#1
Which of the following best defines the law of demand?
As prices increase, quantity demanded decreases
ExplanationInverse relationship between price and quantity demanded.
#2
What does the concept of 'utility' refer to in microeconomics?
The satisfaction or pleasure obtained from consuming a good or service
ExplanationSubjective measure of satisfaction derived from consumption.
#3
What is the equilibrium price in a market?
The price at which quantity demanded equals quantity supplied
ExplanationPoint of market balance with no excess demand or supply.
#4
In a market economy, who ultimately decides the allocation of resources?
Consumers
ExplanationConsumer preferences guide resource distribution.
#5
What is the law of supply in microeconomics?
As the price of a good increases, the quantity supplied increases
ExplanationPositive relationship between price and quantity supplied.
#6
What does the term 'elasticity of demand' measure?
The change in quantity demanded in response to a change in price
ExplanationSensitivity of quantity demanded to price changes.
#7
Which factor does NOT typically affect consumer demand?
Production cost of the good
ExplanationProduction cost doesn't directly impact consumer preferences.
#8
What is the main idea behind the concept of consumer surplus?
The difference between the price consumers are willing to pay and the price they actually pay
ExplanationMeasure of consumer benefit in a transaction.
#9
What is the law of diminishing marginal utility?
As the quantity consumed of a good increases, the marginal utility decreases
ExplanationDecrease in additional satisfaction with each consumed unit.
#10
What is the difference between a normal good and an inferior good?
Normal goods are those for which demand decreases as income increases, while inferior goods are those for which demand decreases as income decreases
ExplanationRelationship between income and demand for different goods.
#11
Which of the following is NOT a determinant of supply?
Consumer preferences
ExplanationFactors affecting supply exclude consumer tastes.
#12
What is the key assumption of perfect competition regarding market participants?
There are many buyers and many sellers, with each having a negligible impact on market price
ExplanationLarge number of participants with limited pricing power.
#13
In a monopolistically competitive market, firms differentiate their products in order to:
Gain market power and increase profits
ExplanationProduct distinctiveness for competitive advantage.
#14
Which of the following is a characteristic of a perfectly competitive market?
Price takers and identical products
ExplanationFirms accepting market price as given with homogeneous products.
#15
Which of the following statements is true about a perfectly elastic demand curve?
It is horizontal and parallel to the x-axis
ExplanationInfinitely responsive to price changes with a horizontal line.
#16
What is the main characteristic of a perfectly elastic demand curve?
It is horizontal
ExplanationTotal responsiveness with an infinitely flat demand curve.