#1
Which economic system relies on private ownership of the means of production?
Market economy
ExplanationEconomic system based on private ownership of resources and decision-making by individuals and firms.
#2
In the context of economic systems, what does the term 'Laissez-faire' mean?
Hands-off approach, letting the market operate freely
ExplanationPolicy of non-interference by the government in economic affairs, allowing markets to self-regulate.
#3
According to the law of demand, what is the relationship between price and quantity demanded?
Inversely proportional
ExplanationAs price rises, quantity demanded falls, and vice versa, assuming other factors remain constant.
#4
What is the primary characteristic of a traditional economic system?
Reliance on custom and tradition to make economic decisions
ExplanationEconomic decisions based on cultural and historical practices rather than market forces.
#5
What is the main premise of the theory of perfect competition in microeconomics?
A large number of buyers and sellers, homogeneous products, and easy entry and exit
ExplanationIdeal market structure characterized by many small firms producing identical products, with no barriers to entry or exit.
#6
Who is considered the father of modern economics and wrote 'The Wealth of Nations'?
Adam Smith
ExplanationScottish philosopher known for advocating free-market principles and the invisible hand.
#7
In economic terms, what is inflation?
A sustained increase in the average price level of goods and services
ExplanationPersistent rise in the general price level leading to a decrease in the purchasing power of money.
#8
What is the primary focus of Keynesian economics during economic downturns?
Stimulating demand through government intervention
ExplanationKeynesian theory emphasizes government spending to boost demand during economic slumps.
#9
Which economic theory emphasizes the role of expectations, perceptions, and animal spirits in shaping economic outcomes?
Behavioral economics
ExplanationField of study that incorporates psychological insights into economic analysis, focusing on irrational behavior.
#10
Who introduced the concept of the Invisible Hand in economics?
Adam Smith
ExplanationTerm coined by Adam Smith, referring to the self-regulating nature of markets.
#11
What is the Tragedy of the Commons in the context of economic theory?
A situation where private individuals overuse a shared resource, leading to depletion or degradation
ExplanationOverexploitation of communal resources due to individual self-interest, highlighting the need for regulation.
#12
According to classical economics, what role does government play in the economy?
Limited intervention to maintain law and order
ExplanationClassical economists advocate for minimal government interference in economic affairs.
#13
What is the concept of 'comparative advantage' in international trade?
A country can produce a good at a lower opportunity cost than another country
ExplanationCountry's ability to produce a good more efficiently than others, justifying specialization and trade.
#14
What is the concept of a price ceiling in microeconomics?
A maximum price set by the government to prevent prices from rising above a certain level
ExplanationLegal cap on prices established by the government to protect consumers from excessively high prices.
#15
Which economist is associated with the theory of creative destruction?
Joseph Schumpeter
ExplanationSchumpeter's theory describes how innovation and entrepreneurship lead to the obsolescence of existing technologies and industries.