micro economics revision

Question 1

What is microeconomics?

Answer 1

Microeconomics is the branch of economics that studies individual agents, such as households and firms, and their interactions in markets.

Question 2

True or False: Microeconomics focuses on the economy as a whole.

Answer 2

False

Question 3

Fill in the blank: The study of how consumers allocate their resources is a key concept in __________.

Answer 3

microeconomics

Question 4

What is the law of demand?

Answer 4

The law of demand states that, all else being equal, as the price of a good decreases, the quantity demanded increases, and vice versa.

Question 5

What does ‘ceteris paribus’ mean?

Answer 5

‘Ceteris paribus’ is a Latin phrase meaning ‘all other things being equal.’

Question 6

Define ‘elasticity’ in microeconomics.

Answer 6

Elasticity measures how much the quantity demanded or supplied of a good responds to changes in price or other factors.

Question 7

What is a perfectly elastic demand curve?

Answer 7

A perfectly elastic demand curve is horizontal, indicating that consumers will buy any quantity at a specific price but none at a higher price.

Question 8

Multiple Choice: Which of the following represents a shift in demand? A) Increase in consumer income B) Change in the price of the good C) Change in quantity supplied

Answer 8

A) Increase in consumer income

Question 9

What is the law of supply?

Answer 9

The law of supply states that, all else being equal, as the price of a good increases, the quantity supplied increases, and vice versa.

Question 10

True or False: A decrease in the price of a substitute good will cause an increase in the demand for the original good.

Answer 10

False

Question 11

What is a market equilibrium?

Answer 11

Market equilibrium is the point where the quantity demanded equals the quantity supplied at a certain price.

Question 12

Fill in the blank: A decrease in supply, with demand held constant, will lead to an increase in __________.

Answer 12

price

Question 13

What is consumer surplus?

Answer 13

Consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay.

Question 14

Define ‘producer surplus’.

Answer 14

Producer surplus is the difference between what producers are willing to accept for a good and the actual price they receive.

Question 15

Multiple Choice: Which factor does NOT affect demand? A) Consumer preferences B) Price of the good C) Number of suppliers

Answer 15

C) Number of suppliers

Question 16

What does ‘marginal utility’ refer to?

Answer 16

Marginal utility refers to the additional satisfaction or benefit gained from consuming one more unit of a good or service.

Question 17

True or False: Diminishing marginal utility means that as a person consumes more of a good, the additional satisfaction decreases.

Answer 17

True

Question 18

What is a ‘normal good’?

Answer 18

A normal good is a good for which demand increases as consumer income rises.

Question 19

What is an ‘inferior good’?

Answer 19

An inferior good is a good for which demand decreases as consumer income rises.

Question 20

Fill in the blank: The __________ curve represents the relationship between the price of a good and the quantity supplied.

Answer 20

supply

Question 21

What is the difference between ‘fixed costs’ and ‘variable costs’?

Answer 21

Fixed costs do not change with the level of output, while variable costs do change with the level of output.

Question 22

Multiple Choice: Which of the following is an example of a fixed cost? A) Raw materials B) Rent for a factory C) Labor costs

Answer 22

B) Rent for a factory

Question 23

What is the concept of ‘opportunity cost’?

Answer 23

Opportunity cost is the value of the next best alternative that is forgone when a decision is made.

Question 24

True or False: Opportunity cost is always monetary.

Answer 24

False

Question 25

What is a 'monopoly'?

Answer 25

A monopoly is a market structure where a single seller controls the entire market for a good or service.

Question 26

What is 'perfect competition'?

Answer 26

Perfect competition is a market structure characterized by many buyers and sellers, homogenous products, and easy entry and exit from the market.

Question 27

Fill in the blank: In a monopoly, the firm is a __________ maker.

Answer 27

price

Question 28

What does 'price discrimination' mean?

Answer 28

Price discrimination is the practice of charging different prices to different consumers for the same good or service.

Question 29

Multiple Choice: Which of the following is NOT a characteristic of perfect competition? A) Many sellers B) Homogeneous products C) Barriers to entry

Answer 29

C) Barriers to entry

Question 30

What is 'market failure'?

Answer 30

Market failure occurs when the allocation of goods and services is not efficient, often due to externalities or public goods.

Question 31

True or False: Externalities can be positive or negative.

Answer 31

True

Question 32

Define 'public goods'.

Answer 32

Public goods are goods that are non-excludable and non-rivalrous, meaning they can be consumed by anyone without reducing availability to others.

Question 33

What is 'price elasticity of demand'?

Answer 33

Price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price.

Question 34

Multiple Choice: If the price of a good increases and the quantity demanded decreases significantly, the demand is considered: A) Elastic B) Inelastic C) Unit elastic

Answer 34

A) Elastic

Question 35

What does 'marginal cost' refer to?

Answer 35

Marginal cost is the cost of producing one additional unit of a good or service.

Question 36

Fill in the blank: The __________ is the point where marginal cost equals marginal revenue.

Answer 36

profit maximizing output

Question 37

What is 'game theory'?

Answer 37

Game theory is a mathematical approach to studying strategic interactions among rational decision-makers.

Question 38

True or False: In oligopoly, firms may benefit from collusion.

Answer 38

True

Question 39

What is a 'price floor'?

Answer 39

A price floor is a minimum price set by the government for a good or service, above the equilibrium price.

Question 40

What is a 'price ceiling'?

Answer 40

A price ceiling is a maximum price set by the government for a good or service, below the equilibrium price.

Question 41

Define 'monopolistic competition'.

Answer 41

Monopolistic competition is a market structure where many firms sell products that are similar but not identical.