#1
Which of the following is a fundamental assumption of microeconomics?
Individuals act rationally to maximize their utility
ExplanationMicroeconomics assumes rational decision-making to optimize individual satisfaction.
#2
What does the law of demand state?
As the price of a good increases, the quantity demanded decreases
ExplanationLaw of demand describes the inverse relationship between price and quantity demanded.
#3
What is the formula for calculating price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationPrice elasticity of demand measures the responsiveness of quantity demanded to price changes.
#4
What does marginal utility represent?
The additional satisfaction derived from consuming one more unit of a good or service
ExplanationMarginal utility quantifies the extra benefit gained from consuming an additional unit.
#5
What is the definition of opportunity cost in economics?
The cost of choosing one alternative over another
ExplanationOpportunity cost signifies the value of the next best alternative foregone.
#6
Which of the following is a characteristic of a perfectly competitive market?
Many buyers and many sellers with similar products
ExplanationPerfectly competitive markets involve numerous buyers and sellers with homogeneous goods.
#7
What is the law of diminishing marginal returns?
As input increases, the marginal product of labor eventually decreases
ExplanationLaw of diminishing returns asserts that adding more of one input while holding others constant will at some point yield lower marginal returns.
#8
What is consumer surplus?
The difference between the price consumers are willing to pay and the price they actually pay
ExplanationConsumer surplus measures the additional benefit consumers receive from paying a price lower than what they were willing to pay.
#9
In consumer theory, what does the budget constraint represent?
The maximum amount a consumer is willing to spend on a good or service
ExplanationBudget constraint shows the affordability limit for consumers based on income and prices.
#10
What is a normal good in economics?
A good with a positive income elasticity of demand
ExplanationNormal goods experience an increase in demand as consumer income rises.
#11
What is the difference between a change in demand and a change in quantity demanded?
A change in demand is caused by a shift in the demand curve, while a change in quantity demanded is movement along the demand curve
ExplanationChange in demand involves a shift of the entire demand curve, while change in quantity demanded results from movement along the curve.
#12
What is the main function of a market in economics?
To allocate scarce resources efficiently
ExplanationMarket allocates resources efficiently by matching supply and demand.
#13
What is the concept of perfect competition?
A market structure with many buyers and sellers, homogeneous products, and no barriers to entry or exit
ExplanationPerfect competition features many sellers and buyers trading homogeneous goods with no barriers to entry.
#14
What does elasticity of demand measure?
The responsiveness of quantity demanded to changes in price
ExplanationElasticity of demand gauges the sensitivity of quantity demanded to price variations.