#1
Which of the following is a characteristic of a perfectly competitive market?
Homogeneous products
ExplanationProducts are identical across producers.
#2
What is the law of demand?
As price increases, quantity demanded decreases
ExplanationThere is an inverse relationship between price and quantity demanded.
#3
What is the opportunity cost?
The value of the best alternative forgone when a decision is made
ExplanationThe value of the next best alternative that must be sacrificed.
#4
Which of the following is a characteristic of monopolistic competition?
Product differentiation
ExplanationFirms differentiate products to gain market share.
#5
What is the law of diminishing marginal returns?
As input increases, the marginal output decreases
ExplanationAdding more of a variable input results in smaller increases in output.
#6
Which of the following is an example of a regressive tax?
Sales tax
ExplanationTax burden falls more heavily on lower-income individuals.
#7
What is the formula for price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationMeasures responsiveness of quantity demanded to price changes.
#8
What is the main determinant of the price elasticity of demand for a good?
The availability of substitutes
ExplanationThe presence of alternative products influences elasticity.
#9
What is the formula for total revenue?
Price x Quantity demanded
ExplanationTotal income from selling a given quantity of goods.
#10
In a perfectly competitive market, what is the relationship between price and marginal revenue?
Price is equal to marginal revenue
ExplanationMarginal revenue equals price due to perfect competition.
#11
What does the price elasticity of supply measure?
The responsiveness of quantity supplied to a change in price
ExplanationHow producers react to changes in market price.
#12
What is the main determinant of the price elasticity of supply?
The time horizon
ExplanationThe duration over which producers can adjust production levels.
#13
Which of the following is an example of a positive externality?
A beekeeper's bees pollinating nearby crops
ExplanationAn activity benefits a third party without compensation.
#14
Which of the following is a characteristic of a natural monopoly?
Decreasing average total cost over a wide range of output
ExplanationEfficiency increases as output expands.
#15
Which of the following is an example of a public good?
National defense
ExplanationNon-excludable and non-rivalrous goods provided by the government.
#16
What is an example of a negative externality?
Pollution from a factory
ExplanationNegative impact on third parties not accounted for in production costs.
#17
What is a positive externality?
A situation where the production or consumption of a good benefits a third party
ExplanationExternal benefit to a third party not directly involved in the transaction.