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Microeconomics
Contributed by: O'Reilly
  • 1. Microeconomics is a branch of economics that focuses on the study of individual households, firms, and industries in making decisions on allocating limited resources. It examines how these economic agents make choices that impact the allocation of resources, production, consumption, and pricing of goods and services. Microeconomics analyzes various factors such as supply and demand, market structures, price elasticity, consumer behavior, production costs, and government regulations that influence decision-making at the individual level. This field of economics plays a crucial role in understanding the behavior of markets and shaping policies to enhance economic efficiency and welfare.

    Which of the following is a determinant of demand?
A) Cost of production
B) Price of the product
C) Consumer preferences
D) Government regulations
  • 2. What type of market structure is characterized by many firms selling a differentiated product?
A) Oligopoly
B) Monopolistic competition
C) Monopoly
D) Perfect competition
  • 3. What does the production function describe in microeconomics?
A) The relationship between inputs and outputs in production
B) Consumer preferences for goods and services
C) Government regulations on production
D) The pricing strategies of firms
  • 4. What is the opportunity cost of a decision?
A) The total cost incurred
B) The revenue generated
C) The value of the next best alternative foregone
D) The market price of the product
  • 5. What is the equilibrium price in a market?
A) The price at which quantity supplied equals quantity demanded
B) The lowest price a producer is willing to accept
C) The price set by the government
D) The highest price a consumer is willing to pay
  • 6. What is the law of diminishing marginal returns?
A) As output increases, average cost decreases
B) As additional units of a variable input are added to fixed inputs, the marginal product of the variable input eventually decreases
C) As input prices decrease, output increases
D) As additional units of a variable input are added, total output increases
  • 7. What does the term 'market power' refer to in microeconomics?
A) The ability of a firm to influence the market price of a product
B) The willingness of consumers to pay higher prices
C) The competition among firms in a market
D) The government's control over trade policies
  • 8. What is the purpose of a subsidy in microeconomics?
A) To limit the production of certain goods
B) To increase competition among firms
C) To promote imports over domestic production
D) To encourage the production or consumption of a good by reducing costs
  • 9. A decrease in the price of a substitute good will lead to what in demand for the original good?
A) C. No change
B) B. Decrease
C) D. Unpredictable
D) A. Increase
  • 10. What is the main purpose of antitrust laws in microeconomics?
A) To regulate consumer prices
B) To control international trade
C) To promote competition and prevent monopolies
D) To subsidize failing industries
  • 11. What is the concept of consumer surplus in microeconomics?
A) The difference between what a consumer is willing to pay and what they actually pay
B) The highest price a producer is willing to accept
C) The profit earned by a consumer from selling goods
D) The total amount a consumer spends on goods
  • 12. Which market structure has a single seller?
A) D. Oligopoly
B) C. Monopolistic competition
C) A. Monopoly
D) B. Perfect competition
  • 13. What is the difference between explicit and implicit costs in microeconomics?
A) Explicit costs are direct monetary expenses, while implicit costs are opportunity costs of using resources
B) They both represent the same concept
C) Implicit costs are included in accounting profit, while explicit costs are not
D) Explicit costs refer to future expenses, while implicit costs occur in the current period
  • 14. What is a command economy in microeconomics?
A) Economic system with no government intervention
B) Economic system where the government makes all decisions
C) Economic system with complete free-market operations
D) Economic system with heavy reliance on international trade
  • 15. What is the purpose of a production possibilities curve in microeconomics?
A) To determine market equilibrium
B) To illustrate the trade-offs in production between two goods
C) To regulate the pricing of goods
D) To show the distribution of income in an economy
  • 16. What is the role of arbitrage in microeconomics?
A) To enforce price controls
B) To regulate market competition
C) To exploit price differences between markets to make a profit
D) To reduce transaction costs
  • 17. What is the role of utility in microeconomics?
A) To determine the quantity of goods produced
B) To regulate market prices
C) To measure the satisfaction or happiness a consumer derives from consuming goods and services
D) To control the distribution of wealth
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