#1
Which of the following is a characteristic of a perfectly competitive market?
All of the above
ExplanationMany buyers and sellers, homogeneous products, free entry and exit
#2
What is the concept of opportunity cost?
The value of the best alternative forgone
ExplanationThe cost of what you give up to choose something else
#3
What market structure is characterized by a single seller with significant market power?
Monopoly
ExplanationControls price, high barriers to entry
#4
What is a characteristic of monopolistic competition?
Product differentiation
ExplanationProducts are differentiated, many firms
#5
What is the relationship between price and quantity demanded according to the law of demand?
Negative
ExplanationInverse relationship, as price goes up, demand goes down
#6
What is the formula for calculating total revenue?
Price multiplied by quantity demanded
ExplanationAmount earned from sales of a given quantity
#7
Which of the following is not a determinant of demand?
Cost of production
ExplanationFactors include income, tastes, expectations, and number of buyers
#8
What is the formula for calculating price elasticity of demand?
Change in price divided by percentage change in quantity demanded
ExplanationMeasure of responsiveness of quantity demanded to a change in price
#9
What does the production possibility frontier (PPF) represent?
The maximum output combinations of two goods given fixed resources
ExplanationIllustrates trade-offs in production due to scarcity
#10
What is the law of diminishing marginal utility?
As consumption increases, total utility decreases
ExplanationEach additional unit consumed provides less additional utility
#11
What does the income elasticity of demand measure?
The change in quantity demanded relative to a change in income
ExplanationWhether demand increases or decreases with income changes
#12
What does the term 'elasticity' refer to in economics?
The responsiveness of quantity demanded to changes in price
ExplanationHow much quantity demanded changes with a change in price
#13
In the long run, a firm in a perfectly competitive market will earn...
Normal profits
ExplanationSufficient to keep the firm in the industry, but no more
#14
What is a characteristic of a perfectly elastic demand curve?
It is horizontal
ExplanationQuantity demanded changes infinitely with any change in price
#15
What is a characteristic of a perfectly competitive firm in the short run?
Earning supernormal profits
ExplanationCan earn above normal profits due to market conditions