#1
Which of the following best defines the price mechanism?
The process through which prices are determined by the forces of supply and demand
ExplanationPrice mechanism is the process by which prices are determined by the interaction of supply and demand.
#2
What happens to the equilibrium price and quantity when demand increases?
Equilibrium price and quantity both increase
ExplanationWhen demand increases, both the equilibrium price and quantity in the market increase.
#3
What is the law of demand?
As the price of a good increases, the quantity demanded decreases
ExplanationThe law of demand states that as the price of a good or service increases, the quantity demanded decreases, and vice versa.
#4
Which of the following is NOT a determinant of supply?
Consumer preferences
ExplanationConsumer preferences are not typically considered a determinant of supply.
#5
In economics, what does elasticity of demand measure?
How sensitive quantity demanded is to a change in price
ExplanationElasticity of demand measures how responsive quantity demanded is to changes in price.
#6
What is a price ceiling?
A government-imposed maximum price that can be charged for a product
ExplanationA price ceiling is a legal maximum price set by the government for certain goods and services.
#7
What is a price floor?
A government-imposed minimum price that must be paid for a product
ExplanationA price floor is a government-imposed minimum price that must be paid for a particular good or service.
#8
What is the main difference between a perfectly competitive market and a monopoly?
In a perfectly competitive market, there are many buyers and sellers, while a monopoly has only one seller
ExplanationA perfectly competitive market has many buyers and sellers, whereas a monopoly has only one seller.
#9
Which factor does NOT typically influence the elasticity of demand for a product?
The cost of production
ExplanationThe cost of production typically does not influence the elasticity of demand for a product.
#10
What is price discrimination?
The practice of charging different prices to different consumers for the same product
ExplanationPrice discrimination is the practice of charging different prices to different customers for the same product or service.
#11
What is the formula for price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationPrice elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.
#12
What is a Giffen good?
A good for which demand increases as price increases
ExplanationA Giffen good is a product that people consume more of as the price rises, violating the law of demand.