#1
What is market equilibrium?
When demand equals supply
ExplanationBalance between supply and demand in a market
#2
Which of the following is NOT a factor affecting demand?
Number of sellers in the market
ExplanationSeller count does not directly influence demand
#3
What is the Law of Demand?
As the price of a good increases, the quantity demanded decreases
ExplanationInverse relationship between price and demand
#4
What is a determinant of supply?
Taxes on production
ExplanationTaxation affecting cost of production and supply
#5
What happens to the market price if there is a shortage?
It increases
ExplanationShortages lead to higher prices due to increased demand
#6
What does the price elasticity of demand measure?
The responsiveness of quantity demanded to changes in price
ExplanationDegree of change in demand with price alterations
#7
What is the main function of a price ceiling?
To prevent prices from rising above a certain level
ExplanationLimiting price increases in the market
#8
Which of the following is an example of a price floor?
Minimum wage
ExplanationLegally set minimum price for labor
#9
What does a shift to the left in the supply curve indicate?
Decrease in quantity supplied
ExplanationReduced amount of goods offered at each price level
#10
What is price elasticity of demand?
A measure of how responsive quantity demanded is to a change in price
ExplanationSensitivity of demand to price fluctuations
#11
What happens to equilibrium price and quantity if both demand and supply increase?
Price increases, quantity increases
ExplanationDual rise in market price and quantity
#12
In a perfectly competitive market, what condition must hold true at equilibrium?
Price equals marginal cost
ExplanationOptimal allocation where price equals production cost
#13
Which of the following is NOT a characteristic of a perfectly competitive market?
Barriers to entry
ExplanationEase of market entry for firms
#14
What effect does an increase in consumer income have on normal goods?
Increase in demand
ExplanationHigher income leads to greater demand for normal goods
#15
What is the role of government in a market economy concerning price controls?
To intervene when prices are considered unfair
ExplanationGovernment action to rectify market price issues
#16
What is the primary determinant of price elasticity of demand?
Substitutability
ExplanationDegree of substitutability for a product
#17
In monopolistic competition, firms differentiate their products to:
Increase elasticity of demand
ExplanationEnhance responsiveness of demand to price changes
#18
What does a perfectly inelastic demand curve look like?
Vertical line
ExplanationDemand remains constant regardless of price changes