#1
What is the law of demand?
As the price decreases, the quantity demanded increases.
ExplanationInverse relationship between price and quantity demanded.
#2
Which of the following is a characteristic of perfect competition?
Many buyers and many sellers
ExplanationNumerous buyers and sellers with homogeneous products.
#3
What is the formula for calculating total revenue?
Price × Quantity
ExplanationPrice of a good multiplied by the quantity sold.
#4
What does the term 'elasticity of demand' measure?
The responsiveness of quantity demanded to a change in price
ExplanationDegree of responsiveness of quantity demanded to price changes.
#5
What is the formula for calculating marginal cost?
Change in Total Cost / Change in Quantity
ExplanationRatio of change in total cost to change in quantity.
#6
In economics, what does the term 'opportunity cost' refer to?
The cost of an opportunity that is not chosen
ExplanationValue of the next best alternative forgone.
#7
Which of the following is NOT a characteristic of monopolistic competition?
Price taker
ExplanationFirms can influence market price.
#8
What is the primary goal of profit maximization for firms?
Maximizing the difference between total revenue and total cost
ExplanationAchieving the highest profit margin.
#9
What is the formula for calculating price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationMeasure of responsiveness of quantity demanded to price changes.
#10
In a perfectly competitive market, how does a firm determine its level of output?
By following the industry price
ExplanationOutput level is dictated by prevailing market price.
#11
What is the short-run supply curve of a firm in perfect competition?
Horizontal
ExplanationSupply curve remains constant at various price levels.
#12
What is the primary characteristic of a natural monopoly?
Many buyers and one seller
ExplanationSingle seller dominates the market.
#13
In economics, what does 'ceteris paribus' mean?
All else being equal
ExplanationAll other variables held constant.
#14
Which of the following is a characteristic of oligopoly?
Few interdependent firms
ExplanationSmall number of firms affecting market behavior.
#15
What is the formula for calculating total cost?
Fixed Cost + Variable Cost
ExplanationSum of fixed and variable costs.
#16
What is the law of diminishing marginal returns?
As input increases, marginal product decreases after a certain point.
ExplanationOutput increases at a decreasing rate.
#17
What is a positive externality in economics?
An action that benefits third parties
ExplanationIndirect benefit to unrelated parties.
#18
What is a firm's total revenue when the price of its product is $10 and it sells 100 units?
$10,000
ExplanationPrice multiplied by quantity sold.
#19
Which market structure is characterized by a few interdependent firms?
Oligopoly
ExplanationMarket with a small number of large firms.
#20
What is the relationship between marginal cost (MC) and marginal revenue (MR) for profit maximization?
MC = MR
ExplanationMC equals MR at the profit-maximizing output.
#21
What is the difference between economic profit and accounting profit?
Economic profit includes implicit costs, while accounting profit does not.
ExplanationAccounting profit minus implicit costs.
#22
Under what conditions will a perfectly competitive firm shut down in the short run?
When total revenue is less than variable cost
ExplanationTotal revenue insufficient to cover variable costs.
#23
In economics, what is the role of the production function?
To describe the relationship between inputs and outputs
ExplanationDefines how inputs translate into outputs.
#24
What is the relationship between average total cost (ATC) and marginal cost (MC) at the minimum point of ATC?
ATC = MC
ExplanationATC equals MC at the lowest point of the cost curve.
#25
What is the long-run equilibrium condition for a perfectly competitive firm?
Price equals average total cost
ExplanationPrice equals production cost in the long run.