Q: Suppose Canada can produce either 100 units of wheat or 50 units of cars with its resources. If Canada decides to produce 80 units of wheat, what is the opportunity cost in terms of cars?

$$\text{Opportunity Cost} = \frac{80}{100} \times 50 = 40$$ cars$

Question 1

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

Accepted Answer

The value of the next best alternative foregone when a choice is made.

Question 2

Suppose Canada can produce either 100 units of wheat or 50 units of cars with its resources. If Canada decides to produce 80 units of wheat, what is the opportunity cost in terms of cars?

Accepted Answer

$$	ext{Opportunity Cost} = \frac{80}{100} 	imes 50 = 40$$ cars$

Question 3

A market is in equilibrium when:

Accepted Answer

The quantity demanded equals the quantity supplied at the market price.

Question 4

If the government imposes a binding price ceiling below the equilibrium price, what is the likely result?

Accepted Answer

A shortage of the good.

Question 5

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

Accepted Answer

A homeowner planting a garden that beautifies the neighborhood.

Question 6

According to the Coase Theorem, private solutions to externalities are possible if:

Accepted Answer

Property rights are clearly defined and transaction costs are low.

Question 7

If the price elasticity of demand for a product is $$-2$$, what happens to total revenue if the price increases by 10%?

Accepted Answer

Total revenue decreases.

Question 8

A country has a comparative advantage in producing a good if:

Accepted Answer

It can produce the good at a lower opportunity cost than other countries.

Question 9

Which of the following best describes a public good?

Accepted Answer

A good that is non-excludable and non-rival in consumption.

Question 10

Suppose the government imposes a per-unit tax on a good. Which of the following is true about the economic incidence of the tax?

Accepted Answer

The side of the market (buyers or sellers) with the more inelastic curve bears more of the tax burden.

Question 11

In the short run, which of the following costs must always decrease as output increases?

Accepted Answer

Average fixed cost (AFC)

Question 12

A perfectly competitive firm maximizes profit by producing the quantity where:

Accepted Answer

$$MR = MC$$

Question 13

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

Accepted Answer

Products are differentiated.

Question 14

If a monopolist faces the following demand curve: $$P = 100 - 2Q$$, and marginal cost is constant at $$MC = 20$$, what is the profit-maximizing quantity?

Accepted Answer

$$Q = 40$$

Question 15

Which of the following best explains why monopolistic competition results in excess capacity in the long run?

Accepted Answer

Firms produce less than the output that minimizes average total cost.

Question 16

In an oligopoly, firms are interdependent because:

Accepted Answer

Each firm's actions affect the profits of other firms.

Question 17

Which of the following is an example of a government policy that restricts international trade?

Accepted Answer

A tariff imposed on imported steel.

Question 18

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

Accepted Answer

They are substitutes.

Question 19

Which of the following statements about consumer surplus is correct?

Accepted Answer

Consumer surplus is the area below the demand curve and above the price.

Question 20

If a firm in a perfectly competitive market is producing where $$P \u003c AVC$$, what should the firm do in the short run?

Accepted Answer

Shut down production immediately.

Economics 100: Principles of Microeconomics – Course Syllabus and Structure

Study Guide - Practice Questions

Study Guide - Flashcards