#1
Which of the following is a characteristic of a perfectly competitive market?
Many buyers and many sellers
ExplanationPerfect competition involves numerous buyers and sellers, leading to a situation where no single entity can influence the market price.
#2
What is the law of demand in microeconomics?
As prices decrease, demand increases
ExplanationThe law of demand states that as the price of a good decreases, the quantity demanded increases, ceteris paribus.
#3
Which of the following is NOT a determinant of demand?
Production costs
ExplanationProduction costs do not directly affect demand; rather, they impact supply.
#4
What is utility in the context of consumer theory?
The satisfaction or pleasure derived from consuming a good or service
ExplanationUtility represents the subjective satisfaction or benefit derived from consuming a good or service.
#5
What is the difference between explicit and implicit costs?
Explicit costs are monetary payments for resources, while implicit costs are the opportunity costs of using self-owned resources.
ExplanationExplicit costs involve direct monetary payments, while implicit costs refer to the forgone opportunities.
#6
Which of the following is a characteristic of monopolistic competition?
Product differentiation
ExplanationMonopolistic competition involves firms offering differentiated products, leading to non-price competition.
#7
What is the law of diminishing marginal utility?
As the quantity of a good consumed increases, the marginal utility derived from the good decreases.
ExplanationThe law of diminishing marginal utility states that as more units of a good are consumed, the additional satisfaction gained from each additional unit decreases.
#8
What does the concept of 'marginal utility' represent?
The additional satisfaction gained from consuming one more unit of a good or service
ExplanationMarginal utility refers to the extra satisfaction obtained from consuming an additional unit of a good or service.
#9
What is price elasticity of demand?
The percentage change in quantity demanded divided by the percentage change in price
ExplanationPrice elasticity of demand measures the responsiveness of quantity demanded to changes in price.
#10
What is the profit-maximizing rule for a firm in perfect competition?
Produce where marginal cost equals price
ExplanationIn perfect competition, firms maximize profit by producing where marginal cost equals market price.
#11
What is the difference between accounting profit and economic profit?
Accounting profit includes only explicit costs, while economic profit includes both explicit and implicit costs.
ExplanationEconomic profit considers both explicit and implicit costs, while accounting profit only considers explicit costs.
#12
What is the income effect in consumer theory?
The change in quantity demanded of a good due to a change in the consumer's income, holding constant the good's price.
ExplanationThe income effect refers to how changes in consumer income impact the quantity of a good or service demanded, assuming prices remain constant.