#1
What does the term 'opportunity cost' represent in economics?
The value of the best alternative foregone
ExplanationThe value sacrificed by choosing one option over another.
#2
What does the 'law of demand' state?
As the price of a good decreases, the quantity demanded decreases
ExplanationInverse relationship between price and quantity demanded.
#3
In microeconomics, what does the term 'elasticity' measure?
The responsiveness of quantity demanded to a change in price
ExplanationMeasures how quantity demanded changes in response to price fluctuations.
#4
Which of the following is an example of a positive externality?
Education benefiting society as a whole
ExplanationAn activity generating benefits beyond those directly involved.
#5
What is the main objective of government intervention in a market economy?
To correct market failures
ExplanationAddresses inefficiencies that markets may fail to resolve on their own.
#6
Which of the following is an example of a regressive tax?
Sales tax
ExplanationLevies a higher percentage on lower incomes.
#7
What is the primary function of a production possibilities frontier (PPF) in economics?
To demonstrate the maximum output combinations attainable with limited resources
ExplanationGraphical representation of resource allocation limits.
#8
Which of the following is a characteristic of a perfectly competitive market?
Price takers
ExplanationFirms accepting market price without influencing it.
#9
What is the 'Laffer curve' used to illustrate in economics?
The relationship between government revenue and tax rates
ExplanationDepicts the trade-off between tax rates and government revenue.
#10
What is the main function of price ceilings in a market?
To prevent prices from rising above a certain level
ExplanationLimits the maximum price for a good or service.
#11
What is the primary goal of antitrust laws in economics?
To prevent monopolistic practices and promote competition
ExplanationAims to ensure fair competition and prevent market dominance abuse.
#12
What is the concept of 'moral hazard' in economics?
The risk that insured parties may act more recklessly than they would if they didn't have insurance
ExplanationIncreased risk-taking due to protection or insurance.