#1
Which of the following is a characteristic of a perfectly competitive market?
Homogeneous products
ExplanationProducts are identical across firms.
#2
What is the main function of a price ceiling?
To prevent the price of a good from falling below a certain level
ExplanationImposes a maximum price.
#3
Which of the following is an example of a positive externality?
A beekeeper's honey production benefiting nearby fruit farmers
ExplanationWhen an activity benefits a third party.
#4
What is the formula to calculate price elasticity of demand?
Percentage change in quantity demanded divided by percentage change in price
ExplanationMeasure of responsiveness of demand to price change.
#5
Which of the following is a characteristic of monopolistic competition?
Product differentiation
ExplanationProducts are similar but not identical.
#6
What is the law of demand?
As the price of a good increases, the quantity demanded decreases, ceteris paribus.
ExplanationInverse relationship between price and quantity demanded.
#7
Which of the following is an example of a perfectly elastic demand?
Air
ExplanationQuantity demanded changes infinitely with any change in price.
#8
What does the term 'opportunity cost' refer to in economics?
The cost of an opportunity that was not chosen
ExplanationValue of the next best alternative.
#9
Which of the following is a characteristic of a monopoly?
High barriers to entry
ExplanationLimited competition due to barriers.
#10
What does the term 'elasticity of demand' measure?
The responsiveness of quantity demanded to a change in price
ExplanationHow much quantity demanded changes with a change in price.
#11
In microeconomics, what does the 'law of diminishing marginal returns' state?
As input increases, marginal output decreases
ExplanationEach additional unit of input yields less additional output.
#12
Which market structure is characterized by a few large firms dominating the industry?
Oligopoly
ExplanationA market dominated by a small number of firms.
#13
What does a production possibilities frontier (PPF) represent?
The maximum combinations of goods and services that can be produced given current resources and technology
ExplanationThe boundary between attainable and unattainable production levels.
#14
Which of the following is NOT a determinant of demand?
Technology used in production
ExplanationDeterminants include price, income, tastes, etc.
#15
What is a 'price floor'?
A minimum price set by the government for a good or service
ExplanationPrevents price from falling below a certain level.
#16
What is the main difference between accounting profit and economic profit?
Accounting profit considers only explicit costs, while economic profit considers both explicit and implicit costs.
ExplanationEconomic profit accounts for opportunity costs.
#17
What is a cartel?
A group of firms that agree to coordinate their production and pricing decisions
ExplanationCollusive organization.
#18
What is the income effect?
The change in quantity demanded of a good due to a change in income
ExplanationHow income changes affect quantity demanded.
#19
What is the primary goal of a firm in the neoclassical economic model?
Maximizing profit
ExplanationMain objective of firms.
#20
What is the 'price elasticity of supply'?
A measure of the responsiveness of quantity supplied to a change in price
ExplanationHow quantity supplied changes with price.
#21
What is the primary determinant of a firm's short-run supply curve?
Marginal cost
ExplanationThe additional cost of producing one more unit.
#22
What is the 'deadweight loss' in economics?
The loss of economic efficiency that occurs when the equilibrium quantity of a good or service is not maximized
ExplanationLoss of allocative efficiency.
#23
Which of the following is a characteristic of a natural monopoly?
High average total cost relative to the market demand
ExplanationCosts decrease with increased production.
#24
What is the 'invisible hand' concept in economics?
The concept that individuals' self-interested behavior can lead to positive social outcomes
ExplanationMarket self-regulation.
#25
What is the 'Tragedy of the Commons'?
A situation where resources are overused and depleted due to individual self-interest
ExplanationOverexploitation of shared resources.