#1
Which of the following is a characteristic of a market economy?
Private ownership of resources
ExplanationIndividuals and businesses own and control resources and make decisions based on market forces.
#2
In economics, what does GDP stand for?
Gross Domestic Product
ExplanationThe total monetary or market value of all final goods and services produced in a country in a given time period.
#3
Which of the following is a factor of production?
Labor
ExplanationHuman effort, including physical and mental skills, used in the production process.
#4
What is a subsidy in economics?
A payment made by the government to producers or consumers to encourage the production or consumption of a certain good or service
ExplanationIt aims to alter the market outcome by encouraging production or consumption.
#5
What is the law of demand?
As the price of a good decreases, the quantity demanded increases
ExplanationThere is an inverse relationship between price and quantity demanded.
#6
What is the law of supply?
As the price of a good increases, the quantity supplied increases
ExplanationThere is a direct relationship between price and quantity supplied.
#7
What does the term 'opportunity cost' refer to?
The cost of using resources for one purpose over another
ExplanationThe value of the next best alternative forgone when a decision is made.
#8
What is the concept of 'elasticity of demand'?
The measure of how much the quantity demanded of a good responds to a change in the price of that good
ExplanationIt measures the responsiveness of quantity demanded to changes in price.
#9
What is the law of diminishing marginal utility?
As consumption of a product increases, the marginal utility derived from each additional unit decreases
ExplanationThe satisfaction or utility derived from consuming additional units of a good declines as consumption increases.
#10
What does the production possibility frontier represent?
The maximum level of production achievable given current resources and technology
ExplanationIt shows the various combinations of two goods that an economy can produce with its given resources and technology.
#11
What is the main function of the price mechanism in a market economy?
To coordinate the decisions of buyers and sellers
ExplanationPrices adjust to allocate resources efficiently and signal information to buyers and sellers.
#12
What is the difference between microeconomics and macroeconomics?
Microeconomics studies individual markets, while macroeconomics studies the economy as a whole
ExplanationMicroeconomics focuses on individual economic units, while macroeconomics studies aggregate behavior.
#13
Which of the following is a feature of a command economy?
Government control over production and distribution
ExplanationThe government determines what goods and services are produced and how they are distributed.