#1
What does the law of diminishing marginal utility state?
As consumption of a product increases, its marginal utility decreases
ExplanationThe additional satisfaction from each unit of a good decreases as more of it is consumed.
#2
According to the law of demand, what happens to quantity demanded when price increases, holding other factors constant?
Quantity demanded decreases
ExplanationConsumers buy less of a good when its price rises, assuming other factors remain constant.
#3
What does the law of supply state?
As price increases, quantity supplied increases
ExplanationProducers offer more of a good at higher prices, assuming other factors remain constant.
#4
What does the term 'ceteris paribus' mean in economics?
All else being equal
ExplanationAnalyzing the effect of a change while holding other factors constant.
#5
In economics, what does the term 'GDP' stand for?
Gross Domestic Product
ExplanationTotal value of all goods and services produced within a country in a given period.
#6
What is the law of diminishing returns?
As more units of a variable input are added to a fixed input, the marginal product of the variable input decreases
ExplanationAdding more of a variable input to a fixed input leads to decreasing additional output.
#7
Which of the following is a basic assumption of the rational choice theory in economics?
Individuals maximize utility
ExplanationPeople make choices to maximize their satisfaction or well-being.
#8
Which of the following is NOT a characteristic of a perfectly competitive market?
Price-setting power of individual firms
ExplanationIn perfect competition, no single firm has control over market price.
#9
What is the concept of opportunity cost in economics?
The value of the next best alternative foregone
ExplanationThe cost of forgoing the next best alternative when making a decision.
#10
Which of the following is a characteristic of monopolistic competition?
Product differentiation
ExplanationFirms offer unique products, creating a degree of market power.
#11
What is the concept of elasticity of demand?
The responsiveness of quantity demanded to a change in price
ExplanationMeasures how consumers adjust demand in response to price fluctuations.
#12
What is the primary role of the central bank in a country's economy?
To control inflation and stabilize the currency
ExplanationCentral banks manage monetary policy to regulate economic stability.
#13
What is the 'Tragedy of the Commons'?
A situation where individuals overuse or deplete a shared resource
ExplanationWhen individuals exploit a common resource, depleting it for their own gain.
#14
In economics, what is the difference between positive and normative statements?
Positive statements are based on facts, while normative statements are based on opinions
ExplanationPositive statements describe what is, while normative statements express value judgments.
#15
What is the concept of perfect information in economics?
Consumers have complete knowledge about all available products and prices
ExplanationAssumes consumers are fully informed about available goods and their prices.
#16
What is the concept of externalities in economics?
The unintended consequences of economic activities affecting third parties
ExplanationSide effects of economic activities impacting individuals not directly involved.