Question 1

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

Accepted Answer

The value of the next best alternative forgone when making a choice.

Question 2

Suppose a country can produce either 10 units of wheat or 20 units of corn with its available resources. What is the opportunity cost of producing 1 unit of wheat?

Accepted Answer

$2$ units of corn

Question 3

Which of the following is NOT an assumption of the production possibilities frontier (PPF)?

Accepted Answer

Resources are unlimited.

Question 4

If a point lies inside the production possibilities frontier, what does this indicate?

Accepted Answer

Resources are being used inefficiently.

Question 5

Which of the following statements about comparative advantage is correct?

Accepted Answer

A country has a comparative advantage if it can produce a good at a lower opportunity cost than another country.

Question 6

Which of the following is an example of a positive economic statement?

Accepted Answer

"An increase in demand will lead to higher prices, ceteris paribus."

Question 7

If the law of demand holds, what happens to the quantity demanded of a good when its price increases, ceteris paribus?

Accepted Answer

Quantity demanded decreases.

Question 8

Which of the following would cause a shift in the demand curve for coffee to the right?

Accepted Answer

An increase in consumer income, assuming coffee is a normal good.

Question 9

Suppose the supply curve for apples shifts to the left. Which of the following could explain this change?

Accepted Answer

An increase in the cost of fertilizer used to grow apples.

Question 10

If the market for electric cars is in equilibrium and the government introduces a subsidy for electric car producers, what is the likely effect on the equilibrium price and quantity?

Accepted Answer

Equilibrium price decreases, equilibrium quantity increases.

Question 11

Which of the following best illustrates the law of supply?

Accepted Answer

As the price of oranges increases, farmers are willing to supply more oranges.

Question 12

A shift in the supply curve, as opposed to a movement along the supply curve, is caused by:

Accepted Answer

A change in input costs.

Question 13

Which of the following is a normative economic statement?

Accepted Answer

"The government should reduce taxes to stimulate growth."

Question 14

If a country can produce 100 units of steel or 50 units of aluminum, what is the opportunity cost of producing 1 unit of aluminum?

Accepted Answer

$2$ units of steel

Question 15

Which of the following is most likely to shift the demand curve for smartphones to the left?

Accepted Answer

A decrease in consumer income, assuming smartphones are normal goods.

Question 16

If the price of a substitute good increases, what is the expected effect on the demand for the original good?

Accepted Answer

Demand for the original good increases.

Question 17

Which of the following best describes the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics studies the behavior of individual markets, while macroeconomics studies the economy as a whole.

Question 18

Which of the following is NOT a factor that shifts market supply?

Accepted Answer

A change in the price of the good.

Question 19

Suppose the market for rental apartments is in equilibrium. If the government imposes a price ceiling below the equilibrium price, what is the likely outcome?

Accepted Answer

A shortage of apartments.

Question 20

If the marginal opportunity cost of producing cars increases as more cars are produced, what does the production possibilities frontier (PPF) look like?

Accepted Answer

A curve bowed outward from the origin.

Microeconomics Study Notes: Scarcity, Opportunity Cost, Production Possibilities, and Market Dynamics

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