#1
Which of the following best describes market equilibrium?
A situation where supply equals demand
ExplanationBalance point where quantity supplied matches quantity demanded.
#2
Which of the following is a characteristic of a perfectly competitive market?
Many buyers and many sellers
ExplanationLarge number of buyers and sellers offering identical products.
#3
Which of the following is an example of a public good?
National defense
ExplanationNon-excludable and non-rivalrous good benefiting the public.
#4
What is the law of demand?
As price decreases, quantity demanded increases
ExplanationInverse relationship between price and quantity demanded.
#5
What is the effect of an increase in consumer income on the market equilibrium for normal goods?
Shifts the demand curve to the right
ExplanationHigher consumer income leads to increased demand, shifting the curve.
#6
In a competitive market, what happens if the price is above the equilibrium price?
There is a surplus of goods
ExplanationExcess supply occurs, resulting in a surplus of goods.
#7
Which of the following is a determinant of supply?
Technology
ExplanationTechnological advancements impact the ability to produce and supply.
#8
Which of the following scenarios would cause a rightward shift of the demand curve?
An increase in consumer preferences for the good
ExplanationGrowing consumer preference leads to increased demand.
#9
What happens to the equilibrium price and quantity if both supply and demand increase?
Equilibrium price and quantity both increase
ExplanationSimultaneous increase in both supply and demand drives up equilibrium.
#10
What is the relationship between price elasticity of demand and total revenue?
As price elasticity of demand increases, total revenue increases
ExplanationHigher elasticity leads to revenue increase with price changes.
#11
What is the primary function of a price ceiling?
To keep prices from falling below a certain level
ExplanationLimits on how low prices can go, ensuring affordability.
#12
In economics, what is elasticity of demand?
The percentage change in quantity demanded for a percentage change in price
ExplanationMeasure of how quantity demanded responds to price changes.
#13
What is the primary determinant of the price elasticity of demand?
The availability of substitutes
ExplanationExtent to which alternatives influence demand sensitivity.
#14
In the long run, what is the effect of an increase in demand for a product in a perfectly competitive market?
Increase in both price and quantity supplied
ExplanationOver time, higher demand leads to increased price and supply.
#15
What is the main difference between a change in quantity demanded and a change in demand?
A change in demand is caused by a movement along the demand curve
ExplanationShifts in demand curve versus movement along the curve.
#16
In a monopolistic market structure, what is true about barriers to entry?
Barriers to entry are low
ExplanationEase of entering the market due to lower obstacles.