#1
What does the law of demand state?
As the price of a good decreases, the quantity demanded increases.
ExplanationInverse relationship between price and quantity demanded.
#2
What is the main assumption of perfect competition regarding entry and exit?
Firms can easily enter and exit the market without barriers.
ExplanationFreedom of entry and exit.
#3
Which of the following is an example of a public good?
Street lighting
ExplanationNon-excludable and non-rivalrous.
#4
What is the purpose of a production possibility frontier (PPF)?
To illustrate the maximum combination of goods and services an economy can produce given its resources.
ExplanationEfficiency of resource allocation.
#5
Which of the following is NOT a determinant of demand?
Cost of production
ExplanationFactors influencing consumer behavior.
#6
Which of the following is NOT a characteristic of a perfectly competitive market?
Barriers to entry
ExplanationAbsence of barriers for entry and exit.
#7
What is the formula for price elasticity of demand?
Percentage change in price / Percentage change in quantity demanded
ExplanationMeasure of responsiveness of quantity demanded to price changes.
#8
What is the difference between explicit and implicit costs?
Explicit costs are monetary payments for resources, while implicit costs are non-monetary opportunity costs.
ExplanationTangible vs. opportunity costs.
#9
Which of the following is a characteristic of monopolistic competition?
There are many sellers, each offering differentiated products.
ExplanationDifferentiated products and many sellers.
#10
What is the income effect in economics?
The change in quantity demanded due to a change in income.
ExplanationImpact of income changes on demand.
#11
Which of the following is an example of a positive externality?
Vaccination programs reducing the spread of disease
ExplanationBenefits to third parties beyond market transactions.
#12
What does Pareto efficiency in a market refer to?
When resources are allocated in a way that no one can be made better off without making someone else worse off
ExplanationOptimal allocation without making others worse off.