#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
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
#8
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
#9
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
#10
9. How does an increase in consumer income affect the demand curve?
Shifts the demand curve to the right
ExplanationReflecting increased purchasing power
#11
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
#12
14. How does a subsidy affect the supply curve?
Shifts the supply curve to the right
ExplanationGovernment support increasing quantity supplied
#13
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
#14
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
#15
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
#16
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
#17
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