Straighterline Microeconomics Exam's Questions
GUARANTEE A+ 2025/2026
Assume Mexico and the United States have labor forces of equal size (for simplicity), and operate in an
environment of constant costs. Each nation can produce beans and rice, but at different efficiency levels.
Assume pre-specialization levels as follows:
US: (pre specialization) 12 rice, 12 beans; (post-specialization) 24 beans, 0 rice
Mexico: (pre-specialization) 8 rice, 4 beans; (post-specialization) 16 rice, 0 beans.
In this case, what is Mexico's opportunity-cost ratio (R=rice, B=beans)? - 2R = 1B
If the cost of an item to Producer A from Producer B is ___________ Producer A's cost and greater than
Producer B's cost, both parties will gain from trade. - less than
True or false. The presence of increasing opportunity costs suggests that the production possibilities
curve will be bowed outward from the origin. - True
the statement "economics is driven by limited resources" is related to which economic concept? -
scarcity
choosing to spend resources on one item rather than on the next-best option is an example of the
concept of: - opportunity cost
True or false. The production possibility curve relies on the assumption that technology is improving
every day. - False
in the production possibilities frontier model, the bowing of the curve out from the origin is caused by: -
the law of increasing opportunity cost
An economic system in which custom and history direct what is produced, and how it is produced, is
known as a: - traditional economy
A ___________ economy relies in a strong centralized authority to determine how goods are produced
and distributed. - command
,True or false. Comparative advantage between producers does not affect trade occurs between trading
parties. - False
If Producer A's cost of production is greater than producer B's cost of production, Producer A will
generally: - gain from trade with Producer B
________________________ will cause the production possibilities curve to shift up and to the right
(away from the origin). - NOT the law of increasing costs
economics is driven by: - money?
the production possibility curve relies on the assumption that: - fixed resources are available
What item is fundamental to the functioning of a traditional economy? - using historical consumption as
a basis for future consumption
lower opportunity cost provides (no advantage, absolute advantage, or comparative advantage) -
comparative advantage
the ramifications of opportunity costs are demonstrated in a production possibilities curve by the face
that - in order to acquire more of one good, some of the alternative good must be given up
what does ceteris paribus mean? - everything else held constant
True or false. Quantity demanded for a good or service is the same regardless of price or time - false
quantity supplied is defined as the amount of a good or service sellers are willing and able to sell... - at a
specific price during a certain time period
4 shift factors for the supply curve include changes in price of productive resources. - capital, labor, land,
and entrepreneurship
, True or false. the tendency of changes in supply to have corresponding changes in demand to maintain
equilibrium is known as the hidden hand - false
in a free market, consumers and firms are informed, directed, and motivated by... - price
what will a price ceiling create if it is set below the market-clearing price? - shortage
a non-market clearing condition occurs when price floors are set: - above the equilibrium price
when comparing a good with a lot of alternatives in the marketplace to an equally-priced good with few
alternatives in the marketplace, the good with more alternatives has an elasticity of demand that is: -
higher
True or false. A perfectly inelastic demand curve will yield a coefficient of elasticity of demand zero,
regardless of price change. - True
If subway tickets have high elasticity of demand, and the goal is to increase overall revenues, it is
possible that: - reducing ticket prices will increase ridership and could thereby increase overall revenues
True or false. An income elasticity of demand > 1.0 means that the item is elastic. - True
A new electric sports car is released, and the income elasticity of demand is found to be equal to 2. In
this case, the good is: - a luxury item
assume that beef has a high income elasticity of demand. If income decreases, then consumers will buy -
less beef
Assume that the quantity of chickens sold falls 15% and the egg prices fall 5%. What is the cross elasticity
of demand between chickens and eggs in this case? - 3.0
GUARANTEE A+ 2025/2026
Assume Mexico and the United States have labor forces of equal size (for simplicity), and operate in an
environment of constant costs. Each nation can produce beans and rice, but at different efficiency levels.
Assume pre-specialization levels as follows:
US: (pre specialization) 12 rice, 12 beans; (post-specialization) 24 beans, 0 rice
Mexico: (pre-specialization) 8 rice, 4 beans; (post-specialization) 16 rice, 0 beans.
In this case, what is Mexico's opportunity-cost ratio (R=rice, B=beans)? - 2R = 1B
If the cost of an item to Producer A from Producer B is ___________ Producer A's cost and greater than
Producer B's cost, both parties will gain from trade. - less than
True or false. The presence of increasing opportunity costs suggests that the production possibilities
curve will be bowed outward from the origin. - True
the statement "economics is driven by limited resources" is related to which economic concept? -
scarcity
choosing to spend resources on one item rather than on the next-best option is an example of the
concept of: - opportunity cost
True or false. The production possibility curve relies on the assumption that technology is improving
every day. - False
in the production possibilities frontier model, the bowing of the curve out from the origin is caused by: -
the law of increasing opportunity cost
An economic system in which custom and history direct what is produced, and how it is produced, is
known as a: - traditional economy
A ___________ economy relies in a strong centralized authority to determine how goods are produced
and distributed. - command
,True or false. Comparative advantage between producers does not affect trade occurs between trading
parties. - False
If Producer A's cost of production is greater than producer B's cost of production, Producer A will
generally: - gain from trade with Producer B
________________________ will cause the production possibilities curve to shift up and to the right
(away from the origin). - NOT the law of increasing costs
economics is driven by: - money?
the production possibility curve relies on the assumption that: - fixed resources are available
What item is fundamental to the functioning of a traditional economy? - using historical consumption as
a basis for future consumption
lower opportunity cost provides (no advantage, absolute advantage, or comparative advantage) -
comparative advantage
the ramifications of opportunity costs are demonstrated in a production possibilities curve by the face
that - in order to acquire more of one good, some of the alternative good must be given up
what does ceteris paribus mean? - everything else held constant
True or false. Quantity demanded for a good or service is the same regardless of price or time - false
quantity supplied is defined as the amount of a good or service sellers are willing and able to sell... - at a
specific price during a certain time period
4 shift factors for the supply curve include changes in price of productive resources. - capital, labor, land,
and entrepreneurship
, True or false. the tendency of changes in supply to have corresponding changes in demand to maintain
equilibrium is known as the hidden hand - false
in a free market, consumers and firms are informed, directed, and motivated by... - price
what will a price ceiling create if it is set below the market-clearing price? - shortage
a non-market clearing condition occurs when price floors are set: - above the equilibrium price
when comparing a good with a lot of alternatives in the marketplace to an equally-priced good with few
alternatives in the marketplace, the good with more alternatives has an elasticity of demand that is: -
higher
True or false. A perfectly inelastic demand curve will yield a coefficient of elasticity of demand zero,
regardless of price change. - True
If subway tickets have high elasticity of demand, and the goal is to increase overall revenues, it is
possible that: - reducing ticket prices will increase ridership and could thereby increase overall revenues
True or false. An income elasticity of demand > 1.0 means that the item is elastic. - True
A new electric sports car is released, and the income elasticity of demand is found to be equal to 2. In
this case, the good is: - a luxury item
assume that beef has a high income elasticity of demand. If income decreases, then consumers will buy -
less beef
Assume that the quantity of chickens sold falls 15% and the egg prices fall 5%. What is the cross elasticity
of demand between chickens and eggs in this case? - 3.0
