Question 1

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

Accepted Answer

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

Question 2

A city planner has a $$12 million budget to build roads and bike paths. If 1 km of road costs 1 $$million and 1 km of bike path costs $0.5 million, what is the opportunity cost of building 1 additional km of road?

Accepted Answer

2 km of bike paths not built.

Question 3

The Production Possibilities Boundary (PPB) is typically concave (bowed out) from the origin. What does this shape indicate?

Accepted Answer

Increasing opportunity cost.

Question 4

Suppose a country is producing inside its PPB. Which of the following is the most likely explanation?

Accepted Answer

Some resources are idle or unemployed.

Question 5

Which of the following is NOT a key economic problem faced by all societies?

Accepted Answer

How to eliminate scarcity.

Question 6

If the price of a product increases, what is the most likely effect on the quantity demanded, according to the law of demand?

Accepted Answer

Quantity demanded decreases.

Question 7

Which of the following would cause a rightward shift in the demand curve for a normal good?

Accepted Answer

An increase in consumer income.

Question 8

Which of the following best illustrates a movement along the supply curve?

Accepted Answer

The price of the product increases.

Question 9

Suppose the price of coffee increases. What is the likely effect on the demand for tea, assuming they are substitutes?

Accepted Answer

The demand for tea increases.

Question 10

If a government sets a price ceiling below the equilibrium price for rental housing, what is the most likely short-run outcome?

Accepted Answer

A shortage of rental housing.

Question 11

Which of the following is an example of a flow variable?

Accepted Answer

The number of eggs sold per week.

Question 12

A leftward shift in the supply curve for wheat could be caused by:

Accepted Answer

An increase in the cost of fertilizer.

Question 13

If the government imposes a minimum wage above the equilibrium wage, what is the likely result in the labor market?

Accepted Answer

Unemployment (excess supply of labor).

Question 14

Which of the following statements about microeconomics and macroeconomics is correct?

Accepted Answer

Microeconomics focuses on individual markets and choices, while macroeconomics studies economic aggregates.

Question 15

Suppose a country can produce either 100 units of wheat or 50 units of steel using all its resources. What is the opportunity cost of producing 1 unit of steel?

Accepted Answer

2 units of wheat.

Question 16

Which of the following would NOT cause a shift in the demand curve for apples?

Accepted Answer

A change in the price of apples.

Question 17

If a technological improvement reduces the cost of producing smartphones, what is the likely effect on the supply curve for smartphones?

Accepted Answer

The supply curve shifts to the right.

Question 18

Which of the following best explains why the PPB is bowed out (concave) from the origin?

Accepted Answer

Resources are not equally good at producing all goods.

Question 19

A government policy that reallocates resources to correct a market failure is most likely intended to:

Accepted Answer

Improve the allocation of resources.

Question 20

If a country is currently producing at a point inside its PPB, which of the following policies would most likely move it toward the boundary?

Accepted Answer

Implementing policies to reduce unemployment.

Microeconomics Midterm Study Notes: Scarcity, Choice, Demand, and Supply

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