#1
What is deadweight loss in microeconomics?
The loss of total surplus in a market due to inefficiency
ExplanationResulting from inefficient allocation of resources.
#2
Which of the following is NOT a source of market distortion?
Perfect competition
ExplanationRepresents an ideal market with no distortions.
#3
What is the primary goal of a government when it imposes taxes on certain goods?
To generate revenue
ExplanationA primary source of government income.
#4
Which of the following is an example of a negative externality?
A factory emits pollution that damages nearby crops
ExplanationCosts borne by third parties not involved in the transaction.
#5
What is the main reason for the occurrence of deadweight loss?
Government intervention in markets
ExplanationInterventions lead to market inefficiencies.
#6
Which of the following is an example of a market distortion caused by government-imposed quotas?
Rent control
ExplanationArtificially setting limits on rental prices.
#7
In a competitive market without any externalities, what is the condition for efficiency?
Price equals marginal cost
ExplanationReflects optimal allocation of resources.
#8
How does a price ceiling typically affect the market?
It leads to a shortage of goods
ExplanationResulting from artificially low prices.
#9
What happens to consumer surplus when a tax is imposed on a good?
It decreases
ExplanationConsumers pay more, receive less.
#10
Which of the following policies aims to correct a positive externality?
Subsidies
ExplanationEncouraging activities with benefits to society.
#11
What is the term used to describe the situation when a good or service is consumed without being paid for?
Positive externality
ExplanationBenefits received without cost.
#12
How does a subsidy affect the equilibrium price and quantity in a market?
Decreases price, increases quantity
ExplanationGovernment aid leads to lower prices and more production.
#13
What is the term used to describe a situation where a single buyer or seller has control over the market?
Monopoly
ExplanationReflects market dominance by one entity.
#14
In the context of market power, what does the term 'monopsony' refer to?
A market with one buyer and many sellers
ExplanationReverse of monopoly, where one buyer dominates.
#15
In a monopolistically competitive market, how do firms differentiate their products?
By advertising and branding
ExplanationUnique selling propositions to attract customers.
#16
In the context of externalities, what is the term used to describe the situation where one party bears the costs of an economic transaction while another party reaps the benefits?
Negative externality
ExplanationUnaccounted costs inflicted on others.
#17
In monopolistic competition, how do firms differentiate their products from competitors?
By producing unique products
ExplanationOffering distinctive features to attract customers.