#1
What is the law of demand in economics?
As the price increases, quantity demanded decreases.
ExplanationHigher prices lead to lower demand.
#2
Which of the following is NOT a determinant of demand?
Cost of production
ExplanationProduction costs do not directly affect demand.
#3
What is the primary function of a market economy?
To allow individuals and businesses to make economic decisions.
ExplanationMarket economies enable decentralized decision-making.
#4
What is consumer surplus?
The difference between the highest price a consumer is willing to pay and the price it actually pays.
ExplanationConsumer surplus reflects the value consumers gain by paying less than their maximum.
#5
In a market, what is the effect of a decrease in supply?
Price increases, quantity decreases.
ExplanationDecreased supply leads to higher prices and reduced availability.
#6
What is the law of supply in economics?
As the price increases, quantity supplied increases.
ExplanationSuppliers respond to higher prices by offering more goods.
#7
What does equilibrium price signify in a market?
The price at which quantity demanded equals quantity supplied.
ExplanationBalanced supply and demand result in equilibrium price.
#8
What is the main function of a price floor in a market?
To maintain a minimum price for a good or service.
ExplanationPrice floors prevent prices from dropping below a certain level.
#9
What is the concept of elasticity of demand?
It measures the responsiveness of quantity demanded to changes in price.
ExplanationElasticity of demand indicates how demand reacts to price changes.
#10
Which of the following is a characteristic of a perfectly competitive market?
Homogeneous products
ExplanationIdentical products are a hallmark of perfect competition.
#11
What is a monopolistic competition market structure characterized by?
A large number of firms with differentiated products.
ExplanationMany firms offer similar but distinct products.
#12
What is the income effect in economics?
The change in quantity demanded due to a change in income.
ExplanationChanges in income alter consumer purchasing power, impacting demand.
#13
In the context of market equilibrium, what happens when there is excess demand?
Price increases and quantity demanded exceeds quantity supplied.
ExplanationExcess demand drives prices up as suppliers struggle to meet demand.
#14
What happens to the equilibrium price and quantity when both demand and supply increase?
Price increases, quantity may increase or decrease.
ExplanationIncreased demand and supply can lead to price fluctuations and variable quantity.
#15
What is the difference between a change in quantity demanded and a change in demand?
A change in quantity demanded is caused by a change in price, while a change in demand is caused by factors other than price.
ExplanationQuantity demanded changes due to price, while demand shifts due to other factors.
#16
What is the cross-price elasticity of demand?
It measures the responsiveness of quantity demanded of one good to changes in the price of another good.
ExplanationCross-price elasticity assesses how demand for one good changes relative to price changes in another.
#17
What is a price ceiling and how does it impact the market?
It is a government-imposed maximum price that can be charged for a good or service, leading to shortages.
ExplanationPrice ceilings cap prices, often causing shortages due to increased demand.
#18
What is the difference between a price taker and a price maker in a market?
A price taker must accept the prevailing market price, while a price maker has control over the market price.
ExplanationPrice takers accept market prices, while price makers have influence over pricing.