SP25_Microeconomics Study Guide

What describes the interdependence between households and businesses in an economic context?

• Households provide resources and consume goods; businesses provide goods and pay for resources.

• Households manufacture products; businesses consume products.

• Households decide government spending; businesses regulate money flow.

• Households and businesses operate independently of each other.

Which diagram is used to explain the real flow of goods, services, resources, and money?

• Supply and demand curve

• Circular flow diagram

• Production possibility frontier

• Market equilibrium graph

In a circular flow diagram, what flows from households to businesses?

• Resources and labor

• Finished goods and services

• Monetary payments

• Government regulation

What determines the production and distribution in a market economy?

• Government policies and laws

• Random events and speculation

• Supply, demand, and prices

• Consumer preferences and habits

How does a price ceiling lead to shortages?

• Limits the maximum price, increasing demand while supply cannot meet this demand

• Sets the lowest possible price, reducing demand

• Encourages more production, increasing available goods

• Creates equilibrium, balancing supply and demand

Which law states that, all else being equal, an increase in price results in an increase in quantity supplied?

• Law of demand

• Law of supply

• Law of diminishing returns

• Law of opportunity cost

What can cause a shift in the supply curve for a product?

• Increase in population

• Rise in consumer income

• Changes in fashion trends

• Advancement in production technology

What are the characteristics of a monopolistic market structure?

• Homogeneous products with many buyers and sellers

• Single producer with no close substitutes

• Multiple producers with differentiated products

• Few firms that control a large market share

What would result culturally in a country with large price ceilings on necessary goods?

• A thriving black market for these goods

• Widespread shortages and rationing

• Increased prices above the ceiling

• Government purchases to meet excess supply

Which element is essential for a perfectly competitive market?

• Many buyers and sellers with no control over prices

• Unique products that create monopolies

• High entry barriers for new firms

• Government regulation controlling production