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 decision.

Question 2

A government report states: 'Increasing the minimum wage will reduce poverty.' This statement is an example of:

Accepted Answer

Normative economics.

Question 3

Suppose a consumer faces the following budget constraint: $$2x + 3y \leq 12. If $$the price of $$y$$ increases from $$3 to$$ $$4$$, what happens to the budget constraint line?

Accepted Answer

It rotates inward, reducing the maximum amount of $$y$$ that can be purchased.

Question 4

Which of the following is NOT a pillar of rational decision-making for consumers?

Accepted Answer

Production technology

Question 5

If the price elasticity of demand for a product is $$-2$$, what will happen to total revenue if the price increases?

Accepted Answer

Total revenue will decrease.

Question 6

A market is in equilibrium when:

Accepted Answer

Quantity demanded equals quantity supplied.

Question 7

Which of the following best illustrates the difference between microeconomics and macroeconomics?

Accepted Answer

Microeconomics studies individual markets, while macroeconomics studies the economy as a whole.

Question 8

If a study finds that ice cream sales and sunglasses sales both increase in summer, but does not prove that one causes the other, this is an example of:

Accepted Answer

Correlation.

Question 9

Suppose the demand curve for a product is given by $$Q_d = 100 - 2P. If $$the price increases from $$20 to$$ $$25$$, what is the change in quantity demanded?

Accepted Answer

$$Q_d$$ decreases by $$10$$ units.

Question 10

A consumer is maximizing utility when:

Accepted Answer

The marginal utility per dollar spent is equal across all goods.

Question 11

If the cross-price elasticity of demand between two goods is positive, the goods are:

Accepted Answer

Substitutes.

Question 12

Which of the following statements about the scientific method in economics is correct?

Accepted Answer

It uses empiricism to test hypotheses and validate models.

Question 13

If a market experiences a surplus, which of the following is true?

Accepted Answer

Quantity supplied exceeds quantity demanded.

Question 14

Suppose a consumer's budget constraint is $$x + y \leq 10. If $$the consumer's income increases from $$10 to$$ $$15$$, what happens to the budget constraint?

Accepted Answer

It shifts outward, allowing more combinations of $$x$$ and $$y.$$

Question 15

If the income elasticity of demand for a good is negative, the good is:

Accepted Answer

An inferior good.

Question 16

Which of the following best describes the law of supply?

Accepted Answer

As price increases, quantity supplied increases.

Question 17

A market is experiencing a shortage. What is likely to happen to the price?

Accepted Answer

Price will increase to restore equilibrium.

Question 18

If a consumer chooses a bundle where the marginal benefit per dollar spent is higher for one good than another, the consumer is:

Accepted Answer

In consumer disequilibrium.

Question 19

Suppose the supply curve for a product is $$Q_s = 3P - 15. $$What is the equilibrium price if the demand curve is $$Q_d = 60 - 2P$$?

Accepted Answer

$$P = 15$$

Question 20

A model in economics is best described as:

Accepted Answer

A simplified representation of reality used to explain economic phenomena.

Principles of Microeconomics: Midterm 1 Study Guide

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