Microeconomics Quiz

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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?

Income Signup and view all the answers

What do various points on a demand curve represent?

Change in quantity demanded Signup and view all the answers

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

Inferior goods 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?

Income change Signup and view all the answers

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

Elasticity of demand Signup and view all the answers

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

Draw a supply curve Signup and view all the answers

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

It does not change significantly Signup and view all the answers

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

Marginal product Signup and view all the answers

What does a steep slope on a demand curve indicate?

Inelastic demand Signup and view all the answers

What does a marginal product schedule show?

The relationship between labor and marginal product Signup and view all the answers

Why is the demand for gasoline inelastic?

Because there is not widely available substitute for cars Signup and view all the answers

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

Marginal cost Signup and view all the answers

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

It is a diagonal line 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?

Those that rely on large capital outlays Signup and view all the answers

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

Time Signup and view all the answers

Under which condition is supply said to be inelastic?

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

What determines how elastic a supply is?

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

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

More Indian restaurants will open in the city. 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?

Switch to alternative materials for tires. Signup and view all the answers

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

The number of producers will increase. 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?

The carmaker's business will contract. Signup and view all the answers

What is the main goal of achieving efficiency in production?

To produce the maximum amount of goods and services possible Signup and view all the answers

What is the difference between microeconomics and macroeconomics?

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

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

Principal * Interest rate = interest earned Signup and view all the answers

What is the law of increasing opportunity costs?

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

What is an economic model?

A simple representation of economic forces Signup and view all the answers

What is the definition of marginal benefit?

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