Economic Decision-Making and Consumer Transactions Quiz

Opportunity cost is the value of the next best alternative foregone when a decision is made.

Markets serve to establish prices and allocate resources efficiently through supply and demand.

Gross Domestic Product (GDP) quantifies the total output of goods and services within a nation's borders over a defined period.

A regressive tax like a sales tax imposes a higher burden on lower-income individuals relative to their income.

Firms aim to maximize profits by optimizing production, pricing, and resource allocation.

Perfectly competitive markets feature numerous buyers and sellers dealing with identical products.

The Federal Reserve regulates the money supply and interest rates to stabilize the economy.

A monopoly exists when there is a single seller dominating the market with no close substitutes.

Elasticity measures how sensitive quantity demanded is to changes in price, reflecting consumer responsiveness.

Inflation denotes a sustained rise in the general price level, reducing the purchasing power of money.

The Law of Increasing Opportunity Cost states that as the production of one good increases, the opportunity cost of producing another good rises.

The cost of production primarily influences supply, not demand, in economic analysis.

Monopsony occurs when there's a single buyer exerting substantial control over the market, influencing prices and quantity.

A shortage occurs when the demand for a product or service exceeds its supply at a given price, potentially leading to price increases.

Economic efficiency signifies the optimal allocation of resources to maximize output and welfare, achieving the highest possible standard of living.