10 Questions
Explain the focus of microeconomics and how it differs from macroeconomics.
Microeconomics focuses on the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. It studies individual markets, sectors, or industries. Macroecnomics, on the other hand, focuses on the sum total of economic activity, dealing with issues of growth, inflation, and unemployment—and with national policies relating to these issues.
What is one goal of microeconomics and how does it achieve this goal?
One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. It achieves this by showing conditions under which free markets lead to desirable allocations and by analyzing market failure, where markets fail to produce efficient results.
How does microeconomics interact with economic policies?
Microeconomics deals with the effects of economic policies, such as changing taxation levels, on microeconomic behavior and thus on the aspects of the economy such as growth, inflation, and unemployment.
What is the Lucas critique and how has it influenced modern macroeconomic theories?
The Lucas critique refers to the argument that the relationship between economic policy and outcomes may change when the policy changes. Modern macroeconomic theories have been built upon microfoundations in response to the Lucas critique, i.e., based upon basic assumptions about micro-level behavior.
What is the difference in focus between microeconomics and macroeconomics in terms of the units of study?
Microeconomics focuses on individual markets, sectors, or industries, while macroeconomics focuses on the sum total of economic activity.
Which economist first propounded the concept of economic surplus?
Jules Dupuit
What is economic surplus in mainstream economics?
The sum of consumer and producer surplus known as social surplus or total surplus
What is consumer surplus in mainstream economics?
The monetary gain obtained by consumers from purchasing a product at a price less than the highest price they would be willing to pay
What does producer surplus represent in mainstream economics?
The amount that producers benefit by selling at a market price higher than the least they would be willing to sell for
What is the term used to describe a decrease in total surplus from inefficiencies?
Deadweight loss
Test your knowledge of the fundamental principles of microeconomics with this quiz. Explore concepts like market mechanisms, price determination, and individual decision-making.
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