#1
What does the law of demand state?
As the price of a good decreases, the quantity demanded increases.
ExplanationPrice down, demand up.
#2
Which of the following is NOT a determinant of demand?
Price of the product
ExplanationPrice doesn't determine demand.
#3
What does elasticity of demand measure?
The responsiveness of quantity demanded to changes in price
ExplanationHow much quantity changes with price.
#4
In the long run, a perfectly competitive firm will earn ______ profit.
Normal
ExplanationJust the average.
#5
What is a price ceiling?
A legal maximum price for a good or service
ExplanationTop limit set by law.
#6
What is the main assumption of the law of diminishing marginal utility?
The more of a good a person consumes, the greater the additional satisfaction derived from each additional unit
ExplanationSatisfaction declines with more.
#7
What is the main difference between a change in quantity demanded and a change in demand?
A change in quantity demanded is caused by a change in price, while a change in demand is caused by non-price factors.
ExplanationPrice change vs. other factors.
#8
Which of the following is NOT a characteristic of a perfectly competitive market?
Barriers to entry and exit
ExplanationNo entry hurdles.
#9
What is the income effect in economics?
The change in consumption of a good due to a change in consumer income
ExplanationSpending shift from income change.
#10
What is consumer surplus?
The difference between the maximum price consumers are willing to pay and the price they actually pay
ExplanationGain from paying less.
#11
What is a characteristic of a monopolistic competition market structure?
Easy entry and exit of firms
ExplanationDoors open for firms.
#12
What is the formula for calculating price elasticity of demand?
Percentage change in price / Percentage change in quantity demanded
ExplanationChange rate ratio.
#13
In economics, what is the term for the situation where one party in a transaction has more information than the other?
Asymmetric information
ExplanationUneven knowledge.
#14
What happens to equilibrium price and quantity when both demand and supply decrease?
Price decreases and quantity decreases
ExplanationBoth down, equilibrium.
#15
What does the cross-price elasticity of demand measure?
The responsiveness of quantity demanded of one good to a change in the price of another good
ExplanationImpact of one price on another's demand.
#16
Which of the following is an example of a public good?
Street lighting
ExplanationShared benefit, publicly provided.