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 100 units of wheat or 200 units of corn with its available resources. What is the opportunity cost of producing one unit of wheat?

Accepted Answer

$$2$$ units of corn

Question 3

If the demand for a product increases while the supply remains constant, what will most likely happen to the equilibrium price and quantity?

Accepted Answer

Equilibrium price will increase and equilibrium quantity will increase.

Question 4

The price elasticity of demand for a product is $$-1.5. If $$the price increases by $$10\%$$, what is the expected percentage change in quantity demanded?

Accepted Answer

$$-15\%$$

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

A government imposes a price ceiling below the equilibrium price in the market for rental apartments. What is the most likely outcome?

Accepted Answer

A shortage of rental apartments.

Question 7

Suppose the supply curve for a good is given by $$Q_s = 2P - 4$$ and the demand curve is $$Q_d = 20 - 2P. $$What is the equilibrium price?

Accepted Answer

$$P = 6$$

Question 8

Which of the following statements about public goods is correct?

Accepted Answer

Public goods are non-excludable and non-rival in consumption.

Question 9

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

Accepted Answer

$$MC = 45$$

Question 10

Which of the following best describes the law of diminishing marginal returns?

Accepted Answer

As more units of a variable input are added to fixed inputs, the additional output from each new unit will eventually decrease.

Question 11

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

Accepted Answer

Shut down production immediately.

Question 12

Suppose a monopolist faces the demand curve $$P = 100 - 2Q$$ and has constant marginal cost of $$MC = 20. $$What is the profit-maximizing quantity?

Accepted Answer

$$Q = 20$$

Question 13

Which of the following is most likely to cause a deadweight loss in a market?

Accepted Answer

A binding price floor.

Question 14

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

Accepted Answer

The goods are substitutes.

Question 15

A firm in a perfectly competitive market faces a market price of $$P = 50. $$Its total cost function is $$TC = 100 + 30Q. $$What is the firm's profit if it produces $$Q = 10$$ units?

Accepted Answer

$$Profit = 200$$

Question 16

Which of the following is an example of a government intervention that can correct a negative externality?

Accepted Answer

Imposing a tax equal to the external cost.

Question 17

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

Accepted Answer

An inferior good.

Question 18

Suppose the government introduces a subsidy for electric cars. What is the most likely effect on the market for electric cars?

Accepted Answer

The supply curve shifts to the right, increasing equilibrium quantity.

Question 19

Which of the following best explains why cartels are difficult to maintain in the long run?

Accepted Answer

Cartel members have an incentive to cheat by producing more than their quota.

Question 20

A firm faces the following production function: $$Q = 10L$$^{0.5}$$K^{0.5}. If$$ $$L = 16$$ and $$K = 25$$, what is the output $$Q$?

Accepted Answer

$$Q = 100$$

Economics 1021: Principles of Microeconomics – Syllabus and Course Structure

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