Question 1

Which of the following best describes the concept of 'opportunity cost' in microeconomics?

Accepted Answer

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

Question 2

Suppose a student spends $100 on textbooks and 10 hours studying for an exam. If the student could have earned $15 per hour working instead, what is the total opportunity cost of preparing for the exam?

Accepted Answer

$250

Question 3

If the market price of a product is above the equilibrium price, which of the following is most likely to occur?

Accepted Answer

A surplus will develop as quantity supplied exceeds quantity demanded.

Question 4

Given the demand function $Q_d = 100 - 2P$ and the supply function $Q_s = 20 + 3P$, what is the equilibrium price?

Accepted Answer

$P = 16$

Question 5

Which of the following statements about elasticity is correct?

Accepted Answer

If demand is elastic, a price decrease will increase total revenue.

Question 6

Suppose the price of coffee increases by 10% and the quantity demanded decreases by 20%. What is the price elasticity of demand for coffee?

Accepted Answer

$-2$

Question 7

A government imposes a price ceiling below the equilibrium price for rental apartments. What is the most likely outcome?

Accepted Answer

A shortage of apartments will occur.

Question 8

If the cross-price elasticity of demand between tea and coffee is positive, what does this indicate?

Accepted Answer

Tea and coffee are substitute goods.

Question 9

Which of the following best explains the concept of 'marginal utility'?

Accepted Answer

The additional satisfaction received from consuming one more unit of a good.

Question 10

A consumer faces the budget constraint $P_x X + P_y Y = I$. If the price of good X doubles and income remains constant, what happens to the consumer's opportunity set?

Accepted Answer

It contracts, reducing the maximum amount of good X that can be purchased.

Question 11

Suppose a firm in a perfectly competitive market faces a market price of $P = 10$. If the firm's marginal cost is $MC = 8$ at its current output, what should the firm do to maximize profit?

Accepted Answer

Increase output.

Question 12

Which of the following is NOT an assumption of the perfectly competitive market model?

Accepted Answer

Products are differentiated.

Question 13

If a government introduces a tax on sellers, which of the following will most likely occur in the market?

Accepted Answer

The equilibrium price increases and equilibrium quantity decreases.

Question 14

Suppose the supply of oranges is perfectly inelastic. If demand increases, what happens to the equilibrium price and quantity?

Accepted Answer

Equilibrium price increases, quantity remains unchanged.

Question 15

Which of the following best describes the 'Invisible Hand' as discussed in microeconomics?

Accepted Answer

The self-regulating nature of the marketplace through individuals pursuing their own interests.

Question 16

A consumer allocates their budget between two goods, X and Y, such that $\frac{MU_X}{P_X} = \frac{MU_Y}{P_Y}$. What does this condition represent?

Accepted Answer

The consumer is maximizing total utility.

Question 17

If the government wants to increase the consumption of a good with positive externalities, which policy is most effective?

Accepted Answer

Provide a subsidy for the good.

Question 18

Suppose the production possibilities frontier (PPF) for an economy is bowed outward. What does this indicate about opportunity costs?

Accepted Answer

Opportunity costs increase as more of one good is produced.

Question 19

A firm faces the following cost structure: Fixed costs = $100$, Variable costs = $5Q$, where $Q$ is output. If the market price is $P = 8$, what is the profit-maximizing output?

Accepted Answer

$Q$ is indeterminate without more information, but the firm should produce where $MC = P$, so $Q$ can be any positive value.

Microeconomics Syllabus and Study Guide: ECO101H5F (Fall 2025)

Study Guide - Practice Questions

Study Guide - Flashcards