#1
What is the law of demand in microeconomics?
As price increases, quantity demanded decreases.
ExplanationPrice and quantity demanded have an inverse relationship.
#2
In microeconomics, what does the term 'elasticity' measure?
Sensitivity of quantity demanded to price changes
ExplanationElasticity indicates responsiveness of demand to price variations.
#3
What is the primary goal of a firm in microeconomics?
Maximizing profit
ExplanationFirms aim to achieve the highest possible earnings.
#4
What is the difference between a perfectly competitive market and a monopoly?
Perfectly competitive markets have many sellers, while monopolies have only one seller.
ExplanationCompetitive markets promote multiple sellers, while monopolies lack competition.
#5
In microeconomics, what is the significance of the production possibility frontier (PPF)?
It represents the maximum output attainable given available resources and technology.
ExplanationPPF delineates the boundary of feasible production.
#6
What is the 'price elasticity of demand' in microeconomics?
The percentage change in quantity demanded divided by the percentage change in price.
ExplanationElasticity measures responsiveness of demand to price variations.
#7
What is a 'normal good' in microeconomics?
A good for which demand increases as income increases
ExplanationNormal goods' demand rises with consumer income growth.
#8
What is the difference between explicit costs and implicit costs for a firm?
Explicit costs are direct monetary expenses, while implicit costs are opportunity costs.
ExplanationExplicit costs are easily quantifiable, whereas implicit costs are not.
#9
What is the concept of 'marginal utility' in microeconomics?
The additional satisfaction gained from consuming one more unit of a good.
ExplanationMarginal utility diminishes with each additional unit consumed.
#10
Explain the 'law of diminishing marginal returns' in microeconomics.
As production increases, the marginal product decreases.
ExplanationIncreasing inputs eventually lead to diminishing additional outputs.
#11
What is the difference between a normal profit and an economic profit for a firm?
Normal profit considers only explicit costs, while economic profit considers both explicit and implicit costs.
ExplanationEconomic profit accounts for all costs, including opportunity costs.