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 are deciding between working a part-time job that pays $$15/hour for 8 hours or attending a concert that costs 60 $$and lasts 8 hours. What is the opportunity cost of attending the concert?

Accepted Answer

$120, the total value of your time if you worked.

Question 3

Which of the following statements is a positive statement?

Accepted Answer

Raising taxes on cigarettes will reduce smoking rates.

Question 4

If the price of a good increases and the quantity demanded decreases, this is an example of:

Accepted Answer

A movement along the demand curve.

Question 5

Suppose the demand for roses is given by $$Q_d = 90 - 2p$$ and the supply is $$Q_s = -30 + p. $$What is the equilibrium price ($$p^*) $$and quantity ($$Q^*$$)?

Accepted Answer

$$p^* = 40, Q^* = 10$$

Question 6

Which of the following would cause a rightward shift in the supply curve for ice cream?

Accepted Answer

A decrease in the cost of milk, a key input.

Question 7

If the cross-price elasticity of demand between chicken and rice is negative, what does this imply?

Accepted Answer

Chicken and rice are complementary goods.

Question 8

Suppose the price of a tennis pass increases from $$7 to 15 $$and sales decrease from 12,000 to 7,000. Using the percentage formula, what is the price elasticity of demand ($$E_d$$)?

Accepted Answer

$$E_d = -0.36$$

Question 9

A price ceiling is binding if:

Accepted Answer

It is set below the equilibrium price.

Question 10

Which of the following best explains why the supply of oceanfront land is perfectly inelastic?

Accepted Answer

Because the quantity supplied cannot be increased regardless of price.

Question 11

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

Accepted Answer

$$40\%$$

Question 12

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

Accepted Answer

The cost of inputs used in production.

Question 13

If the income elasticity of demand for a good is $$E_i = 1.5$$, the good is:

Accepted Answer

A luxury good.

Question 14

Which of the following scenarios would most likely result in deadweight loss?

Accepted Answer

A per-unit tax imposed on a good with elastic demand.

Question 15

Suppose a minimum wage (price floor) is set above the equilibrium wage in a low-skill labor market. What is the most likely outcome?

Accepted Answer

A surplus of workers (unemployment).

Question 16

Which of the following is an example of a normative statement?

Accepted Answer

The government should provide free healthcare to all citizens.

Question 17

If the price elasticity of supply ($$E_s) $$for hot dog vendors is greater than 1, supply is:

Accepted Answer

Relatively elastic.

Question 18

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

Accepted Answer

A change in the price of pizza.

Question 19

If a good is scarce, which of the following must be true?

Accepted Answer

It has limited availability.

Question 20

Which of the following best describes the concept of comparative advantage?

Accepted Answer

Producing a good at a lower opportunity cost than others.

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

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