Question

domain 2: microeconomics
11 - the law of demand states that as price increases,
a. demand increases
b. quantity demanded decreases
c. supply decreases
d. quantity supplied increases
12 - what causes a movement along the demand curve?
a. a change in income
b. a change in tastes
c. a change in the good’s price
d. a change in the number of consumers
13 - elastic demand means:
a. demand is not sensitive to price
b. a small change in price leads to a large change in quantity demanded
c. total revenue remains constant
d. supply exceeds demand
14 - a price floor set above the equilibrium price will lead to:
a. a shortage
b. a surplus
c. no effect
d. market efficiency
15 - if two goods are complements, then an increase in the price of one will:
a. increase the demand for the other
b. decrease the demand for the other
c. not affect the other
d. increase supply of both
16 - in perfect competition:
a. firms are price makers
b. products are differentiated
c. there are many sellers and free entry
d. firms have market power
17 - a monopoly results in:
a. higher prices and lower output than perfect competition
b. lower prices and higher output
c. the same prices as competitive firms
d. perfect efficiency
18 - marginal cost is the:
a. cost of producing one more unit
b. total cost of production
c. fixed cost per unit
d. opportunity cost of labor
19 - if marginal revenue is greater than marginal cost, a firm should:
a. shut down
b. decrease production
c. increase production
d. increase prices
20 - price discrimination occurs when:
a. firms charge the same price to all buyers
b. consumers pay only what they want
c. firms charge different prices to different consumers for the same good
d. prices are set by the government

Explanation:

1. The law of demand states an inverse relationship between price and quantity demanded.
2. A change in the good's price causes a movement along the demand - curve, while other factors shift the curve.
3. Elastic demand means quantity demanded is highly responsive to price changes.
4. A price floor above equilibrium leads to a surplus as quantity supplied exceeds quantity demanded.
5. Complements have an inverse relationship in demand when the price of one changes.
6. In perfect competition, there are many sellers and free entry, and firms are price - takers.
7. A monopoly restricts output to increase prices compared to perfect competition.
8. Marginal cost is the cost of producing one more unit.
9. If marginal revenue > marginal cost, a firm can increase profit by increasing production.
10. Price discrimination is when firms charge different prices to different consumers for the same good.

Answer:

1. B. Quantity demanded decreases
2. C. A change in the good’s price
3. B. A small change in price leads to a large change in quantity demanded
4. B. A surplus
5. B. Decrease the demand for the other
6. C. There are many sellers and free entry
7. A. Higher prices and lower output than perfect competition
8. A. Cost of producing one more unit
9. C. Increase production
10. C. Firms charge different prices to different consumers for the same good