Enhance Your Knowledge Of Microeconomics With This Quiz!
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Enhance your knowledge of microeconomics with this quiz! There are certain topics in this world that you may not know or may never have any intention of knowing about, but one thing that everybody should have a foundation level of knowledge in is the subject of business and economics. Today, we’ll be dipping a toe into that pool by enhancing your knowledge on microeconomics. Think you can get all of the questions correct? Let’s find out!
- 1.
If a society is at point that is inside the production possibilities frontier, the society is experiencing
- A.
Inefficiency
- B.
Maximizing output
- C.
Equity
- D.
Efficiency
Correct Answer
A. InefficiencyExplanation
If a society is at a point that is inside the production possibilities frontier, it means that the society is not utilizing its resources to their full potential. This indicates inefficiency because the society is capable of producing more goods and services, but it is not doing so. This could be due to factors such as underutilization of resources, lack of technological advancements, or inefficient allocation of resources. Therefore, the correct answer is inefficiency.Rate this question:
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- 2.
Opportunity Cost can be measured as the..
- A.
Decrease in the quantity produced of one good as we move along the production possibilities frontier
- B.
Increase in the quantity produced of one good as we move along the production possibilities frontier
- C.
Increase in the quantity produced of one good divided by the decrease in the quantity produced of another good as we move along the production possibilities frontier
- D.
Decrease in the quantity produced of one good divided by the increase in the quantity produced of another good as we move along the production possibilities frontier
Correct Answer
D. Decrease in the quantity produced of one good divided by the increase in the quantity produced of another good as we move along the production possibilities frontierExplanation
Opportunity cost refers to the loss of potential gain from other alternatives when one alternative is chosen. In the context of the production possibilities frontier, it represents the trade-off between producing more of one good and producing less of another good. As we move along the production possibilities frontier, there is a decrease in the quantity produced of one good and an increase in the quantity produced of another good. Therefore, the correct answer is "Decrease in the quantity produced of one good divided by the increase in the quantity produced of another good as we move along the production possibilities frontier." This accurately captures the concept of opportunity cost in terms of the trade-off between different goods.Rate this question:
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- 3.
When we cannot produce more of any one good without giving up some other good that we value more highly, we haved achieved?
- A.
Production efficiency
- B.
Inefficiency
- C.
Equal opportunity
- D.
Allocative efficiency
Correct Answer
A. Production efficiencyExplanation
Production efficiency refers to the situation where we cannot produce more of any one good without giving up some other good that we value more highly. This means that resources are being utilized in the most efficient way possible, maximizing output without wasting any resources. In other words, it indicates that the economy is producing goods and services at the lowest possible cost, given the available resources and technology.Rate this question:
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- 4.
An upward or outward shift in the production possibilities frontier is indicative of?
- A.
Inefficiency
- B.
Efficiency
- C.
Economic growth
- D.
Equity
Correct Answer
C. Economic growthExplanation
An upward or outward shift in the production possibilities frontier is indicative of economic growth. This means that an economy is able to produce more goods and services over time, indicating an increase in productivity and resources. This shift suggests that the economy is becoming more efficient and able to produce at a higher level, leading to overall growth in the economy.Rate this question:
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- 5.
In the circular flow of the market economy,
- A.
Households are sellers in resource markets and buyers in goods markets
- B.
Households are buyers in resources markets and sellers in goods markets
- C.
Firms are sellers in resource markets and buyers in goods markets
- D.
Households are excluded and only firms are represented
Correct Answer
A. Households are sellers in resource markets and buyers in goods marketsExplanation
In a circular flow of the market economy, households play the role of sellers in resource markets by providing their labor and other resources to firms. They receive income in return for these resources. On the other hand, households act as buyers in goods markets by purchasing goods and services produced by firms using the income they earned. This flow of resources and money between households and firms creates a circular flow of economic activity in the market economy.Rate this question:
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- 6.
The amount that consumers plan to buy during a given time period at a particular price is the?
- A.
Quantity demanded
- B.
Demand
- C.
Supply
- D.
Quantity supplied
Correct Answer
A. Quantity demandedExplanation
The amount that consumers plan to buy during a given time period at a particular price is referred to as quantity demanded. This term represents the quantity of a product or service that consumers are willing and able to purchase at a specific price point. It is an essential concept in economics as it helps in understanding consumer behavior and market demand.Rate this question:
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- 7.
When the price of a good or service rises, ceteris paribus, its opportunity cost..
