#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 an example of a perfectly inelastic demand?
Gasoline during an oil crisis
ExplanationNo change in demand despite price.
#7
What is consumer surplus?
The difference between the maximum price a consumer is willing to pay for a good and the price actually paid.
ExplanationConsumer benefit from market transactions.
#8
What is the main reason for economies of scale?
Decreasing average total cost as output increases.
ExplanationCost advantages with increased production.
#9
Which of the following is NOT a characteristic of a perfectly competitive market?
Barriers to entry
ExplanationAbsence of barriers for entry and exit.
#10
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.
#11
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.
#12
Which of the following is a characteristic of monopolistic competition?
There are many sellers, each offering differentiated products.
ExplanationDifferentiated products and many sellers.
#13
What is the income effect in economics?
The change in quantity demanded due to a change in income.
ExplanationImpact of income changes on demand.
#14
In a perfectly competitive market, what does the demand curve look like?
Downward-sloping
ExplanationLaw of demand applies.
#15
What does the concept of elasticity measure?
The responsiveness of quantity demanded to a change in price.
ExplanationSensitivity of demand to price changes.
#16
What is the difference between a normal good and an inferior good?
Normal goods have a positive income elasticity of demand, while inferior goods have a negative income elasticity of demand.
ExplanationIncome's effect on demand.
#17
What is the difference between a firm's short-run and long-run production function?
The short-run production function includes both fixed and variable inputs, while the long-run production function includes only variable inputs.
ExplanationVariability of inputs over time.
#18
What is the role of government in correcting negative externalities?
Impose taxes on producers.
ExplanationMarket intervention for social costs.
#19
What is the difference between perfect competition and monopolistic competition?
Perfect competition involves many firms selling homogeneous products, while monopolistic competition involves many firms selling differentiated products.
ExplanationProduct differentiation and market structure.
#20
What does the law of diminishing marginal utility state?
As the quantity consumed of a good increases, the total utility derived from it increases at a decreasing rate.
ExplanationDecreasing satisfaction with additional consumption.
#21
Which of the following is a characteristic of a monopoly market structure?
One firm producing a unique product with no close substitutes.
ExplanationSingle seller with market dominance.
#22
What does the price elasticity of supply measure?
The responsiveness of quantity supplied to a change in price.
ExplanationSupply's sensitivity to price changes.
#23
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.
#24
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.