Introduction to Microeconomics: Master the Fundamentals of Economic Decision-Making

Question 1

In a perfectly competitive market, firms are known for being:

Accepted Answer

Price takers.

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Having market power.

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Setting their own prices.

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Facing significant barriers to entry.

Question 2

The fundamental reason for scarcity is:

Accepted Answer

Limited resources and unlimited wants.

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High levels of inflation and unemployment.

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Government regulations and taxation.

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Rapid technological developments.

Question 3

The concept of 'elasticity' measures:

Accepted Answer

The responsiveness of quantity demanded or supplied to changes in price.

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The correlation between price and quantity.

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The efficiency of market systems.

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The impact of government policies on economic outcomes.

Question 4

According to the law of diminishing marginal returns, as more units of a particular input are added:

Accepted Answer

The additional output (marginal product) eventually decreases.

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The overall output increases at a decreasing rate.

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The price of the good being produced increases.

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The rate of inflation decreases.

Question 5

What is the opportunity cost of a choice?

Accepted Answer

The value of the best alternative option that is sacrificed.

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The total cost of the selected option.

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The amount of money used to purchase the selected option.

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The difference in price between the chosen option and the best alternative.

Question 6

Which factor does NOT affect the location of a production possibility curve?

Accepted Answer

Consumer preferences

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Available resources

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Level of technology

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Environmental regulations

Question 7

In a market system, who determines prices?

Accepted Answer

The interaction of supply and demand

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The government

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Suppliers only

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Consumers only

Question 8

Which of the following is an example of a microeconomic topic?

Accepted Answer

Consumer behavior

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Inflation

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Economic growth

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Fiscal policy

Question 9

What is a common outcome of a price ceiling?

Accepted Answer

A shortage

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A surplus

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Equilibrium

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Efficiency

Question 10

When producing more of one good, the highest cost incurred is the:

Accepted Answer

Opportunity cost of not producing other goods.

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Actual cost of production.

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Cost of additional resources used.

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Cost of labour and capital.

Question 11

A production possibilities frontier (PPF) illustrates:

Accepted Answer

All feasible combinations of two goods that can be produced with given resources.

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The optimal combination of two goods that can be produced.

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The maximum quantity of one good that can be produced without any of the other good.

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The minimum quantity of one good that must be produced to produce any of the other good.

Question 12

In a market economy, prices are primarily determined by:

Accepted Answer

The forces of supply and demand.

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Government regulations.

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Producers' desires for profit.

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Consumer preferences alone.

Question 13

Market equilibrium occurs when:

Accepted Answer

Quantity supplied equals quantity demanded.

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Supply is greater than demand.

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Demand is greater than supply.

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Prices are at their highest.

Question 14

Government price controls can lead to:

Accepted Answer

Surpluses or shortages.

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Increased consumer satisfaction.

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Higher production levels.

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More efficient resource allocation.

Question 15

Microeconomic analysis is particularly useful for:

Accepted Answer

Understanding individual economic decision-making.

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Predicting the behaviour of entire economies.

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Determining the optimal level of government intervention.

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Explaining the causes of unemployment.

Question 16

How do technological advancements affect a nation's production capabilities?

Accepted Answer

Increase production possibilities

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Decrease production possibilities

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No impact on production possibilities

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Make production possibilities irrelevant

Question 17

Which of the following is the fundamental problem that microeconomics seeks to address?

Accepted Answer

Scarcity

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Economic growth

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Inflation

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Unemployment

Question 18

When individuals or firms make economic decisions, they consider:

Accepted Answer

Opportunity cost

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Market cost

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Marginal cost

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Sunk cost

Question 19

The graphical illustration representing the maximum possible combinations of goods and services that an economy can produce with its available resources is called the:

Accepted Answer

Production possibilities frontier

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Supply curve

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Demand curve

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Indifference curve

Question 20

In a perfectly competitive market, the price of a good is:

Accepted Answer

Determined by the forces of supply and demand

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Equal to the marginal cost

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Fixed by the government

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Controlled by a monopoly

Question 21

A fundamental assumption of the rational choice theory is that:

Accepted Answer

Individuals maximize their satisfaction or benefit

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Individuals have perfect knowledge

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Individuals always act altruistically

Question 22

The downward slope of the demand curve indicates that as the price of a good increases:

Accepted Answer

Consumers will generally buy less of it

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Suppliers will generally produce more of it

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The marginal benefit of the good increases

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The quality of the good improves

Question 23

Which of the following factors will cause a rightward shift of the supply curve?

Accepted Answer

A decrease in the cost of production

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An increase in taxes

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An increase in consumer demand

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A natural disaster

Question 24

In a free market system, the equilibrium price:

Accepted Answer

Balances the quantities of goods supplied and demanded

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Is determined by the government

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Is set below the marginal cost

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Fluctuates randomly

Question 25

The branch of economics that focuses on the behavior of individual decision-makers, such as consumers and firms, is known as:

Accepted Answer

Microeconomics

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Macroeconomics

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Behavioral economics

Answer

Econometrics