Microeconomics Quiz
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Questions and Answers

What is the assumption made when creating demand curves?

  • Inflation always causes product prices to rise
  • All economic factors remain constant except price (correct)
  • Consumer taste is the most important variable
  • Availability of product is the most important variable

    • What is the substitution effect in economics?

  • The change in the amount consumers will buy because they can buy a different product instead (correct)
  • The change in the amount consumers will buy due to a change in the price of a substitute
  • The change in the amount consumers will buy due to a change in income
  • The change in the amount consumers will buy due to a change in consumer taste

    • What determines the shape of a demand curve?

  • Consumer expectation
  • The law of diminishing marginal utility (correct)
  • The income effect
  • The formula to calculate total revenue

    • What factor is affecting demand when a factory closes and consumer spending in the town falls?

    <p>Income</p> Signup and view all the answers

    What do various points on a demand curve represent?

    <p>Change in quantity demanded</p> Signup and view all the answers

    What type of goods do consumers demand less of when their incomes rise?

    <p>Inferior goods</p> Signup and view all the answers

    What is the primary factor that affects demand according to the scenario where a factory in town gives its employees bonuses, and mall purchases increase?

    <p>Income change</p> Signup and view all the answers

    What economic concept measures how responsive consumers are to price changes?

    <p>Elasticity of demand</p> Signup and view all the answers

    What should the owner do to visually show the overall pattern of information?

    <p>Draw a supply curve</p> Signup and view all the answers

    When demand is inelastic, how does the quantity demanded respond to a price change?

    <p>It does not change significantly</p> Signup and view all the answers

    What is the term for the change in total output that results from hiring one additional worker?

    <p>Marginal product</p> Signup and view all the answers

    What does a steep slope on a demand curve indicate?

    <p>Inelastic demand</p> Signup and view all the answers

    What does a marginal product schedule show?

    <p>The relationship between labor and marginal product</p> Signup and view all the answers

    Why is the demand for gasoline inelastic?

    <p>Because there is not widely available substitute for cars</p> Signup and view all the answers

    What is the term for the additional expense of producing one more unit of a product?

    <p>Marginal cost</p> Signup and view all the answers

    What does a demand curve look like when demand is unit elastic?

    <p>It is a diagonal line</p> Signup and view all the answers

    Which type of industry tends to take a great deal of time to shift the resources of production to respond to price changes?

    <p>Those that rely on large capital outlays</p> Signup and view all the answers

    What increases the elasticity of supply for most goods and services?

    <p>Time</p> Signup and view all the answers

    Under which condition is supply said to be inelastic?

    <p>When a change in price leads to a relatively smaller change in quantity supplied.</p> Signup and view all the answers

    What determines how elastic a supply is?

    <p>The ease of changing production to respond to price change.</p> Signup and view all the answers

    What is the likely outcome when Manju opens a successful Indian restaurant in her city?

    <p>More Indian restaurants will open in the city.</p> Signup and view all the answers

    What is the carmaker most likely to do in response to the foreign country's tax on rubber exports?

    <p>Switch to alternative materials for tires.</p> Signup and view all the answers

    What is the effect of Manju's success on the number of producers in the restaurant business?

    <p>The number of producers will increase.</p> Signup and view all the answers

    What is the likely effect of the foreign country's tax on rubber exports on the carmaker's business?

    <p>The carmaker's business will contract.</p> Signup and view all the answers

    What is the main goal of achieving efficiency in production?

    <p>To produce the maximum amount of goods and services possible</p> Signup and view all the answers

    What is the difference between microeconomics and macroeconomics?

    <p>Microeconomics studies individuals, families, and businesses, while macroeconomics studies the economy as a whole</p> Signup and view all the answers

    What is the formula for calculating interest earned in the first year?

    <p>Principal * Interest rate = interest earned</p> Signup and view all the answers

    What is the law of increasing opportunity costs?

    <p>States that as production switches from one product to another, increasing amounts of resources are needed</p> Signup and view all the answers

    What is an economic model?

    <p>A simple representation of economic forces</p> Signup and view all the answers

    What is the definition of marginal benefit?

    <p>The additional satisfaction from using one more unit of a product</p> Signup and view all the answers

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