Economic Principles of Scarcity, Choice, and Cost Quiz

Scarcity arises from the imbalance between limited resources and unlimited human desires.

Opportunity cost represents the value of the best alternative that is forgone when a decision is made.

Total revenue is determined by multiplying the price per unit by the quantity of units sold.

Firms aim to maximize profits by optimizing production and minimizing costs.

The law of demand states that as the price of a good or service decreases, the quantity demanded increases, and vice versa, assuming all other factors remain constant.

The production possibilities frontier shows the maximum combinations of two goods that can be produced given current resources and technology.

As consumption of a good increases, the additional satisfaction gained from each additional unit decreases.

Explicit costs involve direct monetary payments, whereas implicit costs represent the opportunity cost of using resources.

Price elasticity of demand quantifies the sensitivity of quantity demanded to changes in price, essential for understanding consumer behavior.

Normal goods are those for which demand increases as income rises, whereas inferior goods experience a decline in demand when consumer income increases.

Specialization enables individuals and firms to produce goods and services more efficiently by focusing on their comparative advantage.

Perfectly competitive markets feature numerous buyers and sellers, whereas monopolistic markets have only one dominant seller with significant control over price.

Government intervention aims to promote competition, regulate markets, and correct market failures to ensure equitable distribution of resources and protect consumers.

Subsidies increase the supply of goods or services, shifting the supply curve to the right.

Regressive taxes impose a higher burden on low-income earners as a percentage of their income, while progressive taxes impose higher rates on higher income levels.