Question 1

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

Accepted Answer

A company uses its factory to produce cars instead of trucks. The opportunity cost is the trucks that could have been produced.

Question 2

Which of the following statements is a normative economic statement?

Accepted Answer

The government should increase the minimum wage to help low-income workers.

Question 3

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

Accepted Answer

$$2$$ units of corn

Question 4

Which of the following would cause the production possibilities frontier (PPF) to shift outward?

Accepted Answer

A technological advancement in production

Question 5

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

Accepted Answer

Resources are not being fully utilized

Question 6

Country A can produce either 100 units of cloth or 200 units of wine. Country B can produce either 80 units of cloth or 160 units of wine. Which country has the comparative advantage in producing wine?

Accepted Answer

Both countries have the same opportunity cost for wine

Question 7

Which of the following best describes the law of demand?

Accepted Answer

As the price of a good increases, the quantity demanded decreases

Question 8

A decrease in the price of tea causes consumers to buy less coffee. This is an example of which economic concept?

Accepted Answer

Substitution effect

Question 9

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

Accepted Answer

A decrease in the price of pizza

Question 10

Suppose the market for laptops is in equilibrium. If there is a sudden increase in the price of computer chips (an input), what will happen in the short run?

Accepted Answer

The supply curve for laptops will shift to the left, causing a shortage

Question 11

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

Accepted Answer

Raising taxes on gasoline will reduce gasoline consumption.

Question 12

If the market price is above the equilibrium price, what will result?

Accepted Answer

A surplus, causing the price to fall

Question 13

Which of the following best describes a mixed economy?

Accepted Answer

An economy with both private and government involvement in resource allocation

Question 14

Adam Smith’s ‘invisible hand’ principle suggests that:

Accepted Answer

Individuals pursuing their own self-interest can lead to positive outcomes for society

Question 15

Suppose the demand for a normal good increases as consumer income rises. Which of the following equations best represents the demand function for a normal good?

Accepted Answer

$$Q_d = a + bI$$, where $$b \u003e 0$$

Question 16

Which of the following is NOT a fundamental question every society must answer?

Accepted Answer

How to maximize profits for firms?

Question 17

If the supply of a product increases while demand remains unchanged, what will happen to the equilibrium price and quantity?

Accepted Answer

Price will fall and quantity will rise

Question 18

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

Accepted Answer

Microeconomics focuses on individual markets and decision-makers, while macroeconomics examines the economy as a whole.

Question 19

Suppose the market for oranges is described by the following equations:

$$Q_d = 100 - 2P$$

$$Q_s = 20 + 4P$$

What is the equilibrium price?

Accepted Answer

$$P = 13.33$$

Question 20

Which of the following is an example of a factor that would shift the supply curve for cars to the right?

Accepted Answer

A technological improvement in car manufacturing

Principles of Microeconomics: Exam 1 Study Guide

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