Economics Unit 1 Foundations

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Questions and Answers

Which of the following is NOT a factor that affects the elasticity of demand?

Cost of production (correct)

Price of the good

Time

Availability of substitutes

What is the definition of a 'Floor price'?

A price set above the equilibrium price to protect producers. (correct)

A price set by the government to control the market.

A price set below the equilibrium price to protect consumers.

A price determined by the forces of supply and demand.

What type of economy is characterized by private ownership of resources, free markets, and limited government intervention?

Command economy

Traditional economy

Market economy (correct)

Socialist economy

Which of the following is an example of a negative externality?

Air pollution from a factory (D) Signup and view all the answers

What is the difference between 'perfectly inelastic demand' and 'inelastic demand'?

Perfectly inelastic demand means the quantity demanded does not change at all, while inelastic demand means the quantity demanded changes slightly. (C) Signup and view all the answers

Which of the following is NOT a factor of demand?

Cost of production (A) Signup and view all the answers

What is the opportunity cost of a decision?

The value of the best alternative forgone. (A) Signup and view all the answers

What is the purpose of a Production Possibilities Curve (PPC)?

To show the relationship between the production of two goods. (C) Signup and view all the answers

Which of the following is NOT a characteristic of a perfectly competitive market?

Significant market power (B) Signup and view all the answers

What happens to total revenue when demand is elastic and price decreases?

Total revenue increases. (B) Signup and view all the answers

A company that merges with a supplier to gain control of the supply chain is engaging in a:

Vertical merger (B) Signup and view all the answers

Which of the following is NOT a characteristic of a monopoly?

Perfect competition (D) Signup and view all the answers

If a company produces 10 units of output at a total cost of $100 and 11 units of output at a total cost of $115, the marginal cost of the 11th unit is:

$15 (D) Signup and view all the answers

Which of the following market structures is characterized by few firms, differentiated products, and significant barriers to entry?

Oligopoly (A) Signup and view all the answers

A firm is experiencing decreasing returns to scale if:

Output increases at a rate slower than input increases. (C) Signup and view all the answers

Which of the following is a characteristic of a public good?

Non-excludable and non-rivalrous (C) Signup and view all the answers

Study Notes

Unit 1 Foundations of Economics

Economics: The study of how societies use limited resources to satisfy unlimited wants.
Opportunity Cost: The value of the next best alternative forgone when a choice is made.
Scarcity: The fundamental economic problem of unlimited wants exceeding limited resources.
Production Possibility Curve (PPC): A graph depicting the maximum combinations of two goods or services an economy can produce with its available resources.

Demand

Demand: The quantity of a good or service that consumers are willing and able to buy at various prices during a specific time period.
Law of Demand: As the price of a good increases, the quantity demanded decreases, and vice versa, all other factors remaining constant.
Factors of Demand: Factors that affect consumer willingness and ability to purchase a good or service. (Specific factors need the data)

Supply

Supply: The quantity of a good or service that producers are willing and able to offer for sale at various prices during a specific time period.
Law of Supply: As the price of a good increases, the quantity supplied increases, and vice versa, all other factors remaining constant.
Factors of Supply: (Specific factors need the data)

Unit 2A + B: Elasticity + The Firm

Elastic Demand: Demand is responsive to price changes.
Inelastic Demand: Demand is relatively unresponsive to price changes.
Perfectly Elastic Demand: Demand is infinitely responsive to price changes.
Perfectly Inelastic Demand: Demand is completely unresponsive to price changes.
Factors of Elasticity of Demand: (Specific factors need to be added).
Revenue and Price Elasticity Relationships: Relationship between price changes and total revenue obtained

Unit 2: Elasticity + The Firm, continued

Cross Price Elasticity: Measures the responsiveness of demand for one good to a change in the price of another good.
Income Elasticity: Measures the responsiveness of demand for a good to a change in consumer income.
Factors of Elasticity of Supply: (List factors)
Applications of Price Elasticity (and misconceptions): (List the applications)

Unit 2: Corporations, Sole Proprietorships, partnerships, etc.

Corporations and Characteristics: (Characteristics of Corporations listed, if present)
Sole Proprietorship and Characteristics: (Characteristics of Sole Proprietorship listed, if present)
Partnership and Characteristics: (Characteristics of Partnership listed, if present)
Non-Profits and Characteristics: (Characteristics of Nonprofits listed, if present)

Unit 3: The Government

Human Development Index (HDI): A composite index measuring a country's average achievement in key dimensions of human development.
Gross National Happiness (GNH): A philosophical concept and development approach emphasizing happiness, health, education, good governance, and cultural preservation.
Wage Determination (list): (List needed)
Lorenz Curve: Depicts the distribution of income in an economy.
Lorenz Curve Calculations: (Data needed for the calculations to be included)

Unit 4: Macroeconomics

GDP vs. GNP: Gross Domestic Product versus Gross National Product.
GDP (Income and expenditure approach): Methods for calculating Gross Domestic Product.
Circular Flow Model: A diagram illustrating the flow of goods, services, and money in an economy.
Types of employment:(List)
Inflation: A sustained increase in the general price level of goods and services in an economy over a period of time.
Consumer Price Index (CPI): A measure of the average change over time in the prices paid by urban consumers for a basket of consumer goods and services.
Fiscal Policy: Government policies concerning taxation and expenditure for economic stabilization.
Expansionary Fiscal Policy: Involves increased government spending and/or tax cuts to stimulate the economy during a recession.
Contractionary Fiscal Policy: Involves decreased government spending and/or tax increases to cool down an overheating economy.

Unit 3 + Unit 4 (Continued)

Public Goods: Goods that are non-excludable and non-rivalrous.
Horizontal Merger: Combination of two or more firms in the same industry.
Vertical Merger: Combination of companies at different stages of production.
Conglomerate: Combination of companies unrelated in various industries.

Types of Market Structures

Perfect Competition: (Characteristics of perfect competition include number of buyers and sellers, type of product sold, barriers to entry, and market power)
Monopoly: (Characteristics of monopoly include number of buyers and sellers, barriers to entry, and market power)
Monopolistic Competition: (Characteristics of monopolistic competition include number of buyers and sellers, type of product sold, barriers to entry, and market power)
Oligopoly: (Characteristics of oligopoly include number of buyers and sellers, type of product sold, barriers to entry, and market power)

The Firm

Revenue: Total income from sales.
TC: Total Cost
TVC: Total Variable Cost
TFC: Total Fixed Cost
ATC: Average Total Cost
AVC: Average Variable Cost
AFC: Average Fixed Cost
MC: Marginal Cost
MR: Marginal Revenue
Profit: Firm's financial gain
Break-even formula: (List)
Long Run Curve and Situation: (List information on this)
Law of diminishing returns: (List)

Please note that some sections are marked "specific factors need data". This means I need the relevant data (like lists of factors) to completely fill out that section.

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Description

This quiz covers the foundational concepts of economics, including opportunity cost, scarcity, demand, and supply. Test your understanding of key theories and definitions that establish the groundwork for economic principles. Prepare to delve into the factors influencing demand and the production possibility curve.