Question 1

Suppose a country can produce either 1000 windows and 250 doors, or 500 windows and 500 doors. What is the opportunity cost of producing one additional door when moving from the first to the second production point?

Accepted Answer

$$4$$ windows$

Question 2

A production possibilities curve (PPC) for a country shows food on the horizontal axis and clothing on the vertical axis. If a new technology doubles the ability to produce food but does not affect clothing, how does the PPC change?

Accepted Answer

The PPC shifts outward only along the horizontal axis

Question 3

Which of the following is an example of a change in demand rather than a change in quantity demanded for fish?

Accepted Answer

Fears of mercury poisoning lead locals to shun fish caught in nearby lakes

Question 4

Early in 2011, the world price of copper reached a record high due to China's infrastructure boom and an explosion at a major Chilean port. Which of the following best describes the effects on the copper market?

Accepted Answer

Demand shifts right and supply shifts left, causing price to rise

Question 5

Suppose the demand for gasoline is given by $$p = 80 - 5Q_D$$ and the supply by $$p = 24 + 2Q_S. $$What is the equilibrium price and quantity?

Accepted Answer

$$P = 40$$ cents, $$Q = 8$$ million litres

Question 6

If the price of movie tickets falls from $$14.00 to 11.00 $$and ticket sales increase from 1200 to 1350, what is the price elasticity of demand using the midpoint formula?

Accepted Answer

$$E_d = 0.49 ($$inelastic)

Question 7

A stamp dealer burns one of two unique stamps, believing the demand is highly inelastic. What outcome does the dealer expect?

Accepted Answer

The price of the remaining stamp will rise more than proportionally, increasing total value

Question 8

Suppose a major drought in Russia reduces the world supply of wheat. What is the likely effect on the world equilibrium price and quantity, and why do Canadian wheat farmers benefit?

Accepted Answer

World price rises, quantity falls; Canadian farmers benefit from higher prices

Question 9

When the price of cellphones fell and producers' revenues soared, what can you conclude about the price elasticity of demand for cellphones?

Accepted Answer

Demand is price elastic

Question 10

Suppose the government imposes a tax of 14 cents per litre on gasoline. If the pre-tax equilibrium price is 40 cents and the new consumer price is 50 cents, what share of the tax is paid by consumers?

Accepted Answer

$$10$$ cents per litre

Question 11

If the price of beef rises due to a widespread bovine disease, what is the likely effect on the demand for chicken?

Accepted Answer

Demand for chicken shifts to the right

Question 12

Which of the following goods is likely to have the most elastic demand?

Accepted Answer

Leafy vegetables sold at your local supermarket on Wednesdays

Question 13

Suppose the government sets a price ceiling on burritos at $$1.50 when the equilibrium price is 2.50. $$What is the effect on the quantity exchanged and economic surplus?

Accepted Answer

Quantity falls to 150, economic surplus decreases

Question 14

If the government guarantees milk producers a price of $2.00 per litre and promises to buy any surplus, what is the quantity of milk the government must buy if quantity supplied is 5 million litres and quantity demanded is 1.67 million litres?

Accepted Answer

$$3.33$$ million litres

Question 15

If the government issues milk quotas for 1.67 million litres per month, what price do consumers pay for milk according to the demand curve $$p = 225 - 15Q$$?

Accepted Answer

$$200$$ cents per litre

Question 16

After a major failure of Brazil’s coffee crop, coffee prices rise from $$3.00 to$$ $$4.80$$ per kilogram, and tea sales in Canada increase from $$7500 to$$ $$8000 kg $$per month. What is the cross-price elasticity of demand for tea with respect to coffee?

Accepted Answer

$$0.14 ($$substitutes)

Question 17

If a normal good has an income elasticity of $$4.8$$, what does this imply about the good?

Accepted Answer

It is a luxury good

Question 18

Suppose the government uses a quota system for milk production, issuing quotas for 1.67 million litres per month. Compared to a price floor system where 5 million litres are produced and sold at $$2.00$$ per litre, how much less revenue do dairy farmers receive under the quota system?

Accepted Answer

$$6,660,000$$

Question 19

If the price elasticity of demand for bus rides is less than one, what happens to total revenue when bus fares decrease?

Accepted Answer

Total revenue decreases

Question 20

Which of the following best explains why the demand for wheat is considered price inelastic?

Accepted Answer

A fall in price leads to a fall in total revenue for wheat farmers

Microeconomics Study Guidance: Opportunity Cost, Demand & Supply, Elasticity, and Market Interventions

Study Guide - Practice Questions

Study Guide - Flashcards