Q: Which formula correctly calculates the opportunity cost of producing one more unit of good X in terms of good Y?

$$\frac{\text{Change in Y}}{\text{Change in X}}$$

Question 1

Suppose a government imposes a price ceiling below the equilibrium price for a life-saving medication. Which of the following is the most likely outcome?

Accepted Answer

Producer surplus will decrease and there will be a shortage of the medication.

Question 2

Which formula correctly calculates the opportunity cost of producing one more unit of good X in terms of good Y?

Accepted Answer

$$\frac{	ext{Change in Y}}{	ext{Change in X}}$$

Question 3

A country can produce either 100 units of wheat or 200 units of corn. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$$2$$ units of corn

Question 4

If the price elasticity of demand for a product is $$-0.5$$, what does this imply about consumer responsiveness?

Accepted Answer

Demand is inelastic; consumers are not very responsive to price changes.

Question 5

Which of the following best describes deadweight loss resulting from a tax imposed on a market?

Accepted Answer

It is the reduction in total economic surplus due to the tax.

Question 6

A straight-line Production Possibility Curve (PPC) implies which of the following?

Accepted Answer

Constant opportunity costs between the two goods.

Question 7

Suppose the cross-price elasticity of demand between tea and coffee is $$+0.8. $$What does this indicate?

Accepted Answer

Tea and coffee are substitutes.

Question 8

If a tax is imposed on sellers in a market, which factor determines who bears the greater burden of the tax?

Accepted Answer

The relative elasticities of supply and demand.

Question 9

A hospital faces a downward-sloping demand curve for emergency services. If the hospital raises its prices, what will happen to its total revenue if demand is elastic?

Accepted Answer

Total revenue will decrease.

Question 10

Which of the following is true about consumer surplus?

Accepted Answer

It is the difference between the price consumers are willing to pay and the price they actually pay.

Question 11

If the income elasticity of demand for a luxury car is $$+2.5$$, what does this indicate?

Accepted Answer

Luxury cars are normal goods and demand increases more than proportionally with income.

Question 12

Which of the following best explains why the PPC is typically concave (bowed out) from the origin?

Accepted Answer

Opportunity costs increase as more of one good is produced.

Question 13

A bakery finds that the price elasticity of demand for its bread is $$-1.2. If $$the bakery increases the price by 10%, what is the expected percentage change in quantity demanded?

Accepted Answer

$$-12\%$$

Question 14

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

Accepted Answer

The government’s tax rate on the good

Question 15

If a country has a comparative advantage in producing steel, what should it do according to economic theory?

Accepted Answer

Specialize in steel production and trade for other goods.

Question 16

Which formula is used to calculate the price elasticity of demand?

Accepted Answer

$$\frac{\%\ 	ext{change in quantity demanded}}{\%\ 	ext{change in price}}$$

Question 17

A new technology increases the efficiency of solar panel production. What is the likely effect on the supply curve?

Accepted Answer

The supply curve shifts to the right.

Question 18

Which of the following best describes producer surplus?

Accepted Answer

The difference between the price producers receive and the minimum price they are willing to accept.

Question 19

If a good is a complement, what is the expected sign of its cross-price elasticity of demand?

Accepted Answer

Negative

Question 20

A country can produce 50 units of oil or 100 units of coal. Another country can produce 40 units of oil or 80 units of coal. Which country has the absolute advantage in oil production?

Accepted Answer

The first country

Microeconomics Concepts: Opportunity Cost, Elasticity, and Economic Efficiency

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