- A.
Remains the same
- B.
Cannot be determined
- C.
Rises
- D.
Falls
Correct Answer
C. RisesExplanation
When the price of a good or service rises, ceteris paribus, its opportunity cost also rises. This is because when the price increases, individuals have to give up more of other goods or services in order to obtain the same quantity of the good or service whose price has increased. Therefore, the opportunity cost of obtaining that good or service increases as well.Rate this question:
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- 8.
If the price of a good or service falls, then the demand curve for a complementary good or service will?
- A.
Decrease
- B.
Remain the same
- C.
Increase
- D.
Decrease initially and then increase
Correct Answer
C. IncreaseExplanation
When the price of a good or service falls, it becomes more affordable for consumers, leading to an increase in demand. As a result, the demand curve for a complementary good or service will also increase. Complementary goods are those that are used together, so when the price of one good decreases, it incentivizes consumers to purchase more of that good, which in turn increases the demand for the complementary good.Rate this question:
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- 9.
A good whose demand increases as income increases is a
- A.
Complement
- B.
Inferior good
- C.
Normal good
- D.
Subsitute
Correct Answer
C. Normal goodExplanation
A normal good is a type of good whose demand increases as income increases. This means that as people's income rises, they are willing and able to purchase more of this good. This is because normal goods are considered to be of higher quality or luxury items, and as people have more disposable income, they are more likely to spend it on these goods. Therefore, the correct answer is normal good.Rate this question:
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- 10.
If the price of a good or service falls , ceteris paribus, there is a?
- A.
Rightward shift in the supply curve
- B.
Leftward shift in the supply curve
- C.
Movement up along the supply curve
- D.
Movement down along the supply curve
Correct Answer
D. Movement down along the supply curveExplanation
When the price of a good or service falls, ceteris paribus (all other factors remaining constant), there is a movement down along the supply curve. This means that as the price decreases, suppliers are willing to supply less of the good or service. The quantity supplied decreases as a result of the lower price. This movement down along the supply curve indicates a decrease in the quantity supplied, but the supply curve itself does not shift.Rate this question:
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- 11.
All of the following are likely to cause an increase in the supply of beef except:
- A.
An increase in the number of cattle ranchers
- B.
An increase in the demand for chicken
- C.
An increase in the demand for leather goods
- D.
A fall in the price of feed grain that is fed to cattle
Correct Answer
B. An increase in the demand for chickenExplanation
An increase in the demand for chicken would not cause an increase in the supply of beef because beef and chicken are two different types of meat. The increase in demand for chicken would likely lead to an increase in the supply of chicken, not beef.Rate this question:
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- 12.
A market moves toward its equilibrium through adjustments in
- A.
Quantity
- B.
Price
- C.
Supply
- D.
Demand
Correct Answer
B. PriceExplanation
The market moves toward its equilibrium through adjustments in price because price acts as a mechanism to balance supply and demand. When there is excess demand, prices tend to rise, signaling to suppliers that they can increase their prices and earn more profit. This encourages suppliers to produce more, increasing the quantity supplied and eventually reducing the excess demand. On the other hand, when there is excess supply, prices tend to fall, signaling to consumers that they can purchase goods at lower prices. This stimulates demand, increasing the quantity demanded and eventually reducing the excess supply. Therefore, price adjustments play a crucial role in bringing the market closer to its equilibrium.Rate this question:
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- 13.
In the market for chocolate chip cookies, an increase in demand will result in
- A.
A decrease in both price and quantity
- B.
An increase in both price and quantity
- C.
An increase in price and a decrease in quantity
- D.
A decrease in price and an increase in quantity
Correct Answer
B. An increase in both price and quantityExplanation
An increase in demand for chocolate chip cookies will result in an increase in both price and quantity. When the demand for a product rises, producers will often increase the price to take advantage of the higher demand and maximize their profits. Additionally, they may also increase the quantity produced to meet the increased demand and ensure that enough cookies are available for consumers. Therefore, both the price and quantity of chocolate chip cookies will increase when there is an increase in demand.Rate this question:
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- 14.
A price ceiling can cause an excess demand which leads to an illegal market in which the price exceeds the legally imposed price ceiling that is called a
- A.
Free market
- B.
Black market
- C.
Free trade market
- D.
