MICROECONOMICS EXAMINATION QUESTIONS AND
CORRECT ANSWER WITH EXPLANATION GRADED A+
STUDY GUIDE SOUTHERN NEW HAMPSHIRE UNIVERSITY
1. Microeconomics studies:
A. Individual economic units
B. Entire economy
C. Government budgets only
D. International trade only
Answer: A
Rationale: Focuses on consumers, firms, and markets.
2. Demand refers to:
A. Willingness and ability to buy
B. Supply of goods
C. Production only
D. Government spending
Answer: A
Rationale: Consumer purchasing behavior.
3. Law of demand states:
A. Price and quantity demanded are inversely related
B. Price and demand increase together
C. Supply is constant
D. Demand is fixed
Answer: A
Rationale: Inverse relationship between price and demand.
4. Supply refers to:
A. Quantity producers are willing to sell
B. Consumer demand
C. Taxes
D. Imports
Answer: A
Rationale: Producer behavior in markets.
5. Law of supply states:
A. Price and quantity supplied are directly related
, B. Price and supply are unrelated
C. Demand decreases with price
D. Supply is fixed
Answer: A
Rationale: Higher prices encourage more supply.
6. Market equilibrium occurs when:
A. Demand equals supply
B. Demand is zero
C. Supply is zero
D. Prices are fixed
Answer: A
Rationale: Market clears at equilibrium.
7. Equilibrium price is:
A. Price where demand equals supply
B. Highest price
C. Lowest price
D. Government price
Answer: A
Rationale: Balance between buyers and sellers.
8. Excess demand is also called:
A. Shortage
B. Surplus
C. Equilibrium
D. Inflation
Answer: A
Rationale: Demand exceeds supply.
9. Excess supply is also called:
A. Surplus
B. Shortage
C. Inflation
D. Deficit
Answer: A
Rationale: Supply exceeds demand.
10. Price elasticity of demand measures:
A. Responsiveness of demand to price changes
, B. Supply changes
C. Income changes
D. Tax changes
Answer: A
Rationale: Sensitivity of consumers to price.
11. Elastic demand means:
A. High responsiveness to price changes
B. Low responsiveness
C. No demand
D. Fixed demand
Answer: A
Rationale: Quantity changes significantly.
12. Inelastic demand means:
A. Low responsiveness to price changes
B. High responsiveness
C. No supply
D. Fixed price
Answer: A
Rationale: Quantity changes slightly.
13. Income elasticity of demand measures:
A. Response of demand to income changes
B. Price changes
C. Tax changes
D. Supply changes
Answer: A
Rationale: Income effect on demand.
14. Cross elasticity of demand measures:
A. Effect of price of one good on another
B. Income changes
C. Supply changes
D. Inflation
Answer: A
Rationale: Relationship between related goods.
15. Substitute goods are:
A. Goods that can replace each other
CORRECT ANSWER WITH EXPLANATION GRADED A+
STUDY GUIDE SOUTHERN NEW HAMPSHIRE UNIVERSITY
1. Microeconomics studies:
A. Individual economic units
B. Entire economy
C. Government budgets only
D. International trade only
Answer: A
Rationale: Focuses on consumers, firms, and markets.
2. Demand refers to:
A. Willingness and ability to buy
B. Supply of goods
C. Production only
D. Government spending
Answer: A
Rationale: Consumer purchasing behavior.
3. Law of demand states:
A. Price and quantity demanded are inversely related
B. Price and demand increase together
C. Supply is constant
D. Demand is fixed
Answer: A
Rationale: Inverse relationship between price and demand.
4. Supply refers to:
A. Quantity producers are willing to sell
B. Consumer demand
C. Taxes
D. Imports
Answer: A
Rationale: Producer behavior in markets.
5. Law of supply states:
A. Price and quantity supplied are directly related
, B. Price and supply are unrelated
C. Demand decreases with price
D. Supply is fixed
Answer: A
Rationale: Higher prices encourage more supply.
6. Market equilibrium occurs when:
A. Demand equals supply
B. Demand is zero
C. Supply is zero
D. Prices are fixed
Answer: A
Rationale: Market clears at equilibrium.
7. Equilibrium price is:
A. Price where demand equals supply
B. Highest price
C. Lowest price
D. Government price
Answer: A
Rationale: Balance between buyers and sellers.
8. Excess demand is also called:
A. Shortage
B. Surplus
C. Equilibrium
D. Inflation
Answer: A
Rationale: Demand exceeds supply.
9. Excess supply is also called:
A. Surplus
B. Shortage
C. Inflation
D. Deficit
Answer: A
Rationale: Supply exceeds demand.
10. Price elasticity of demand measures:
A. Responsiveness of demand to price changes
, B. Supply changes
C. Income changes
D. Tax changes
Answer: A
Rationale: Sensitivity of consumers to price.
11. Elastic demand means:
A. High responsiveness to price changes
B. Low responsiveness
C. No demand
D. Fixed demand
Answer: A
Rationale: Quantity changes significantly.
12. Inelastic demand means:
A. Low responsiveness to price changes
B. High responsiveness
C. No supply
D. Fixed price
Answer: A
Rationale: Quantity changes slightly.
13. Income elasticity of demand measures:
A. Response of demand to income changes
B. Price changes
C. Tax changes
D. Supply changes
Answer: A
Rationale: Income effect on demand.
14. Cross elasticity of demand measures:
A. Effect of price of one good on another
B. Income changes
C. Supply changes
D. Inflation
Answer: A
Rationale: Relationship between related goods.
15. Substitute goods are:
A. Goods that can replace each other
