Microeconomics Knowledge Test! Practice Quiz! Trivia

1. In Duopoly, there is/are:

Many firms.

Two firms controlling the Market.

Large corporations.

None of the above.

Duopoly is a form of oligopoly where two large firms control the market.

Explanation

Duopoly is a form of oligopoly where two large firms control the market.

2. A monopoly is a form of market where there is:

Large number of buyer.

Small number of buyer

A single firm controlling the market.

Any of the above.

Monopoly is a form of market where a single producer controls the market and has power to change the price and output.

Explanation

Monopoly is a form of market where a single producer controls the market and has power to change the price and output.

3. Law of Demand states that:

With the increase in price, quantity increases.

With the increase in price, quantity decreases other things remaining the same.

Quantity does not change with any increase in price.

All of the above.

Law of demand states that other things remaining the same every increase in price causes the quantity to be decreased and vice versa.

Explanation

Law of demand states that other things remaining the same every increase in price causes the quantity to be decreased and vice versa.

4. Price discrimination is a situation when a producer:

Charges different prices in different markets.

Charges same price.

Charges many prices.

All of the above.

Price discrimination refers to the practice of a producer charging different prices for the same product or service in different markets. This strategy allows the producer to maximize their profits by taking advantage of variations in demand and willingness to pay across different customer segments or geographical locations. By tailoring prices to specific market conditions, the producer can capture more value from customers who are willing to pay higher prices while still attracting customers who are more price-sensitive. This approach requires the producer to have market power and the ability to segment customers effectively.

Explanation

Price discrimination refers to the practice of a producer charging different prices for the same product or service in different markets. This strategy allows the producer to maximize their profits by taking advantage of variations in demand and willingness to pay across different customer segments or geographical locations. By tailoring prices to specific market conditions, the producer can capture more value from customers who are willing to pay higher prices while still attracting customers who are more price-sensitive. This approach requires the producer to have market power and the ability to segment customers effectively.

5. What Microeconomics is about?

Study of Business Environment.

Study of financial position of the economy.

Study of the Economy at Micro Level.

None of the above.

Microeconomics is concerned with the study of the individual consumer/producer or single economic unit.

Explanation

Microeconomics is concerned with the study of the individual consumer/producer or single economic unit.

6. The Slope of the Indifference Curve indicates:

Marginal Rate of Substitution of x for y.

Prices of x and y.

Slope of the budget line.

Change in prices.

The slope of the Indifference Curve shows MRSxy.

Explanation

The slope of the Indifference Curve shows MRSxy.

7. The shape of the Total Fixed Cost(TFC) Curve is:

Verticle

Horizontal

45 degree line.

None of the above.

Since the fixed cost is given its shape is a horizontal line.

Explanation

Since the fixed cost is given its shape is a horizontal line.

8. Production Functions Shows:

Prices of input and output.

Relationship between output and input.

Various combinations of inputs.

All of the above.

A production function shows a level of output associated with inputs. Choice B is correct.

Explanation

A production function shows a level of output associated with inputs. Choice B is correct.

9. While in Perfect Competition:

Firms are price taker.

Buyers are independent.

Input prices are given.

All of the above.

In perfect competition, firms are price takers, buyers make independent choices, and input prices are given. This market structure represents a scenario where there is no market power, and both buyers and sellers operate in a competitive, decentralized manner.

Explanation

In perfect competition, firms are price takers, buyers make independent choices, and input prices are given. This market structure represents a scenario where there is no market power, and both buyers and sellers operate in a competitive, decentralized manner.

10. Model of Monopolistic Competition (i.e Imperfect competition) is characterized by:

Homogeneous goods.

Differentiated goods.

Substitute Goods.

All of the above.

In monopolistic goods are differentiated and the firm faces a downward sloping demand curve i.e with every increase(decrease) in price there is a decrease(increase) in quantity.

Explanation

In monopolistic goods are differentiated and the firm faces a downward sloping demand curve i.e with every increase(decrease) in price there is a decrease(increase) in quantity.