#1
Which of the following is a characteristic of a perfectly competitive market?
Many buyers and sellers
ExplanationLarge number of buyers and sellers with no single entity influencing the market.
#2
In microeconomics, what is the term used to describe a situation where quantity supplied equals quantity demanded?
Market equilibrium
ExplanationA state where the quantity of a good or service supplied is equal to the quantity demanded.
#3
What is the main characteristic of a monopolistic competition market structure?
Product differentiation
ExplanationDifferentiation of products among competitors, giving some degree of market power.
#4
In microeconomics, what is the term used to describe a situation where one firm can produce the entire market output at a lower cost than two or more firms?
Natural monopoly
ExplanationWhen one firm can produce at a lower cost than multiple firms, leading to monopoly.
#5
In a competitive market, what happens if the price is above the equilibrium price?
A surplus occurs, leading to downward pressure on price.
ExplanationExcess supply leads to a surplus, which in turn lowers the price.
#6
What is the law of demand?
As the price of a good increases, the quantity demanded decreases.
ExplanationInverse relationship between price and quantity demanded.
#7
Which of the following is a characteristic of a monopoly market structure?
Single seller dominating the market
ExplanationOne firm dominates the market, with significant control over prices.
#8
What is consumer surplus?
The amount a buyer is willing to pay minus the actual price
ExplanationDifference between what consumers are willing to pay and what they actually pay.
#9
What is the price elasticity of demand if a 10% increase in price leads to a 5% decrease in quantity demanded?
0.5
ExplanationThe responsiveness of quantity demanded to changes in price; in this case, it's inelastic.
#10
What is the income elasticity of demand if a 10% increase in income leads to a 15% increase in quantity demanded of a normal good?
1.5
ExplanationThe responsiveness of quantity demanded to changes in income; in this case, it's elastic.
#11
Which of the following is an example of a positive externality?
Education benefits to society
ExplanationBenefits gained by a third party due to actions of others, such as education benefiting society.
#12
What is the formula for calculating price elasticity of demand?
Percentage change in quantity demanded / Percentage change in price
ExplanationMeasurement of responsiveness of quantity demanded to price changes.
#13
What is the difference between a change in quantity supplied and a change in supply?
A change in quantity supplied is caused by a change in price, while a change in supply is caused by factors other than price.
ExplanationQuantity supplied changes due to price; supply changes due to factors besides price.
#14
What is the primary determinant of the price elasticity of demand?
The availability of substitutes
ExplanationThe presence of substitutes affects how consumers respond to changes in price.
#15
What effect would an increase in the price of a complementary good have on the demand curve of the original good?
Shift the demand curve to the left
ExplanationPrice increase in a complementary good leads to less demand for the original good.
#16
Which of the following is an example of a perfectly elastic demand?
Salt
ExplanationDemand where any price increase leads to quantity demanded falling to zero.