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 choice.

Question 2

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

Accepted Answer

$$2$$ units of corn

Question 3

Which of the following statements is a positive economic statement?

Accepted Answer

"Raising taxes will reduce the budget deficit."

Question 4

If the production possibilities frontier (PPF) is bowed outward, what does this indicate about opportunity costs?

Accepted Answer

Opportunity costs are increasing.

Question 5

A country can produce either 100 cars or 200 computers. Another country can produce either 50 cars or 150 computers. Which country has the comparative advantage in producing computers?

Accepted Answer

The second country

Question 6

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

Accepted Answer

A decrease in the price of coffee

Question 7

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

Accepted Answer

Demand for the original good will increase.

Question 8

Suppose the market for oranges is in equilibrium. A sudden frost destroys half the orange crop. What is the most likely immediate effect on the market?

Accepted Answer

The supply curve shifts to the left, causing the equilibrium price to rise.

Question 9

If the price elasticity of demand for a product is $$-2$$, what will happen to total revenue if the price increases?

Accepted Answer

Total revenue will decrease.

Question 10

The cross-price elasticity of demand between two goods is $$+1.5. $$What does this indicate about the relationship between the two goods?

Accepted Answer

They are substitutes.

Question 11

Which of the following is NOT considered a factor of production?

Accepted Answer

Money

Question 12

A market is in equilibrium at price $$P^*. If $$both demand and supply increase simultaneously, what can be said about the new equilibrium price and quantity?

Accepted Answer

Equilibrium quantity will increase, but the effect on price is indeterminate.

Question 13

If a good has an income elasticity of demand of $$-0.8$$, what type of good is it?

Accepted Answer

An inferior good

Question 14

Which of the following best illustrates the concept of marginalism?

Accepted Answer

Deciding whether to study one more hour for an exam

Question 15

Suppose the price of a good increases from $$\10$ to $$\$$12$$, and the quantity demanded decreases from $$100$$ units to $$80$$ units. What is the price elasticity of demand (using the midpoint formula)?

Accepted Answer

$$-2$$

Question 16

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

Accepted Answer

"The government should reduce unemployment."

Question 17

If a country specializes in producing the good for which it has a comparative advantage and trades with another country, what is the likely outcome?

Accepted Answer

Both countries can consume outside their own production possibilities frontiers.

Question 18

Which of the following would NOT shift the supply curve for smartphones?

Accepted Answer

A decrease in the price of smartphones

Question 19

If the government enforces strong property rights and contract enforcement, what is the most likely effect on economic activity?

Accepted Answer

It will encourage investment and economic growth.

Question 20

Suppose a good has a price elasticity of demand of $$-0.3. If $$the price increases by $$10\%$$, what happens to the quantity demanded?

Accepted Answer

It decreases by $$3\%.$$

Core Concepts in Microeconomics: Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards