#1
In economics, what does the term 'opportunity cost' refer to?
The value of the next best alternative forgone
ExplanationThe value of what is given up for the chosen option.
#2
Which of the following is not a factor of production?
Profit
ExplanationEarnings from production, not a resource.
#3
What is the law of supply?
As the price of a good increases, the quantity supplied increases.
ExplanationDirect relationship between price and quantity supplied.
#4
Which of the following is not a determinant of demand?
Cost of production
ExplanationCosts influence supply, not demand.
#5
What does the term 'ceteris paribus' mean in economics?
All else being equal
ExplanationHolding all other factors constant.
#6
What is the primary goal of a firm in a market economy?
Maximizing profits
ExplanationFinancial optimization.
#7
Which of the following best describes the law of diminishing returns?
As more of a variable input is added to a fixed input, the marginal product of the variable input eventually decreases.
ExplanationDecrease in productivity as more resources are added.
#8
What is the relationship between marginal cost and marginal product in the short run?
Marginal cost is increasing when marginal product is decreasing.
ExplanationCost rises as productivity falls.
#9
What does the production possibility frontier illustrate?
The maximum efficiency of production given current resources and technology
ExplanationEfficient allocation of resources.
#10
Which of the following is a characteristic of perfect competition?
There are no barriers to entry or exit
ExplanationFreedom of entry and exit for firms.
#11
What is the law of diminishing marginal utility?
As the quantity of a good consumed increases, the marginal utility decreases.
ExplanationDecreasing additional satisfaction from consuming more.
#12
Which of the following is a characteristic of monopolistic competition?
There are many small firms in the market.
ExplanationLarge number of competitors with differentiated products.
#13
Which of the following is an example of a positive externality?
A beekeeper's bees pollinating nearby crops
ExplanationBeneficial side effect on a third party.
#14
What is the formula to calculate elasticity of demand?
Percentage change in quantity demanded divided by percentage change in price
ExplanationMeasurement of responsiveness of demand to price changes.
#15
What is the main function of the Federal Reserve in the United States?
Monetary policy
ExplanationRegulation of money supply and interest rates.
#16
Which of the following is a characteristic of a command economy?
Centralized planning by the government
ExplanationGovernment controls production and distribution.
#17
What is the concept of the 'invisible hand' in economics, as proposed by Adam Smith?
It describes how self-interested individuals unintentionally promote the social interest through their economic actions.
ExplanationMarket self-regulation through individual actions.