Regulated market
Correct Answer
B. Black marketExplanation
A price ceiling is a maximum price set by the government for a particular good or service. When the price ceiling is set below the equilibrium price, it creates a situation where the quantity demanded exceeds the quantity supplied, resulting in excess demand. In such cases, a black market emerges where sellers are able to charge prices higher than the legally imposed ceiling. This illegal market allows buyers and sellers to trade at a price that is higher than the government-determined maximum, hence the term "black market".Rate this question:
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- 15.
A minimum wage is an example of
- A.
A tax
- B.
Price ceiling
- C.
Price floor
- D.
Subsidy
Correct Answer
C. Price floorExplanation
A minimum wage is an example of a price floor. It sets a legally mandated minimum price that employers must pay for labor. This means that employers cannot pay their workers below this minimum wage, ensuring that workers receive a fair compensation for their labor. By setting a price floor, it aims to protect workers from exploitation and ensure a basic standard of living.Rate this question:
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- 16.
Minimum wage legislation leads to
- A.
Efficiency
- B.
Economic growth
- C.
Unemployment
- D.
Capital accumulation
Correct Answer
C. UnemploymentExplanation
Minimum wage legislation leads to unemployment because when the government sets a minimum wage above the equilibrium wage rate, it increases the cost of labor for businesses. As a result, businesses may be unable or unwilling to hire as many workers, leading to a decrease in employment opportunities. This can result in higher levels of unemployment as workers who are willing to work at the minimum wage may not be able to find employment.Rate this question:
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- 17.
The price elasticity of demand measures the responsiveness of the
- A.
Quantity demanded to change in the price of a good, ceteris paribus
- B.
Price to a change in the quantity demanded of a good, ceteris paribus
- C.
Price to a change in the quantity supplied of a good, ceteris paribus
- D.
Quantity supplied to a change in the price of a good, ceteris paribus
Correct Answer
A. Quantity demanded to change in the price of a good, ceteris paribusExplanation
The price elasticity of demand measures how sensitive the quantity demanded of a good is to changes in its price, assuming all other factors remain constant. It helps determine the extent to which a change in price affects the quantity demanded. A higher price elasticity of demand indicates that a small change in price will result in a proportionally larger change in quantity demanded, suggesting that the good is more price-sensitive.Rate this question:
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- 18.
If the quantity demanded of chocolate chip cookies falls from 10 pounds to 5 pounds when the price of the cookies rises from $4.00 to $5.00, the price elasticity of demand is
- A.
3
- B.
5 pounds
- C.
$1.00
- D.
1/3
Correct Answer
A. 3Explanation
The price elasticity of demand measures the responsiveness of the quantity demanded to changes in price. In this case, the quantity demanded of chocolate chip cookies falls from 10 pounds to 5 pounds when the price rises from $4.00 to $5.00. This indicates that the quantity demanded is relatively responsive to changes in price. A price elasticity of 3 suggests that for every 1% increase in price, the quantity demanded will decrease by 3%. Therefore, the given answer of 3 is the correct choice for the price elasticity of demand in this scenario.Rate this question:
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- 19.
If the price elasticity of demand is 3.5, an increase in price will
- A.
Increase total revenue
- B.
Have no effect on total revenue
- C.
Decrease total revenue
- D.
Have an unpredictable effect on total revenue
Correct Answer
C. Decrease total revenueExplanation
When the price elasticity of demand is 3.5, it means that a 1% increase in price will result in a 3.5% decrease in quantity demanded. Therefore, an increase in price will lead to a decrease in total revenue because the decrease in quantity demanded will outweigh the increase in price.Rate this question:
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- 20.
If a price cut decreases total revenue, demand is
- A.
Unit elastic
- B.
Relatively elastic
- C.
Relatively inelastic
- D.
Perfectly elastic
Correct Answer
C. Relatively inelasticExplanation
If a price cut decreases total revenue, it suggests that the decrease in price did not result in a significant increase in quantity demanded. This indicates that the demand for the product is relatively inelastic. Inelastic demand means that changes in price have a relatively small impact on the quantity demanded. Therefore, a price cut did not lead to a substantial increase in demand, resulting in a decrease in total revenue.Rate this question:
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- 21.
Factors that influence the elasticity of demand inculde all of the following except
- A.
Resource substitution possibilities
- B.
Closeness of substitutes
- C.
Time elapsed since a price change
- D.
