#1
Which of the following is a characteristic of a perfectly competitive market?
Many buyers and sellers
ExplanationPresence of numerous buyers and sellers leads to competitive pricing.
#2
What does the term 'opportunity cost' represent?
The cost of the next best alternative forgone
ExplanationOpportunity cost denotes the value of the foregone alternative when a choice is made.
#3
Which of the following is NOT a determinant of demand?
Cost of production
ExplanationCost of production affects supply, not demand.
#4
What is the formula for calculating total revenue?
Price × Quantity
ExplanationTotal revenue is the amount earned from selling a given quantity of a product at a given price.
#5
What is the formula for calculating marginal cost?
Change in total cost / Change in quantity
ExplanationMarginal cost measures the change in total cost from producing one more unit.
#6
In microeconomics, what does the term 'elasticity' refer to?
The responsiveness of quantity demanded to a change in price
ExplanationElasticity measures how much quantity demanded changes with a change in price.
#7
Which of the following is NOT a type of market structure in microeconomics?
Monopsony
ExplanationMonopsony is not a market structure; it's the dominance of a single buyer.
#8
What does the production possibilities frontier (PPF) represent?
The maximum combination of goods and services an economy can produce given its resources
ExplanationPPF illustrates the trade-offs between two goods due to limited resources.
#9
What is the formula for calculating price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationElasticity of demand measures the responsiveness of quantity demanded to price changes.
#10
In the context of consumer surplus, what does the area under the demand curve represent?
Consumer welfare
ExplanationIt represents the difference between what consumers are willing to pay and what they actually pay.
#11
What is the law of diminishing marginal utility?
As the quantity of a good consumed increases, the total utility derived from consuming that good increases at a decreasing rate
ExplanationEach additional unit of a good provides less additional satisfaction.
#12
What is Pareto efficiency?
When resources are allocated both efficiently and equitably
ExplanationAllocation where no one can be made better off without making someone worse off.
#13
What is the difference between explicit and implicit costs?
Explicit costs are monetary payments while implicit costs are non-monetary opportunity costs
ExplanationExplicit costs involve direct monetary payments; implicit costs are opportunity costs.
#14
What is the difference between economic profit and accounting profit?
Economic profit considers only explicit costs while accounting profit considers both explicit and implicit costs
ExplanationEconomic profit accounts for opportunity costs, while accounting profit does not.
#15
What is a perfectly elastic demand curve?
A demand curve that is horizontal
ExplanationQuantity demanded changes infinitely with a slight change in price.
#16
What is the difference between average variable cost and average total cost?
Average variable cost includes only variable costs, while average total cost includes both variable and fixed costs
ExplanationAVC covers costs that vary with output; ATC includes all costs, fixed and variable.
#17
What does a perfectly inelastic demand curve look like?
A vertical line
ExplanationQuantity demanded remains the same regardless of price changes.