Economic Chapter 2 Quiz

What is the law of demand?

• The law of demand states that as the price of a good or service increases, the quantity demanded increases, and vice versa.

• The law of demand states that as the price of a good or service increases, the quantity demanded remains constant.

• The law of demand states that as the price of a good or service increases, the quantity demanded decreases, and vice versa.

• The law of demand states that as the price of a good or service decreases, the quantity demanded decreases, and vice versa.

What is the law of supply?

• The law of supply states that as the price of a good or service increases, the quantity supplied by producers decreases, and vice versa.

• The law of supply states that as the price of a good or service decreases, the quantity supplied by producers also decreases, and vice versa.

• The law of supply states that the price of a good or service has no effect on the quantity supplied by producers.

• The law of supply states that as the price of a good or service increases, the quantity supplied by producers also increases, and vice versa.

What is market equilibrium?

• A state in which the supply and demand for a product or service are non-existent, resulting in fluctuating prices.

• A state in which the supply and demand for a product or service are balanced, resulting in stable prices.

• A state in which the supply and demand for a product or service are irrelevant, resulting in unpredictable prices.

• A state in which the supply and demand for a product or service are imbalanced, resulting in unstable prices.

What is elasticity of demand?

• Elasticity of demand is a measure of the responsiveness of the quantity demanded of a good or service to a change in its income.

• Elasticity of demand is a measure of the responsiveness of the quantity supplied of a good or service to a change in its price.

• Elasticity of demand is a measure of the responsiveness of the quantity demanded of a good or service to a change in its price.

• Elasticity of demand is a measure of the responsiveness of the quantity demanded of a good or service to a change in its quality.

What is the formula for price elasticity of demand?

• Percentage change in quantity demanded / Percentage change in price

• Percentage change in price / Percentage change in quantity demanded

• Total revenue / Quantity demanded

• Change in quantity demanded / Change in price

What is the production possibilities frontier?

• The production possibilities frontier is a measure of the total output of an economy.

• The production possibilities frontier is a tool used to measure the efficiency of resource allocation.

• The production possibilities frontier is a concept that only applies to a closed economy.

• The production possibilities frontier is a graphical representation of the maximum output combinations of two goods or services that an economy can achieve when all resources are fully and efficiently utilized.

What is opportunity cost?

• The value of the least desirable alternative

• The cost of a decision

• The cost of an opportunity

• The value of the next best alternative that is forgone when making a decision.

What does a point inside the production possibilities frontier represent?

• An inefficient use of resources

• An efficient use of resources

• A use of resources that is impossible to achieve

• An optimal use of resources

What does a point outside the production possibilities frontier represent?

• An unattainable combination of goods or services.

• A feasible combination of goods or services.

• A point of maximum production.

• An efficient allocation of resources.

What is the opportunity cost of increasing the production of one good?

• The opportunity cost of increasing the production of one good is the value of the previous alternative that is forgone.

• The opportunity cost of increasing the production of one good is the same as the cost of producing the good.

• The opportunity cost of increasing the production of one good is zero.

• The opportunity cost of increasing the production of one good is the value of the next best alternative that is forgone.