Economics Quiz

According to the Law of Demand, what happens to the quantity demanded of a good if its price decreases while all other factors remain constant?

• It remains unchanged.

• It decreases.

• It increases.

• It depends on supply conditions.

In the Cobb-Douglas production function Q = A ⋅ Kα ⋅ L1−α, what does 'K' represent?

• Labor used in production.

• Total factor productivity.

• Capital used in production.

• Elasticity of output with respect to labor.

Which type of market is characterized by no single seller influencing the price, identical products, and perfect information among buyers?

• Monopoly.

• Oligopoly.

• Perfect competition.

• Monopolistic competition.

When evaluating a project using Cost-Benefit Analysis, the project is considered viable if:

• Total benefits equal total costs.

• Total costs exceed total benefits.

• Total benefits exceed total costs.

• Total benefits are discounted to a lower value than costs.

Aggregate demand curves slope downward primarily because:

• Higher prices reduce purchasing power, leading to lower consumption.

• Lower prices reduce the cost of production.

• The supply of goods and services decreases at higher prices.

• Producers offer discounts during high-demand periods.

A project requires an initial investment of $100,000 and is expected to generate cash flows of $40,000, $50,000, and $60,000 in the next three years. If the discount rate is 10%, calculate the Net Present Value (NPV) of the project and the Profitability Index (PI). Should the project be accepted or rejected?