#1
Which of the following is a characteristic of a perfectly competitive market?
Many buyers and many sellers
ExplanationLarge number of buyers and sellers, selling homogeneous products
#2
What does the law of demand state?
As price increases, quantity demanded decreases
ExplanationInverse relationship between price and quantity demanded
#3
Which of the following is a characteristic of monopolistic competition?
Many sellers with differentiated products
ExplanationLarge number of sellers offering differentiated products
#4
What is the 'price ceiling' in microeconomics?
A maximum price set by the government below which a good cannot be sold
ExplanationGovernment-imposed upper limit on prices
#5
What is 'consumer surplus' in microeconomics?
The difference between the price a consumer is willing to pay for a good and the price actually paid
ExplanationBenefit consumers receive from paying less than their maximum willingness to pay
#6
In a competitive market, who sets the price of a product?
Market forces of supply and demand
ExplanationPrice determined by interaction of buyers and sellers
#7
In economics, what does the term 'opportunity cost' refer to?
The cost of an alternative that must be forgone to pursue a certain action
ExplanationCost of the next best alternative foregone
#8
Which of the following is NOT a determinant of supply?
Consumer preferences
ExplanationConsumer tastes and preferences do not directly affect supply
#9
What is the formula for calculating price elasticity of demand?
Percentage change in quantity demanded divided by percentage change in price
ExplanationMeasures responsiveness of quantity demanded to price changes
#10
What does the term 'deadweight loss' represent in economics?
The loss of consumer surplus due to a tax or other market distortion
ExplanationLoss in economic efficiency due to market distortion
#11
What is the primary goal of profit maximization for firms in microeconomics?
To maximize shareholder wealth
ExplanationObjective is to increase value for shareholders
#12
Which of the following is a determinant of price elasticity of demand?
Availability of substitutes
ExplanationPresence of close substitutes affects elasticity
#13
What is the 'Laffer Curve' in economics?
A graphical representation of the relationship between tax rates and tax revenue
ExplanationIllustrates the trade-off between tax rates and tax revenue
#14
What is the 'marginal rate of substitution' in microeconomics?
The rate at which a consumer is willing to substitute one good for another while maintaining the same level of satisfaction
ExplanationRate of exchange between two goods with constant utility
#15
What is a 'Giffen good' in economics?
A good that violates the law of demand
ExplanationRare situation where demand increases with price
#16
What is the 'Pareto efficiency' in microeconomics?
A situation where no one can be made better off without making someone else worse off
ExplanationOptimal allocation of resources with no one worse off