Proportion of income spent on the good
Correct Answer
A. Resource substitution possibilitiesExplanation
The elasticity of demand is a measure of how responsive the quantity demanded of a good is to changes in its price. Factors that influence elasticity include the closeness of substitutes, time elapsed since a price change, and the proportion of income spent on the good. Resource substitution possibilities, on the other hand, refer to the ability to replace one resource with another in the production process. This factor does not directly affect the demand for a good, so it is not included in the list of factors that influence elasticity.Rate this question:
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- 22.
The elasticity of demand for a good that has a lot of close substitutes is likely to be
- A.
Have an elasticity of zero
- B.
Elastic
- C.
Inelastic
- D.
Unit elastic
Correct Answer
B. ElasticExplanation
When a good has a lot of close substitutes, it means that consumers have many alternative options to choose from. This increases their responsiveness to changes in price, as they can easily switch to a substitute if the price of the good they originally preferred increases. Therefore, the demand for a good with many close substitutes is likely to be elastic, meaning that a small change in price will lead to a relatively larger change in quantity demanded.Rate this question:
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- 23.
The cross elasticity of demand for a substitute is
- A.
Equal to one
- B.
Less than zero
- C.
Equal to one
- D.
Less than zero
Correct Answer
A. Equal to oneExplanation
The cross elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. In this case, when the cross elasticity of demand for a substitute is equal to one, it means that a percentage change in the price of one good will result in an equal percentage change in the quantity demanded of the substitute good. This indicates a strong substitutability between the two goods, where consumers are willing to switch between them easily in response to price changes.Rate this question:
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- 24.
The income elasticity of demand for an inferior good is
- A.
Equal to zero
- B.
Greater than zero
- C.
Equal to one
- D.
Less than zero
Correct Answer
D. Less than zeroExplanation
The income elasticity of demand measures the responsiveness of the quantity demanded to a change in income. An inferior good is a type of good for which demand decreases as income increases. Therefore, the income elasticity of demand for an inferior good is negative, indicating that as income increases, the quantity demanded decreases.Rate this question:
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- 25.
A price elasticity of demand for a good or service of -2.5 tells us that
- A.
The price changes by $2.50 when quantity changes by one unit
- B.
Quantity demanded decreases by 2.5% when the price rises by 1%
- C.
The price rises by 2.5% when quantity demanded falls by 1%
- D.
Quantity demanded falls by 2.5 units when price changes by $1
Correct Answer
B. Quantity demanded decreases by 2.5% when the price rises by 1%Explanation
The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. A price elasticity of -2.5 indicates that a 1% increase in price will lead to a 2.5% decrease in quantity demanded. In other words, the demand for the good or service is relatively elastic, meaning that small changes in price will result in larger changes in quantity demanded.Rate this question:
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- 26.
An (own) price elasticity of demand of -1.5 means that:
- A.
Demand is elastic
- B.
Quantity demanded changes 1.5 units for each 1% change in price
- C.
Quantity demanded changes .5% for each 1% change in price
- D.
Quantity demanded changes 5% for each 1% change in price
Correct Answer
A. Demand is elasticExplanation
An own price elasticity of demand of -1.5 means that demand is elastic. This is because the absolute value of the elasticity coefficient is greater than 1. In elastic demand, a small change in price leads to a relatively larger change in quantity demanded. In this case, a 1% change in price will result in a 1.5 unit change in quantity demanded. Therefore, the answer is that demand is elastic.Rate this question:
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- 27.
If the price of a good goes up by 5% and in response the quantity falls by 20%, the price elasticity of demand would be
- A.
-.05
- B.
-4
- C.
-.25
- D.
-.20
Correct Answer
B. -4Explanation
The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. In this case, the price of the good has increased by 5% and as a result, the quantity demanded has fallen by 20%. This indicates a relatively large change in quantity in response to a small change in price, suggesting that the demand for the good is elastic. The negative sign indicates an inverse relationship between price and quantity demanded. Therefore, the correct answer is -4, which represents a 4-fold change in quantity for every 1% change in price.Rate this question:
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- 28.
A the manager of a ski resort you want to increase the number of lift tickets sold by 8%. Your staff economist has determined that the price elasticity of demand for lift tickets is -0.5. To increase sales by the desired amount you should decrease the price of a lift ticket by :
- A.
2%
- B.
4%
- C.
8%
- D.
16%
Correct Answer
D. 16%Explanation
The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. In this case, the price elasticity of demand for lift tickets is -0.5, indicating that a 1% decrease in price will result in a 0.5% increase in quantity demanded. To increase sales by 8%, the price needs to be decreased by a larger percentage. Since a 1% decrease in price leads to a 0.5% increase in quantity demanded, an 8% increase in quantity demanded would require a 16% decrease in price. Therefore, to increase sales by the desired amount, the price of a lift ticket should be decreased by 16%.Rate this question:
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- 29.
