Economics Unit 1 Foundations Quiz

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Questions and Answers

What is the primary characteristic of a monopoly in terms of market power?

Significant control over prices (correct)

High number of buyers and sellers

Homogeneous products sold

Low barriers to entry for competitors

Which market structure is characterized by many firms selling differentiated products?

Monopolistic Competition (correct)

Oligopoly

Perfect Competition

Monopoly

How does the law of diminishing returns affect a firm's production?

It increases total output indefinitely.

It maintains constant returns regardless of resource inputs.

It allows firms to gain monopoly power.

It leads to a decrease in marginal returns as more units are added. (correct)

What is the formula for calculating break-even point?

Total Revenue = Total Cost Signup and view all the answers

Which of the following describes cross price elasticity?

The measure of how demand for one product changes in response to price change of another product. Signup and view all the answers

Which characteristic is NOT associated with perfect competition?

High market power for individual firms Signup and view all the answers

In which market structure do firms work together, often leading to higher prices?

Oligopoly Signup and view all the answers

Income elasticity of demand measures how demand changes with a change in:

Consumer income Signup and view all the answers

What is the concept of 'opportunity cost' primarily concerned with?

The next best alternative forgone Signup and view all the answers

Which of the following best describes 'market equilibrium'?

The price at which consumers are willing to buy all that is produced Signup and view all the answers

In the context of supply, what does the 'law of supply' state?

Suppliers are willing to sell more at higher prices Signup and view all the answers

What does 'negative externalities' refer to?

Costs incurred by third parties not invited to the transaction Signup and view all the answers

Which economic system is characterized by collective or governmental ownership of resources?

Communism Signup and view all the answers

What is an example of perfectly inelastic demand?

Essential medications Signup and view all the answers

Which factor is NOT typically associated with demand?

Production costs Signup and view all the answers

What defines a mixed economy?

Combines both private enterprise and government regulation Signup and view all the answers

Study Notes

Unit 1 Foundations of Economics

Economics: The study of how societies allocate scarce 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 graphical representation showing the maximum possible output combinations of two goods or services given a set of resources and technology.
Demand: The quantity of a good or service that consumers are willing and able to purchase at various price points, in a given time period.
Law of Demand: As price increases, quantity demanded decreases, and vice versa, assuming other factors remain constant.
Factors of Demand (Examples need to be listed 1-5): Factors influencing demand that include (but not limited to): price of substitutes, price of complements, income, tastes and preferences, expectations about the future, number of buyers.

Supply

Law of Supply: As price increases, quantity supplied increases, and vice versa, assuming other factors remain constant.
Factors of Supply (Examples need to be listed 1-7): Factors influencing supply that include (but are not limited to): input costs, technology, expectations, number of sellers, government regulations, and natural conditions.

Unit 2A + B: Elasticity + The Firm

Elastic Demand: Measures the responsiveness of the quantity demanded to a change in price. If % change in quantity demanded > % change in price then it is elastic.
Inelastic Demand: Measures the responsiveness of the quantity demanded to a change in price. If % change in quantity demanded < % change in price then it is inelastic.
Perfectly Elastic Demand: A perfectly horizontal demand curve, meaning any price change will result in either zero demand or infinite demand.
Perfectly Inelastic Demand: A perfectly vertical demand curve, meaning quantity demanded is unaffected by changes in price.
Factors of elasticity of demand (Examples need to be listed 1-3): Factors influencing demand elasticity which include (but are not limited to). availability of substitutes, proportion of income spent on the good, time period considered.
Revenue and price elasticity relationships: Description of revenue changes based on price elasticity (inelastic vs. elastic).

Cross Price Elasticity (Definition, formula and relationships)

Income elasticity (Definition, formula, and relationships):

Factors of elasticity of supply (Examples need to be listed 1-4):

Factors influencing supply elasticity: Factors influencing supply elasticity, i.e. factors influencing how quickly supply changes in relation to price changes, which include (but are not limited to): time period considered, availability of inputs, ease of changing production level.

Types of Firms

Sole proprietorship, partnership, corporations (and characteristics), Non-profits (and characteristics): Explanations for characteristics, including liability, ownership structures, and management.

Unit 3: The Government

Human Development Index (HDI): A composite statistic of life expectancy, education, and per capita income indicators, which are used to rank countries into four tiers of development.
Gross National Happiness (GNH): A philosophical concept that emphasizes happiness and well-being as primary goals of policy-making.
Wage determination (list): Factors that establish the level of wages, including labor supply and demand, human capital, unions, government regulations.
Lorenz curve: A graphical representation of income distribution within a population.
Diagram and calculations: Calculations for constructing the Lorenz curve.

Unit 4: Macroeconomics

GDP vs. GNP: Gross Domestic Product (GDP) vs. Gross National Product (GNP)
GDP (Income and expenditure approach): Calculating GDP using income and expenditure methods.
Circular flow model: A model of the flow of goods, services, and money between households and businesses, including the role of government, international trade, and financial markets.
Types of employment (Examples need to be listed 1-3). Different forms of employment and how they work within economics, i.e. full-time, part-time, temporary.
Inflation: A sustained increase in the general price level of goods and services in an economy over a period of time.
Consumer Price Index (Formula): A measure of the average change over time in the prices paid by urban consumers for a basket of consumer goods and services. Formula to calculate.
Fiscal Policy: Government policies that affect the economy through government spending and taxation.
Expansionary Fiscal Policy: Government spending increase or tax cuts to stimulate the economy.
Contractionary Fiscal Policy: Government spending restrictions or tax increases to cool down the economy.

Unit 2A + B: Elasticity + The Firm (continued)

Cross price elasticity (continued): Definition, formula, and relationships.

Unit 2A + B: Elasticity + The Firm (continued):

Income elasticity (continued): Definition, formula, and relationships.

Types of Market Structures (Unit 7)

Perfect Competition: A market structure with many buyers and sellers, homogeneous products, free entry and exit, and no market power.
Diagram of demand curve
characteristics
Monopoly: A market structure with a single seller, unique product, significant barriers to entry, and substantial market power.
Diagram of demand curve
characteristics
Monopolistic Competition: A market structure with many buyers and sellers, differentiated products, relatively low barriers to entry, and some market power
Diagram of demand curve
characteristics
Oligopoly: A market structure with a few significant sellers, differentiated or homogeneous products, and significant barriers to entry.
characteristics
Diagram of demand curve

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Test your knowledge of the key concepts in Unit 1 of Economics, including scarcity, opportunity cost, and the law of demand. This quiz will challenge you on essential terms and their implications for economic decision-making.