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 the demand for coffee increases due to a rise in consumer income. Which of the following best explains this change?

Accepted Answer

Coffee is a normal good.

Question 3

If the price of a product increases and the quantity demanded decreases, this relationship is best explained by:

Accepted Answer

The law of demand.

Question 4

A market is in equilibrium when:

Accepted Answer

Quantity supplied equals quantity demanded.

Question 5

Suppose the price elasticity of demand for gasoline is $$-0.3. If $$the price of gasoline increases by $$10\%$$, what is the expected percentage change in quantity demanded?

Accepted Answer

$$-3\%$$

Question 6

Which of the following is most likely to have an inelastic demand?

Accepted Answer

Salt

Question 7

If a government imposes a price ceiling below the equilibrium price, what is the most likely outcome?

Accepted Answer

A shortage will occur.

Question 8

A firm faces the following total cost function: $$TC = 100 + 5Q + 2Q^2$. What is the marginal cost (MC) when Q = 10$?

Accepted Answer

$$MC = 5 + 4Q = 45$$

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 a competitive market is in equilibrium. If the government imposes a tax on sellers, what will happen to the equilibrium price and quantity?

Accepted Answer

Price will increase and quantity will decrease.

Question 11

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

Accepted Answer

They are substitutes.

Question 12

A firm in a perfectly competitive market faces a market price of $$P = 20. $$Its marginal cost is given by $$MC = 4 + Q. $$What is the profit-maximizing output level?

Accepted Answer

$$Q = 16$$

Question 13

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

Accepted Answer

A person getting vaccinated, reducing disease spread.

Question 14

Suppose the supply curve for a product shifts to the left. Which of the following could explain this change?

Accepted Answer

An increase in the cost of raw materials.

Question 15

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

Accepted Answer

$$Q = 20$$

Question 16

Which of the following statements about consumer surplus is correct?

Accepted Answer

Consumer surplus is the difference between what consumers are willing to pay and what they actually pay.

Question 17

A firm’s average total cost (ATC) is minimized when:

Accepted Answer

Marginal cost equals average total cost.

Question 18

Suppose a government wants to correct a negative externality. Which policy is most likely to achieve this goal?

Accepted Answer

Imposing a tax equal to the external cost.

Question 19

If the marginal product of labor is decreasing as more workers are hired, this is an example of:

Accepted Answer

Diminishing marginal returns.

Question 20

A city government is considering building a new public park. Which characteristic of public goods makes it difficult for the private market to provide the park efficiently?

Accepted Answer

Non-excludability.

Economics 1021: Principles of Microeconomics – Syllabus and Study Guide

Study Guide - Practice Questions

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