#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 a production possibility frontier?
A curve representing the maximum combination of goods and services that can be produced with the available resources and technology
ExplanationBoundary of production choices.
#11
What is the law of diminishing returns?
As more units of a variable input are added to fixed inputs, the marginal product of the variable input eventually decreases.
ExplanationOutput dip with added input.
#12
Which of the following is a characteristic of a monopoly market structure?
A single seller with complete control over the market
ExplanationOne dominates market.
#13
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.
#14
What is a characteristic of a monopolistic competition market structure?
Easy entry and exit of firms
ExplanationDoors open for firms.
#15
What is the formula for calculating price elasticity of demand?
Percentage change in price / Percentage change in quantity demanded
ExplanationChange rate ratio.
#16
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.
#17
What happens to equilibrium price and quantity when both demand and supply decrease?
Price decreases and quantity decreases
ExplanationBoth down, equilibrium.
#18
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.
#19
Which of the following is an example of a public good?
Street lighting
ExplanationShared benefit, publicly provided.
#20
In economics, what is the term for the situation where a single firm supplies the entire market?
Monopoly
ExplanationOne controls all.
#21
What does the term 'opportunity cost' refer to in economics?
The value of the next best alternative forgone when a decision is made
ExplanationCost of the next choice.
#22
What does the term 'perfect information' imply in a market context?
Consumers have complete information about all available products and prices
ExplanationFull knowledge for buyers.
#23
What is the main difference between explicit costs and implicit costs?
Explicit costs are costs that involve a direct monetary payment, while implicit costs do not.
ExplanationMoney vs. non-money.
#24
What does the term 'externality' refer to in economics?
The cost or benefit that affects a party who did not choose to incur that cost or benefit.
ExplanationSide effects on others.
#25
In a perfectly competitive market, how does a firm maximize profit in the short run?
By producing at the point where marginal revenue equals marginal cost.
ExplanationBalance at peak profit.