Question 1

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

Accepted Answer

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

Question 2

Suppose a student spends 3 hours and $$20 to attend a concert. If she values her time at 15 $$per hour, what is the total opportunity cost of attending the concert?

Accepted Answer

$65

Question 3

Which of the following statements about the law of demand is correct?

Accepted Answer

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

Question 4

If the demand for coffee increases due to a rise in consumer income, coffee is considered:

Accepted Answer

A normal good

Question 5

Which equation represents the market equilibrium condition?

Accepted Answer

$$Q_d = Q_s$$

Question 6

A price ceiling set below the equilibrium price will most likely result in:

Accepted Answer

A shortage

Question 7

If the cross-price elasticity of demand between two goods is positive, the goods are:

Accepted Answer

Substitutes

Question 8

Suppose the supply function for a product is $$Q_s = 2P - 4$$ and the demand function is $$Q_d = 10 - P. $$What is the equilibrium price?

Accepted Answer

$$P = 4$$

Question 9

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Barriers to entry

Question 10

If a firm in a perfectly competitive market faces a market price of $$P = 10$$ and its marginal cost is $$MC = 8$$, what should the firm do to maximize profit?

Accepted Answer

Increase output

Question 11

Which of the following best describes consumer surplus?

Accepted Answer

The difference between what consumers are willing to pay and what they actually pay.

Question 12

A binding minimum wage is an example of:

Accepted Answer

A price floor

Question 13

If the government imposes a tax on sellers, what happens to the supply curve?

Accepted Answer

It shifts to the left

Question 14

Which of the following is an example of a public good?

Accepted Answer

National defense

Question 15

Suppose the price elasticity of demand for a product is $$-0.5. If $$the price increases by 10%, what happens to the quantity demanded?

Accepted Answer

It decreases by 5%

Question 16

Which of the following is most likely to cause a rightward shift in the demand curve for electric cars?

Accepted Answer

An increase in consumer income

Question 17

If a firm’s total revenue is $$TR = 100Q$$ and its total cost is $$TC = 20Q + 200$$, what is the profit-maximizing output if the market price is $$P = 100$$?

Accepted Answer

$$Q$$ can be any positive value

Question 18

Which of the following best explains why monopolies can earn long-run economic profits?

Accepted Answer

They face no competition due to barriers to entry.

Question 19

Which of the following is an example of a positive externality?

Accepted Answer

Vaccination against infectious diseases

Question 20

If a firm’s marginal cost is given by $$MC = 4Q$$ and the market price is $$P = 20$$, what is the profit-maximizing output for a perfectly competitive firm?

Accepted Answer

$$Q = 4$$

Principles of Microeconomics - Syllabus and Course Structure

Study Guide - Practice Questions

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