Understanding Economic Principles

What is opportunity cost and why is it important?

• Opportunity cost is the profit made from a decision.

• Opportunity cost is the time spent on making a decision.

• Opportunity cost is the value of the next best alternative forgone when making a decision, and it is important for efficient resource allocation.

• Opportunity cost is the total cost of production.

How do supply and demand interact to determine market prices?

• Supply and demand determine market prices through their interaction, establishing an equilibrium price where quantity supplied equals quantity demanded.

• Market prices are determined solely by government regulations.

• Prices are fixed and do not change with supply and demand.

• Supply and demand have no effect on market prices.

What are the four main types of market structures?

• Monopoly, oligopoly, perfect competition, price discrimination

• Perfect monopoly, oligopolistic competition, duopoly, perfect competition

• Perfect competition, monopolistic competition, oligopoly, monopoly

• Monopolistic monopoly, perfect competition, oligopoly, market failure

How does elasticity of demand affect consumer behavior?

• Higher elasticity always leads to increased sales.

• Elasticity of demand has no impact on consumer choices.

• Elasticity of demand only affects producers, not consumers.

• Elasticity of demand affects consumer behavior by determining how price changes influence the quantity demanded.

What is a positive externality and can you provide an example?

• A positive externality occurs when a person receives a tax break.

• A positive externality is when a factory pollutes the air.

• An example of a positive externality is a homeowner planting a garden that beautifies the neighborhood.

• An example of a positive externality is a company laying off workers.

How does a decrease in supply affect equilibrium price?

• A decrease in supply has no effect on equilibrium price.

• A decrease in supply leads to a surplus in the market.

• A decrease in supply decreases equilibrium price.

• A decrease in supply leads to an increase in equilibrium price.

What factors can cause a shift in the demand curve?

• Technological advancements in production

• Natural disasters affecting supply

• Factors causing a shift in the demand curve include changes in income, preferences, prices of related goods, expectations, and demographics.

• Changes in government regulations

What is the difference between elastic and inelastic demand?

• Elastic demand is always higher than inelastic demand.

• Inelastic demand is always sensitive to price changes.

• Elastic demand refers to goods that are necessities.

• Elastic demand is sensitive to price changes, while inelastic demand is not.

How do negative externalities impact society?

• Negative externalities only benefit large corporations.

• Negative externalities have no effect on society.

• Negative externalities improve public health and economic growth.

• Negative externalities lead to social costs that harm public health, the environment, and economic productivity.

What role do government regulations play in market structures?

• Government regulations only affect international trade, not local markets.

• Government regulations eliminate all competition in the market.

• Government regulations shape market structures by influencing competition, entry barriers, and consumer protection.

• Government regulations have no impact on consumer rights or protections.