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web.groovymark@gmail.com
- December 7, 2024
Question 01
What is the definition of marginal cost?
a) The total cost of producing all goods
b) The cost of producing one more unit of a good
c) The amount a consumer is willing to pay for an additional unit
d) The difference between fixed and variable costs
Answer: b) The cost of producing one more unit of a good
Explanation: Marginal cost refers to the additional cost incurred when producing one more unit of a good or service. It helps businesses in deciding how much to produce.
Question 02
What does the term “price elasticity of demand” refer to?
a) How much the quantity demanded responds to changes in price
b) How much prices fluctuate over time
c) The difference between supply and demand
d) The effect of subsidies on the market
Answer: a) How much the quantity demanded responds to changes in price
Explanation: Price elasticity of demand measures the responsiveness of consumers to changes in price. A higher elasticity means demand is more sensitive to price changes.
Question 03
What is the goal of antitrust laws?
a) To create monopolies
b) To protect consumers from high prices
c) To prevent monopolies and promote competition
d) To regulate international trade
Answer: c) To prevent monopolies and promote competition
Explanation: Antitrust laws are designed to prevent monopolies, promote competition, and protect consumers by ensuring no single company can dominate a market unfairly.
Question 04
What is the impact of a price ceiling?
a) It creates a surplus in the market
b) It sets the maximum price that can be charged for a good or service
c) It encourages businesses to raise prices
d) It increases supply and lowers demand
Answer: b) It sets the maximum price that can be charged for a good or service
Explanation: A price ceiling is a government-imposed limit on how high a price can be charged for a good or service, often leading to shortages if the ceiling is below equilibrium price.
Question 05
What is the result of a price floor being set above the equilibrium price?
a) It leads to excess supply or a surplus
b) It causes prices to drop
c) It increases consumer demand
d) It creates a shortage of goods
Answer: a) It leads to excess supply or a surplus
Explanation: When a price floor is set above the equilibrium price, suppliers are willing to produce more than consumers are willing to buy, leading to a surplus.
Question 06
What is a monopoly?
a) A market with many competitors
b) A market dominated by a single seller
c) A situation where all firms have the same market share
d) A system where no firm has any market power
Answer: b) A market dominated by a single seller
Explanation: A monopoly exists when a single company or entity dominates a market, controlling the supply of a good or service and setting prices without competition.
Question 07
What is an oligopoly?
a) A market with only one producer
b) A market dominated by a few large producers
c) A market with no government intervention
d) A market where prices are set by consumers
Answer: b) A market dominated by a few large producers
Explanation: An oligopoly is a market structure where a small number of firms dominate the industry. These firms may collude to set prices or output levels.
Question 08
What is the primary purpose of taxes?
a) To increase the supply of goods
b) To generate revenue for the government
c) To decrease consumer demand
d) To reduce inflation
Answer: b) To generate revenue for the government
Explanation: Taxes are imposed by governments to raise revenue for public services, infrastructure, and other governmental functions.
Question 09
What is inflation?
a) A decrease in the price level of goods and services
b) An increase in the general price level of goods and services over time
c) A decline in consumer spending
d) A rise in the production of goods
Answer: b) An increase in the general price level of goods and services over time
Explanation: Inflation refers to the sustained increase in the overall price level of goods and services in an economy over a period of time, reducing the purchasing power of money.
Question 10
What is the role of the Federal Reserve in the U.S. economy?
a) To set tax rates
b) To regulate the stock market
c) To manage monetary policy and control inflation
d) To provide loans to businesses
Answer: c) To manage monetary policy and control inflation
Explanation: The Federal Reserve, as the central bank of the U.S., manages the money supply and interest rates to maintain price stability and control inflation.
Question 11
What is a public good?
a) A good that can only be used by those who pay for it
b) A good that is non-excludable and non-rivalrous
c) A good that is provided exclusively by private firms
d) A good that is consumed individually by a single consumer
Answer: b) A good that is non-excludable and non-rivalrous
Explanation: Public goods, like street lighting or national defense, are non-excludable and non-rivalrous, meaning they are available to everyone without diminishing in supply.
Question 12
What is the function of a subsidy?
a) To encourage the production or consumption of a particular good
b) To increase consumer prices
c) To reduce government spending
d) To eliminate tariffs
Answer: a) To encourage the production or consumption of a particular good
Explanation: Subsidies are financial aid provided by the government to encourage the production or consumption of certain goods, reducing the cost to consumers.
Question 13
What does the term “opportunity cost” mean?
a) The financial cost of a business decision
b) The benefit lost when choosing one alternative over another
c) The total cost of all inputs
d) The additional cost of producing one more unit
Answer: b) The benefit lost when choosing one alternative over another
Explanation: Opportunity cost represents the value of the next best alternative that is forgone when making a choice.
Question 14
What is perfect competition?
a) A market with a single producer
b) A market where firms have no control over prices and all products are identical
c) A market with government-set prices
d) A market where firms control both price and supply
Answer: b) A market where firms have no control over prices and all products are identical
Explanation: In perfect competition, many firms sell identical products, and no single firm can influence the price, which is determined by supply and demand.
Question 15
What is the definition of fixed costs?
a) Costs that vary with the level of output
b) Costs that do not change regardless of the level of output
c) The cost of raw materials
d) The cost of labor
Answer: b) Costs that do not change regardless of the level of output
Explanation: Fixed costs remain constant, regardless of how much is produced. Examples include rent, insurance, and salaries of permanent staff.
Question 16
What is the law of diminishing returns?
a) The idea that increasing production always leads to lower costs
b) The concept that as more units of a variable input are added to fixed inputs, the additional output will eventually decrease
c) The idea that more production will always result in higher profits
d) The relationship between supply and demand
Answer: b) The concept that as more units of a variable input are added to fixed inputs, the additional output will eventually decrease
Explanation: The law of diminishing returns states that after a certain point, each additional unit of input results in a smaller increase in output.
Question 17
What is a tariff?
a) A tax imposed on domestic goods
b) A tax on imported goods
c) A fee for licensing intellectual property
d) A penalty for monopolistic practices
Answer: b) A tax on imported goods
Explanation: A tariff is a tax imposed on goods imported into a country, often to protect domestic industries from foreign competition or raise government revenue.
Question 18
What is the balance of payments?
a) A record of all monetary transactions between a country and the rest of the world
b) The difference between a country’s imports and exports
c) A measure of a country’s debt
d) The financial statement of a company
Answer: a) A record of all monetary transactions between a country and the rest of the world
Explanation: The balance of payments summarizes all economic transactions, including trade, services, and capital flows, between residents of a country and the rest of the world.
Question 19
What is meant by the term “market failure”?
a) The collapse of an entire industry
b) A situation where free markets lead to inefficient outcomes
c) A shortage of goods in the market
d) The monopolization of an industry
Answer: b) A situation where free markets lead to inefficient outcomes
Explanation: Market failure occurs when the free market does not allocate resources efficiently, leading to outcomes like pollution or inequality.
Question 20
What is meant by “externalities” in economics?
a) The internal costs of a firm
b) The benefits or costs imposed on third parties not involved in a transaction
c) The additional costs borne by producers
d) The financial transactions between businesses
Answer: b) The benefits or costs imposed on third parties not involved in a transaction
Explanation: Externalities occur when a transaction affects someone other than the buyer or seller. Positive externalities provide benefits, while negative externalities impose costs.
