#1
1. What does the law of demand state?
As price increases, quantity demanded decreases.
ExplanationHigher prices lead to lower demand.
#2
6. What is the difference between a change in quantity supplied and a change in supply?
A change in supply is a movement along the supply curve.
ExplanationSupply curve shifts due to factors other than price.
#3
11. What is the concept of price elasticity of supply?
A measure of how responsive quantity supplied is to a change in price.
ExplanationSupplier responsiveness to price fluctuations.
#4
16. What is the concept of consumer surplus?
The difference between the maximum price a consumer is willing to pay and the actual price paid.
ExplanationExcess benefit consumers receive from paying less.
#5
21. What is the concept of consumer equilibrium in microeconomics?
The point where the consumer maximizes utility given their budget constraint.
ExplanationOptimal utility within budget limitations.
#6
2. Which factor does NOT typically influence demand?
Cost of production
ExplanationProduction costs affect supply, not demand.
#7
3. What is the elasticity of demand?
A measure of how responsive quantity demanded is to a change in price.
ExplanationIt quantifies consumers' responsiveness to price changes.
#8
7. What is the law of diminishing marginal returns?
As more units of a variable input are added to a fixed input, the marginal product of the variable input decreases.
ExplanationAdding units of input yields decreasing additional output.
#9
8. What is the difference between normal goods and inferior goods?
Normal goods are goods for which demand increases as income increases, and inferior goods are the opposite.
ExplanationIncome affects demand differently for each.
#10
12. What is the cross-price elasticity of demand?
A measure of how responsive the quantity demanded of one good is to a change in the price of another good.
ExplanationRelation between demand for different goods.
#11
13. What is a price floor, and how does it impact the market?
A government-imposed minimum price for a good or service.
ExplanationPrevents prices from falling below a certain level.
#12
4. What is a price ceiling?
A government-imposed maximum price for a good or service.
ExplanationLimits prices from exceeding a set maximum.
#13
5. In a perfectly competitive market, what is true about the price and output of each firm?
They take the market price as given and produce at the profit-maximizing level.
ExplanationFirms compete based on market price.
#14
9. What is a subsidy, and how does it affect the market?
A subsidy is a payment from the government to producers, leading to a decrease in prices.
ExplanationGovernment support lowers production costs.
#15
10. What is the difference between a movement along the demand curve and a shift of the demand curve?
A movement is a change in both price and quantity demanded, while a shift is a change in factors other than price.
ExplanationMovement relates to price and quantity changes.
#16
14. What is the difference between a normal profit and an economic profit?
A normal profit is the minimum profit required to keep a business running, while economic profit includes opportunity costs.
ExplanationEconomic profit accounts for opportunity costs.
#17
15. In a market with perfectly elastic demand, how does the firm set its price?
By following the market price.
ExplanationPrice determined by market conditions.