Microeconomic Concepts Quiz

Perfectly competitive markets have numerous buyers and sellers.

Utility refers to the satisfaction or pleasure a consumer gets from consuming a good or service.

Cost of production is a key determinant of supply, influencing how much producers are willing and able to sell at different prices.

'Ceteris paribus' means holding all other factors constant, isolating the effect of the factor being studied.

Total revenue is calculated by multiplying price per unit by the quantity sold.

The price of the good itself is a key determinant of demand, influencing how much consumers are willing and able to buy at different prices.

Price elasticity of demand measures how much quantity demanded changes in response to a change in price.

Positive externality occurs when a third party benefits from a transaction, like education benefiting society beyond the individual.

Firms in monopolistic competition offer differentiated products and face easy entry and exit.

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.

Perfectly inelastic demand means quantity demanded remains constant regardless of price changes, like unbranded basic commodities.

Marginal cost is calculated as the change in total cost divided by the change in quantity.

Opportunity cost is the value of the next best alternative that is forgone when a decision is made.

A natural monopoly occurs when one firm can produce a good at lower costs than two or more firms, typically due to high fixed costs and low marginal costs.

The Laffer curve illustrates the relationship between tax rates and tax revenue, suggesting that at some point, increasing tax rates can lead to lower tax revenue.

Price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price.

Marginal utility refers to the additional satisfaction gained from consuming one more unit of a good or service.