Question 1

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

Accepted Answer

"Raising the minimum wage should be a government priority."

Question 2

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

Accepted Answer

$$2$$ units of corn

Question 3

A production possibilities frontier (PPF) is bowed out from the origin. What does this shape represent?

Accepted Answer

The law of increasing opportunity cost

Question 4

If the price of Pepsi increases, what is the expected effect on the demand for Coke, assuming they are substitutes?

Accepted Answer

The demand for Coke will increase

Question 5

Given the demand equation $$Q_d = 120 - 4P$$ and the supply equation $$Q_s = 20 + 2P$$, what is the equilibrium price?

Accepted Answer

$$P = 16$$

Question 6

A binding price ceiling is imposed below the equilibrium price in the market for apartments. Which of the following is a likely result?

Accepted Answer

A persistent shortage of apartments

Question 7

If a per-unit tax is imposed on a good, which of the following statements is correct regarding the burden of the tax?

Accepted Answer

The side of the market that is more inelastic bears a greater share of the tax burden

Question 8

Suppose the price of a good rises from $$10 to$$ $$14$$, and the quantity demanded falls from $$100 to$$ $$60. $$Using the midpoint formula, what is the price elasticity of demand (in absolute value)?

Accepted Answer

$$1.25$$

Question 9

Which of the following would cause a movement along the supply curve for smartphones, rather than a shift of the supply curve?

Accepted Answer

A change in the price of smartphones

Question 10

A country has the following production per worker per day: 10 cars or 5 computers. What is the opportunity cost of producing one computer?

Accepted Answer

$$2$$ cars

Question 11

If the cross-price elasticity of demand between two goods is $$-0.8$$, what does this indicate about the relationship between the goods?

Accepted Answer

They are complements

Question 12

A straight-line demand curve has a constant slope. Which of the following is true about its price elasticity of demand?

Accepted Answer

Elasticity varies along the curve, being elastic at high prices and inelastic at low prices

Question 13

If a binding price floor is set above the equilibrium price in the wheat market, what will be the result?

Accepted Answer

A surplus of wheat

Question 14

Which of the following best describes the fallacy of composition?

Accepted Answer

Assuming what is true for one part is true for the whole

Question 15

Suppose the government imposes a tax on a good with perfectly inelastic demand. What is the deadweight loss from the tax?

Accepted Answer

$$0$$

Question 16

If the income elasticity of demand for a good is $$-0.3$$, what type of good is it?

Accepted Answer

Inferior good

Question 17

A technological improvement increases the productivity of producing only capital goods. How will the PPF shift?

Accepted Answer

It will rotate outward along the capital goods axis only

Question 18

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

Accepted Answer

The cost of production

Question 19

If a firm raises the price of its product and total revenue increases, what can be said about the price elasticity of demand over that range?

Accepted Answer

Demand is inelastic

Question 20

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

Accepted Answer

Consumers have more time to find alternatives and adjust their behavior

Microeconomics Unit 1–5 Study Guide: Core Concepts, Models, and Applications

Study Guide - Practice Questions

Study Guide - Flashcards