1. What is the primary concern of microeconomics?
A) National income and unemployment
B) Aggregate demand and supply
C) The behavior of individual economic agents such as households and firms
D) Government fiscal policies
Answer: C) The behavior of individual economic agents such as households and firms
2. Which of the following is a feature of a perfectly competitive market?
A) A few firms dominate the market
B) Barriers to entry are high
C) Homogeneous products are sold by firms
D) Firms have pricing power
Answer: C) Homogeneous products are sold by firms
3. What is the law of demand?
A) As price rises, demand for a good rises
B) As price rises, demand for a good falls, ceteris paribus
C) As income rises, demand for inferior goods rises
D) As income falls, demand for luxury goods rises
Answer: B) As price rises, demand for a good falls, ceteris paribus
4. Which of the following is an example of a public good?
A) A private car
B) National defense
C) A branded handbag
D) A seat in a movie theater
Answer: B) National defense
5. What is GDP (Gross Domestic Product)?
A) The total wealth of a country
B) The total value of all goods and services produced within a country during a specific period
C) The total income earned by individuals in a country
D) The total value of exports minus imports
Answer: B) The total value of all goods and services produced within a country during a specific period
6. Which of the following is considered an example of inflation?
A) A decrease in the general price level of goods and services
B) A sustained increase in the general price level of goods and services
C) A decrease in the value of money
D) A sharp increase in employment
Answer: B) A sustained increase in the general price level of goods and services
7. What is the term for the situation where total spending in an economy is less than the total value of output?
A) Inflation
B) Deflation
C) Recession
D) Overheating economy
Answer: C) Recession
8. Which of the following is the main tool used by central banks to control money supply?
A) Taxation
B) Monetary policy (e.g., changing interest rates)
C) Government spending
D) Regulation of prices
Answer: B) Monetary policy (e.g., changing interest rates)
9. What is the opportunity cost of a decision?
A) The cost of the best alternative foregone
B) The monetary cost of making a choice
C) The difference between total cost and total benefit
D) The total economic cost of producing goods
Answer: A) The cost of the best alternative foregone
10. Which of the following is a characteristic of a monopolistic competition market?
A) One firm controls the entire market
B) There are no close substitutes for the product
C) Many firms sell differentiated products
D) Barriers to entry are extremely high
Answer: C) Many firms sell differentiated products