#1
Which of the following is a characteristic of a perfectly competitive market?
Price taker behavior
ExplanationFirms in perfect competition accept the market price as given.
#2
What does the law of demand state?
As price increases, quantity demanded decreases
ExplanationInverse relationship between price and quantity demanded.
#3
What is the main idea behind the concept of 'opportunity cost' in economics?
It is the value of the next best alternative forgone when a decision is made.
ExplanationValue of the next best alternative.
#4
In the context of supply and demand, what happens to the equilibrium price and quantity if there is an increase in both demand and supply?
Equilibrium price and quantity both increase.
ExplanationShift in both curves leads to higher price and quantity.
#5
In microeconomics, what is the significance of the production possibility frontier (PPF)?
It shows the maximum output achievable with current technology
ExplanationGraphical representation of production trade-offs.
#6
What is the formula for calculating elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationMeasure of responsiveness of demand to price changes.
#7
Which market structure is characterized by a small number of interdependent firms and significant barriers to entry?
Oligopoly
ExplanationMarket dominated by a few large firms.
#8
What is the concept of a 'deadweight loss' in economics?
A loss of economic efficiency that can occur when equilibrium is not achieved
ExplanationWelfare loss due to market inefficiency.
#9
What is the formula for calculating the price elasticity of supply?
Percentage change in quantity supplied / Percentage change in price
ExplanationMeasure of responsiveness of supply to price changes.
#10
In the context of market efficiency, what does the term 'arbitrage' refer to?
The simultaneous purchase and sale of an asset to profit from price discrepancies
ExplanationExploiting price differences for profit.
#11
What is the primary function of a price floor in a market?
To prevent the price from falling below a certain level
ExplanationGovernment intervention to set a minimum price.
#12
According to the Coase Theorem, under what conditions can private bargaining result in an efficient solution to an externality?
When transaction costs are low and property rights are well-defined
ExplanationPrivate negotiation can resolve externalities.
#13
What is the 'Laffer Curve' used to illustrate in economics?
The impact of taxes on government revenue
ExplanationRelationship between tax rates and tax revenue.
#14
What is the difference between explicit costs and implicit costs in economics?
Explicit costs are the actual payments made by a firm, while implicit costs are the opportunity costs of resources.
ExplanationDirect vs. indirect costs.