Question 1

Refer to the first production possibilities frontier (tractors and tubas). Which points represent efficient production combinations for the economy?

Accepted Answer

Points B and E

Question 2

Refer to the first production possibilities frontier (tractors and tubas). What does point D represent?

Accepted Answer

Inefficient use of resources

Question 3

Refer to the second production possibilities frontier (batteries and bagels). The shift from curve A to curve B is most likely caused by:

Accepted Answer

A general technological breakthrough

Question 4

Refer to the third production possibilities frontier (baseballs and bananas). What is the opportunity cost to society of moving from point A (200 baseballs, 0 bananas) to point C (0 baseballs, 400 bananas)?

Accepted Answer

$200$ baseballs

Question 5

Refer to the third production possibilities frontier (baseballs and bananas). If the economy moves from point C to point D, what is the most likely cause?

Accepted Answer

Unemployment or inefficient use of resources

Question 6

Refer to the supply and demand graph (image 4). What is the equilibrium price and quantity in this market?

Accepted Answer

$12.40$ and $60$ units

Question 7

Refer to the supply and demand graph (image 4). If the price is set at $14, what will occur in the market?

Accepted Answer

A surplus of $20$ units and price will tend to fall

Question 8

Refer to the demand curve (image 5). When price falls from $40$ to $30$, total revenue increases from $8000$ to $9000$. What does this indicate about the elasticity of demand?

Accepted Answer

Demand is elastic

Question 9

Refer to the demand curve (image 6). Between points A ($P=7$, $Q=12$) and B ($P=5$, $Q=16$), what is the slope and elasticity of the demand curve?

Accepted Answer

Slope is $-1/4$ and elasticity is $-2/3$

Question 10

Suppose the government imposes a price ceiling below the equilibrium price in the market shown in image 4. What will be the likely result?

Accepted Answer

A shortage, as quantity demanded exceeds quantity supplied

Question 11

If the demand for a good is perfectly inelastic, what will the demand curve look like on a price-quantity graph?

Accepted Answer

A vertical line

Question 12

If the price of a substitute good increases, what will happen to the demand curve for the original good?

Accepted Answer

The demand curve will shift to the right

Question 13

If the government increases taxes on producers, what is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the left

Question 14

If a normal good experiences a decrease in consumer income, what will happen to the equilibrium price and quantity?

Accepted Answer

Both equilibrium price and quantity will decrease

Question 15

If the cross-price elasticity of demand between two goods is positive, what does this imply?

Accepted Answer

The goods are substitutes

Production Possibilities Frontier (PPF) and Market Graphs: Microeconomics Exam Review Guidance

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