Q.1 What does microeconomics primarily study?
Whole economy
Individual markets and decisions
Government policies
International trade
Explanation - Microeconomics focuses on the behavior of individuals, households, and firms in making decisions regarding allocation of resources.
Correct answer is: Individual markets and decisions
Q.2 Which of the following best describes 'opportunity cost'?
Money spent on goods
Cost of all alternatives
Value of the next best alternative foregone
Production cost only
Explanation - Opportunity cost is the benefit missed out when choosing one option over another.
Correct answer is: Value of the next best alternative foregone
Q.3 The law of demand states that:
As price rises, demand rises
As price falls, demand falls
As price rises, demand falls
Price and demand are unrelated
Explanation - The law of demand suggests an inverse relationship between price and quantity demanded.
Correct answer is: As price rises, demand falls
Q.4 Which curve shows the relationship between price and quantity demanded?
Supply curve
Demand curve
Production curve
Cost curve
Explanation - The demand curve slopes downward, showing how quantity demanded changes with price.
Correct answer is: Demand curve
Q.5 Which factor shifts the demand curve?
Price change
Consumer income
Producer costs
Government taxes
Explanation - A change in income shifts the demand curve, while a price change moves along the curve.
Correct answer is: Consumer income
Q.6 Elasticity of demand measures:
Change in income
Change in supply
Responsiveness of demand to price changes
Production cost variations
Explanation - Elasticity shows how much demand changes when price changes.
Correct answer is: Responsiveness of demand to price changes
Q.7 If demand is perfectly inelastic, the demand curve is:
Horizontal
Vertical
Upward sloping
Curved
Explanation - Perfectly inelastic demand means quantity demanded does not change regardless of price.
Correct answer is: Vertical
Q.8 Which of these is an example of a substitute good?
Tea and Coffee
Pen and Ink
Shoes and Socks
Car and Petrol
Explanation - Substitute goods can replace each other in consumption, like tea and coffee.
Correct answer is: Tea and Coffee
Q.9 Complementary goods are:
Unrelated items
Used together
Always substitutes
Goods with the same price
Explanation - Complementary goods are consumed jointly, like cars and petrol.
Correct answer is: Used together
Q.10 The supply curve generally slopes:
Upward
Downward
Horizontally
Vertically
Explanation - The supply curve is upward sloping, showing higher prices lead to greater supply.
Correct answer is: Upward
Q.11 What does equilibrium price mean?
Price set by government
Price where demand equals supply
Lowest market price
Price after inflation
Explanation - Equilibrium is reached when the quantity demanded equals the quantity supplied.
Correct answer is: Price where demand equals supply
Q.12 When supply increases while demand stays constant, equilibrium price will:
Rise
Fall
Stay same
Become negative
Explanation - More supply with unchanged demand pushes prices downward.
Correct answer is: Fall
Q.13 A price ceiling is:
Minimum price set
Maximum price allowed
Equilibrium price
Government subsidy
Explanation - A price ceiling restricts prices from rising above a set level.
Correct answer is: Maximum price allowed
Q.14 Which of the following is a price floor?
Rent control
Minimum wage
Subsidy
Inflation rate
Explanation - A price floor prevents prices from falling below a minimum level, like minimum wages.
Correct answer is: Minimum wage
Q.15 Which cost changes with output level?
Fixed cost
Variable cost
Sunk cost
Total fixed cost
Explanation - Variable costs depend on production levels, like raw materials.
Correct answer is: Variable cost
Q.16 Which of the following is a fixed cost?
Wages of workers
Raw materials
Factory rent
Electricity per unit
Explanation - Fixed costs do not change with production, such as rent.
Correct answer is: Factory rent
Q.17 Marginal cost refers to:
Total production cost
Cost of producing one more unit
Fixed cost per unit
Average cost
Explanation - Marginal cost measures the increase in total cost from producing an additional unit.
Correct answer is: Cost of producing one more unit
Q.18 Which is true about diminishing marginal utility?
Utility increases endlessly
Utility decreases with price
Additional satisfaction decreases as more is consumed
No effect on consumption
Explanation - The law of diminishing marginal utility states that satisfaction reduces with each additional unit consumed.
Correct answer is: Additional satisfaction decreases as more is consumed
Q.19 Perfect competition features:
One seller
Many buyers and sellers
Product differentiation
Government monopoly
Explanation - Perfect competition involves many buyers and sellers with identical products.
Correct answer is: Many buyers and sellers
Q.20 Which market structure is dominated by a single seller?
Monopoly
Oligopoly
Perfect competition
Monopolistic competition
Explanation - In monopoly, one seller controls the entire market.
Correct answer is: Monopoly
Q.21 Oligopoly means:
One seller
Few sellers
Many sellers
No sellers
Explanation - Oligopoly is a market with a few dominant sellers.
Correct answer is: Few sellers
Q.22 Which competition has differentiated products?
Perfect competition
Monopolistic competition
Monopoly
Oligopoly
Explanation - Monopolistic competition has many sellers with slightly differentiated products.
Correct answer is: Monopolistic competition
Q.23 Consumer surplus is:
Extra profit of seller
Difference between what consumers are willing to pay and actual price
Government subsidy
Production cost savings
Explanation - Consumer surplus is the benefit consumers get when they pay less than they are willing to.
Correct answer is: Difference between what consumers are willing to pay and actual price
Q.24 Producer surplus refers to:
Excess of price received over minimum acceptable price
Consumer benefit
Total revenue
Market demand
Explanation - Producer surplus is the difference between the price producers receive and the minimum they would accept.
Correct answer is: Excess of price received over minimum acceptable price
Q.25 Which of these is NOT a feature of microeconomics?
Studies individuals
Analyzes firms
Focuses on national income
Examines market structures
Explanation - National income is part of macroeconomics, not microeconomics.
Correct answer is: Focuses on national income