#1
In microeconomics, what does the term 'utility' refer to?
The satisfaction or pleasure a consumer derives from consuming goods and services
ExplanationUtility represents consumer satisfaction.
#2
What does the concept of elasticity of demand measure?
The responsiveness of quantity demanded to changes in price
ExplanationIt measures demand responsiveness to price changes.
#3
What is the primary determinant of a consumer's demand for a good according to the law of demand?
Price of the good
ExplanationPrice is the primary determinant.
#4
What is consumer surplus?
The difference between the total amount consumers are willing to pay for a good and the total amount they actually pay
ExplanationDifference between what consumers pay and are willing to pay.
#5
Which of the following is NOT a characteristic of a monopolistically competitive market?
Price takers
ExplanationMonopolistic competition doesn't have price-taking behavior.
#6
What is the concept of a production possibilities frontier (PPF) in microeconomics?
It shows the maximum combinations of goods and services that a society can produce given its resources and technology
ExplanationIllustrates maximum production possibilities.
#7
What is the law of diminishing returns in production?
As the quantity of a variable input increases, the marginal product of that input decreases, holding all other inputs constant
ExplanationMarginal product decreases with additional input.
#8
What is the law of diminishing marginal utility?
As more of a good is consumed, the additional satisfaction from consuming one more unit decreases
ExplanationThe law states satisfaction decreases with additional consumption of a good.
#9
Which of the following is NOT a characteristic of an indifference curve?
It is convex to the origin
ExplanationIndifference curves aren't necessarily convex.
#10
What is the budget constraint in consumer theory?
The limitation on the consumer's income restricting what they can afford to buy
ExplanationIt limits what a consumer can buy with their income.
#11
What is the income effect in consumer choice theory?
The change in quantity demanded of a good due to a change in consumer income
ExplanationIt relates changes in income to changes in demand.
#12
Which of the following is NOT an assumption of consumer rationality in microeconomics?
Consumers have unlimited income
ExplanationAssumes consumers have limited income.
#13
Which of the following is NOT a characteristic of a perfectly competitive market?
Barriers to entry and exit
ExplanationPerfect competition lacks entry/exit barriers.
#14
What is the substitution effect in response to a price change?
Consumers substitute one good for another when the relative price changes
ExplanationConsumers switch goods due to price changes.
#15
What is the optimal consumption bundle for a consumer?
The combination of goods and services that maximizes total utility given the consumer's income and the prices of goods
ExplanationIt maximizes total utility within budget constraints.
#16
What is the difference between ordinal utility and cardinal utility?
Ordinal utility measures utility based on the ranking of preferences, while cardinal utility assigns numerical values to utility
ExplanationOrdinal ranks, while cardinal assigns values.
#17
What is the concept of marginal rate of substitution (MRS) in consumer choice theory?
The rate at which a consumer is willing to substitute one good for another while maintaining the same level of utility
ExplanationRate of substitution while maintaining utility.
#18
What is the significance of consumer equilibrium in microeconomics?
It represents the point at which a consumer maximizes total utility given their budget constraint
ExplanationIt's where utility is maximized within budget.
#19
What is the formula to calculate price elasticity of demand using the midpoint method?
[(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]
ExplanationMidpoint formula for demand elasticity.
#20
What is the concept of market equilibrium in microeconomics?
The point where quantity demanded equals quantity supplied
ExplanationBalance of demand and supply.
#21
What is the long run in microeconomics?
A time period in which all inputs can be varied
ExplanationTime when all inputs can change.