What determines the market equilibrium price and quantity in microeconomics?
Interaction of supply and demand
Microeconomic models provide insights that can inform decision-making and guide economic policy.
True
What is the scope of microeconomics?
Specific markets and sectors
The opportunity cost is the value of the next best alternative that is foregone
Opportunity cost is the value of the next best alternative that must be sacrificed
Microeconomics examines the behavior of individual economic agents such as consumers and firms.
True
What is the key difference between microeconomics and macroeconomics?
Focus on individual vs. economy
What is the purpose of the Supply and Demand model?
Determines market equilibrium
When the quantity demanded equals the quantity supplied, the market reaches equilibrium
What is opportunity cost?
Value of next best alternative
What is the marginal cost of producing one additional unit?
Cost of next unit
Microeconomics studies the economy as a whole, including national income and unemployment.
False
Opportunity cost is the value of the next best alternative foregone when making a choice.
True
Match the microeconomic model with its purpose:
Supply and Demand ↔️ Determines market equilibrium
Consumer Choice ↔️ Analyzes utility maximization
Production ↔️ Examines profit maximization
Microeconomics examines aggregate economic variables like GDP and inflation.
False
What determines the market equilibrium price and quantity?
Supply and demand
Match the microeconomic model with its purpose:
Supply and Demand ↔️ Explains market equilibrium
Consumer Choice ↔️ Analyzes decision-making
Production ↔️ Examines input combination
One of the key variables influencing supply is the cost of production
GDP and inflation are key variables studied in microeconomics.
False
Microeconomic models are used to understand and predict the behavior of economic agents
In perfect competition, firms have high pricing power due to low barriers to entry.
False
The key differences between market structures include the number of firms, barriers to entry, pricing power, and product differentiation.
True
The equilibrium price is the market-clearing price.
True
Elastic demand means a large change in quantity in response to a small change in price.
True
What is the scope of microeconomics?
Examines specific markets and sectors
Price elasticity of demand measures the responsiveness of demand to changes in price
What does microeconomics primarily focus on?
Individual economic agents
The key difference between microeconomics and macroeconomics is that microeconomics analyzes individual agents, while macroeconomics examines the economy as a whole.
What does elasticity measure in microeconomics?
Responsiveness to price changes
The cost of production is a factor affecting the supply of a good.
True
What does macroeconomics study?
Economy as a whole
Match the microeconomic principle with its description:
Scarcity ↔️ Limited availability of resources
Opportunity Cost ↔️ Value of the next best alternative
Supply and Demand ↔️ Determines market price and quantity
What is the definition of opportunity cost in microeconomics?
Value of the next best alternative
Market equilibrium results in a stable market price and quantity.
True
In a perfectly competitive market, firms have no ability to influence the market price
Market equilibrium is achieved when quantity demanded equals quantity supplied
Microeconomics examines how economic agents make decisions regarding resource allocation
The key difference between microeconomics and macroeconomics is that microeconomics analyzes individual economic agents, while macroeconomics looks at the economy as a whole
What do consumers and firms compare in marginal analysis to make decisions?
Marginal benefit and marginal cost
Microeconomics studies the behavior of individual economic agents, such as consumers, firms, and specific markets, while macroeconomics studies the economy as a whole