Economic & Business Environment Quiz

What does the law of demand state?

• Quantity demanded increases as price increases

• Quantity demanded decreases as price decreases

• Quantity demanded remains constant regardless of price

• Quantity demanded increases as price decreases

Which of the following is NOT an assumption of the law of demand?

• No change in consumer's income

• No change in consumer's preferences

• No change in the price of related goods

• No change in government policy

What is a Giffen good?

• A necessity with elastic demand

• A good that has no substitutes

• A good that is demanded more as its price rises

• A luxury good with high demand

What does the law of supply indicate?

• Supply increases as price increases

• Supply remains constant regardless of price

• Supply increases as price decreases

• Supply decreases as price increases

What is the equilibrium price?

• The price set by the government

• The price at which demand exceeds supply

• The price at which supply exceeds demand

• The price at which quantity supplied equals quantity demanded

Which type of elasticity measures the responsiveness of demand to changes in consumer income?

• Price elasticity of demand

• Supply elasticity

• Cross elasticity of demand

• Income elasticity of demand

What is perfectly elastic demand?

• Demand changes significantly with small price changes

• Demand is constant regardless of price

• Demand does not change with price changes

• Demand changes proportionately with price changes

In which market structure do firms sell differentiated products?

• Oligopoly

• Monopoly

• Monopolistic competition

• Perfect competition

What is the primary characteristic of a monopoly?

• One seller controls the market

• Easy entry and exit from the market

• Many sellers and buyers

• Products are identical

What does cross elasticity of demand measure?

• Change in demand due to price changes of related goods

• Change in demand due to price changes of the same good

• Change in income affecting demand

• Change in supply due to price changes