#1
1. What is the law of demand?
As price increases, quantity demanded decreases
ExplanationInverse relationship between price and quantity demanded
#2
2. Which of the following is not a determinant of supply?
Number of buyers
ExplanationNot directly affecting the ability or willingness to sell
#3
6. What is the relationship between price and quantity supplied in the law of supply?
Directly proportional
ExplanationPositive correlation: as price increases, quantity supplied increases
#4
7. Which factor does not affect the price elasticity of demand?
Consumer income
ExplanationNot influencing the sensitivity of demand to price changes
#5
11. What is the income elasticity of demand for a normal good?
Positive
ExplanationDirect relationship between income and demand
#6
12. Which market structure is characterized by a large number of sellers, differentiated products, and easy entry and exit?
Monopolistic competition
ExplanationCompetition with product differentiation
#7
16. What is the role of the Federal Reserve in the context of monetary policy?
Manage interest rates and money supply
ExplanationRegulating money circulation and cost of borrowing
#8
17. How does a binding price floor affect the market for a good?
Results in a surplus of the good
ExplanationCreating excess supply due to price constraint
#9
21. What is the concept of price elasticity of supply?
Percentage change in quantity supplied / Percentage change in price
ExplanationMeasure of responsiveness of quantity supplied to price changes
#10
22. Which factor is not a determinant of demand elasticity?
Consumer preferences
ExplanationPreferences do not directly influence the sensitivity to price changes
#11
3. What is the price elasticity of demand formula?
Percentage change in quantity demanded / Percentage change in price
ExplanationMeasure of responsiveness of quantity demanded to price changes
#12
4. In a competitive market, what happens if there is excess demand?
Price increases and quantity demanded increases
ExplanationMarket forces push price and demand upwards
#13
8. What is the primary function of a price ceiling?
To prevent the price from rising above a certain level
ExplanationImposing an upper limit on prices
#14
9. How does an increase in consumer income affect the demand curve?
Shifts the demand curve to the right
ExplanationReflecting increased purchasing power
#15
13. What is the cross-price elasticity of demand formula?
Percentage change in price of one good / Percentage change in quantity demanded of another good
ExplanationMeasure of responsiveness of one good's demand to another good's price change
#16
14. How does a subsidy affect the supply curve?
Shifts the supply curve to the right
ExplanationGovernment support increasing quantity supplied
#17
18. What is the significance of the elasticity coefficient in determining the responsiveness of quantity demanded to a price change?
A higher coefficient indicates elastic demand
ExplanationDegree of sensitivity of quantity demanded to price fluctuations
#18
19. In the context of market structures, what is a characteristic of a natural monopoly?
Single seller dominating the market
ExplanationMarket controlled by one entity due to efficiency or infrastructure
#19
23. What happens to equilibrium price and quantity if both demand and supply increase?
Price increases, quantity may increase or decrease
ExplanationImpact on equilibrium due to changes in both supply and demand
#20
24. How does a decrease in the cost of production affect the supply curve?
Shifts the supply curve to the right
ExplanationLowering production costs increases quantity supplied
#21
5. What is the concept of price floors?
A legal minimum price below which a good cannot be sold
ExplanationGovernment intervention setting a floor on prices
#22
10. In a perfectly competitive market, what is the long-run outcome regarding economic profit?
Economic profit is always zero
ExplanationAbsence of economic profit due to market equilibrium
#23
15. What is the concept of price discrimination?
Charging different prices to different customers for the same product
ExplanationVaried pricing strategy based on customer segments
#24
20. What is the primary function of a central bank in a country's economy?
To issue currency and control money supply
ExplanationAuthority over monetary policy and currency management
#25
25. In the context of market forces, what is a characteristic of monopolistic competition?
Differentiated products with some pricing power
ExplanationVariety in products and limited market power