, Economic Systems, Demand, Supply, Price, and Elasticity

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