Q: Suppose a country can produce either 100 units of wheat or 200 units of corn with its available resources. If the country is currently producing 100 units of wheat, what is the opportunity cost of producing an additional 50 units of corn?

$$\text{Opportunity Cost} = \frac{100\ \text{wheat}}{200\ \text{corn}} \times 50 = 25\ \text{wheat}$$

Question 1

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

Accepted Answer

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

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn with its available resources. If the country is currently producing 100 units of wheat, what is the opportunity cost of producing an additional 50 units of corn?

Accepted Answer

$$	ext{Opportunity Cost} = \frac{100\ 	ext{wheat}}{200\ 	ext{corn}} 	imes 50 = 25\ 	ext{wheat}$$

Question 3

Which of the following statements is a positive economic statement?

Accepted Answer

Raising taxes will reduce consumer spending.

Question 4

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

Accepted Answer

Demand for the original good will increase.

Question 5

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 6

If the price elasticity of demand for a product is $$2.5$$, what does this imply?

Accepted Answer

Demand is elastic; quantity demanded is highly responsive to price changes.

Question 7

Which of the following would cause a rightward shift in the supply curve for electric cars?

Accepted Answer

A technological breakthrough that reduces production costs.

Question 8

Suppose the government imposes a price ceiling below the equilibrium price on rental apartments. What is the most likely outcome?

Accepted Answer

A shortage of rental apartments.

Question 9

If a tax is imposed on a good with perfectly inelastic demand, who bears the entire burden of the tax?

Accepted Answer

Buyers bear the entire burden.

Question 10

Which of the following best explains why the production possibilities frontier (PPF) is typically bowed outward?

Accepted Answer

Opportunity costs increase as more of one good is produced.

Question 11

A country can produce either 10 cars or 20 computers with its resources. Another country can produce either 5 cars or 15 computers. Which country has the comparative advantage in producing computers?

Accepted Answer

The second country, because it has a lower opportunity cost for computers.

Question 12

If the cross elasticity of demand between two goods is negative, what does this indicate?

Accepted Answer

The goods are complements.

Question 13

Which of the following is an example of a regressive tax?

Accepted Answer

A tax where the average tax rate decreases as income increases.

Question 14

Suppose the government introduces a minimum wage above the equilibrium wage. What is the most likely effect in the labor market for low-skilled workers?

Accepted Answer

Unemployment among low-skilled workers increases.

Question 15

Which of the following best describes allocative efficiency in a competitive market?

Accepted Answer

Marginal benefit equals marginal cost.

Question 16

If the price of a normal good increases, what is the expected effect on quantity demanded and total revenue if demand is inelastic?

Accepted Answer

Quantity demanded decreases, total revenue increases.

Question 17

Which of the following allocation methods is most likely to be used for distributing scarce organ transplants?

Accepted Answer

Personal characteristics

Question 18

A tax on a good creates deadweight loss unless:

Accepted Answer

Demand or supply is perfectly inelastic.

Question 19

Which of the following is a normative statement about income distribution?

Accepted Answer

Income inequality should be reduced through higher taxes on the rich.

Question 20

If the government wants to minimize the deadweight loss from a tax, it should tax goods with:

Accepted Answer

Low price elasticity of demand or supply.

Foundations of Microeconomics: Principles, Models, and Policy Tools

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