A sporting goods store observes that as they reduce the price of squash balls from $8 to $4, their quantity demanded rises from 200 to 220. The own-price elasticity of demand of squash balls can be calculated to be?
- A.
0.14
- B.
0.3
- C.
3.3
- D.
5
Correct Answer
A. 0.14Explanation
The own-price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. In this case, as the price of squash balls is reduced from $8 to $4, the quantity demanded increases from 200 to 220. To calculate the own-price elasticity of demand, we use the formula: (percentage change in quantity demanded) / (percentage change in price). The percentage change in quantity demanded is (220-200)/200 = 0.1, and the percentage change in price is (4-8)/8 = -0.5. Therefore, the own-price elasticity of demand is 0.1 / -0.5 = 0.2.Rate this question:
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- 30.
Price Quantity $2.40 90 2.60 80 2.80 60 3.00 40 3.20 20 Demand between $2.40 and $2.60 is:
- A.
Elastic
- B.
Unit elastic
- C.
Inelastic
- D.
Perfectly elastic
Correct Answer
A. ElasticExplanation
The demand between $2.40 and $2.60 is elastic because there is a relatively large change in quantity demanded (90 to 80) in response to a relatively small change in price ($2.40 to $2.60). This indicates that the demand is responsive to price changes, suggesting that consumers are sensitive to price and are willing to adjust their purchases accordingly.Rate this question:
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- 31.
Cross-Price elasticity of demand is defined as the percentage change in____ divided by the percentage change in_____ of a related good.
- A.
Quantity, price
- B.
Quantity, quantity
- C.
Price, quantity
- D.
Price, price
Correct Answer
A. Quantity, priceExplanation
Cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another related good. It is calculated as the percentage change in quantity divided by the percentage change in price. Therefore, the correct answer is "quantity, price" as it represents the correct variables that are used to calculate cross-price elasticity of demand.Rate this question:
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- 32.
Income elasticity is_____ for normal goods.
- A.
Positive
- B.
Greater than 1
- C.
Negative
- D.
Equal to 1.
Correct Answer
A. PositiveExplanation
Income elasticity measures the responsiveness of the quantity demanded of a good to a change in income. For normal goods, as income increases, the demand for these goods also increases. Therefore, the income elasticity for normal goods is positive, indicating that a percentage increase in income leads to a greater percentage increase in the quantity demanded of the good.Rate this question:
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- 33.
For complements, cross-price elasticity is:
- A.
Negative
- B.
Positive
- C.
Between zero and one only
- D.
Zero
Correct Answer
A. NegativeExplanation
Cross-price elasticity measures the responsiveness of demand for one good to a change in the price of another good. A negative cross-price elasticity indicates that the two goods are complements, meaning that an increase in the price of one good leads to a decrease in the demand for the other good. Therefore, the correct answer is "negative."Rate this question:
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- 34.
For subsitutes, cross price elasticity is:
- A.
Negative
- B.
Positive
- C.
Between zero and one only
- D.
Zero
Correct Answer
B. PositiveExplanation
Cross price elasticity measures the responsiveness of the quantity demanded of one good to a change in the price of another good. A positive cross price elasticity indicates that the two goods are substitutes, meaning that an increase in the price of one good will lead to an increase in the demand for the other good. This is because consumers will switch to the substitute good when the price of one good becomes relatively more expensive. Therefore, the correct answer is positive.Rate this question:
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- 35.
If the demand curve is perfectly inelastic the burden of a tax on suppliers is borne:
- A.
Entirely by the suppliers
- B.
Entirely by the consumers
- C.
Mostly by the suppliers and partly by the consumers, if the demand curve
- D.
Partly by the suppliers, and mostly by the consumers, if the demand curve is elastic.
Correct Answer
B. Entirely by the consumersExplanation
If the demand curve is perfectly inelastic, it means that the quantity demanded does not change regardless of the price. In this case, consumers are willing to pay any price for the good, and the burden of the tax falls entirely on them. Suppliers can pass on the full amount of the tax to consumers without affecting the quantity demanded. Therefore, the correct answer is that the burden of the tax is borne entirely by the consumers.Rate this question:
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Mar 22, 2023Quiz Edited by
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