#1
Which of the following is a characteristic of a perfectly competitive market structure?
Price taker behavior
ExplanationFirms in perfect competition have no control over the market price.
#2
In microeconomics, what is the law of demand?
As price increases, quantity demanded decreases
ExplanationThere's an inverse relationship between price and quantity demanded.
#3
What is a natural monopoly?
A monopoly that arises from economies of scale
ExplanationIt's a situation where one firm can serve the entire market most efficiently.
#4
What is the Prisoner's Dilemma in game theory?
A situation where both players in a game can benefit from cooperation, but each has an incentive to betray the other
ExplanationIndividuals act in their own self-interest, resulting in a worse outcome for both.
#5
What is the concept of price elasticity of demand?
The percentage change in quantity demanded divided by the percentage change in price
ExplanationIt measures the responsiveness of quantity demanded to changes in price.
#6
In oligopoly, what is the term used to describe a situation where firms implicitly coordinate their actions without explicit agreements?
Price leadership
ExplanationLeading firms set prices, which others follow without explicit agreement.
#7
What is the difference between explicit and implicit costs in economics?
Explicit costs are the actual monetary payments made, while implicit costs are the foregone opportunities
ExplanationExplicit costs are tangible, while implicit costs are opportunity costs.
#8
What is the concept of monopolistic competition?
A market structure with a small number of sellers producing differentiated products
ExplanationIt combines elements of monopoly and perfect competition, with differentiated products and many sellers.
#9
What is the law of diminishing marginal returns in economics?
As the quantity of a variable input increases, the total output increases at a decreasing rate
ExplanationAdding more of a variable input to fixed inputs eventually yields less additional output.
#10
What is the difference between allocative efficiency and productive efficiency?
Allocative efficiency focuses on distributing resources optimally, while productive efficiency focuses on minimizing waste
ExplanationAllocative efficiency ensures resources are used in the most desirable way, while productive efficiency minimizes resource waste.
#11
What is the difference between a normal good and an inferior good?
Normal goods have a positive income elasticity, while inferior goods have a negative income elasticity
ExplanationNormal goods' demand increases with income, while inferior goods' demand decreases with income.
#12
What is the concept of deadweight loss in economics?
The loss of total surplus due to market inefficiency
ExplanationIt's the loss of economic efficiency that occurs when the equilibrium quantity is not achieved.
#13
What is the Nash equilibrium in game theory?
A situation where each player chooses their best strategy given the strategy chosen by the other player
ExplanationPlayers have no incentive to change their strategy unilaterally.
#14
In the context of microeconomics, what does the term 'marginal utility' refer to?
The additional satisfaction or pleasure gained from consuming one more unit of a good
ExplanationIt measures the additional utility gained from consuming one more unit of a good.
#15
What is the relationship between price elasticity and total revenue for a normal good?
As price increases, total revenue remains constant
ExplanationInelastic demand results in constant total revenue with price changes.
#16
What is the Coase Theorem in economics?
A theorem stating that in the absence of transaction costs, private bargaining will result in an efficient solution to the problem of externalities
ExplanationPrivate bargaining can lead to an efficient allocation of resources, even in the presence of externalities.