#1
Which of the following is a characteristic of a perfectly competitive market?
A large number of buyers and sellers
ExplanationCharacterized by a multitude of buyers and sellers with no one having significant market power.
#2
What is the primary goal of microeconomics?
To analyze the behavior of individual consumers and firms
ExplanationMicroeconomics focuses on understanding the choices made by individual actors within the economy.
#3
What does the term 'elasticity of demand' measure?
The change in quantity demanded in response to a change in price
ExplanationElasticity of demand quantifies the sensitivity of consumer demand to changes in price.
#4
Which of the following is a characteristic of a command economy?
Centralized government control
ExplanationIn a command economy, the government dictates production, distribution, and prices.
#5
What is the formula for calculating price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationPrice elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price.
#6
In a monopolistic competition market structure, firms differentiate their products to:
Gain market power
ExplanationProduct differentiation allows firms to create a perceived uniqueness, potentially leading to greater control over pricing and demand.
#7
Which of the following is a characteristic of an oligopoly market structure?
Interdependence among firms
ExplanationOligopolies feature a few large firms, each aware of the actions and reactions of its competitors, leading to strategic decision-making.
#8
What is the purpose of antitrust laws?
To prevent unfair business practices and promote competition
ExplanationAntitrust laws aim to maintain fair competition in markets by preventing monopolistic behavior and promoting consumer welfare.
#9
What is the key characteristic of a natural monopoly?
High barriers to entry
ExplanationNatural monopolies face significant obstacles for potential competitors to enter the market due to high initial costs or technological complexity.
#10
What is the term used to describe a situation where one person's consumption of a good reduces the amount available for others?
Rivalry
ExplanationRivalry occurs when consumption of a good or service by one individual decreases its availability for others.
#11
What is the term used to describe the total value of all final goods and services produced within a country in a given period of time?
Gross Domestic Product (GDP)
ExplanationGDP measures the economic output of a nation and is a key indicator of its economic health.
#12
Which of the following is a tool of monetary policy used by central banks to control the money supply?
Open market operations
ExplanationCentral banks conduct open market operations to buy or sell government securities, influencing the money supply and interest rates.
#13
What is the term used to describe the situation where a single firm controls the entire supply of a particular product or service?
Monopoly
ExplanationA monopoly exists when one company dominates the market for a specific product or service, controlling supply and prices.
#14
Which of the following is NOT a tool of fiscal policy?
Open market operations
ExplanationOpen market operations are a tool of monetary policy, not fiscal policy.
#15
Which of the following is NOT a determinant of demand?
Cost of production
ExplanationThe cost of production affects supply, not demand, which is determined by factors like consumer preferences, income, and prices of related goods.