January 2026 | MicroeconoMics coMplete exaM
& assignMent study guide | in-depth notes,
graphical analysis, supply & deMand,
elasticity, Market structures, consuMer
theory, production & costs, practice Questions
& step-by-step explanations for university
students
Question 1:
Which of the following best describes the law of demand?
A) As the price of a good increases, the quantity demanded decreases.
B) As the price of a good increases, the quantity demanded increases.
C) The quantity demanded is independent of price changes.
D) The demand curve slopes upwards.
Correct Option: A
Rationale: The law of demand states that, all else being equal, as the price of a good
increases, the quantity demanded decreases. This negative relationship is often
represented graphically by a downward-sloping demand curve.
Question 2:
What is the primary focus of microeconomics?
A) National economic growth
B) Individual consumer behavior and firm decision-making
C) International trade and finance
D) Monetary policy
Correct Option: B
Rationale: Microeconomics focuses on the behavior of individual consumers and firms
in making decisions regarding the allocation of resources. It examines how these
entities interact in the marketplace.
Question 3:
If a product has many substitutes available, what is likely to be the price elasticity
of demand for that product?
A) Perfectly inelastic
B) Elastic
C) Unitary elastic
D) Inelastic
,Correct Option: B
Rationale: When a product has many substitutes, consumers can easily switch to
alternatives if the price rises, leading to a more elastic demand. This means that
quantity demanded is highly responsive to price changes.
Question 4:
Which of the following is an example of a public good?
A) A sandwich
B) National defense
C) A car
D) A smartphone
Correct Option: B
Rationale: Public goods are characterized by non-excludability and non-rivalrous
consumption, which means they are available to all without reducing their availability to
others. National defense is a prime example.
Question 5:
What happens in a market when there is a surplus?
A) Prices will increase.
B) Prices will decrease.
C) Demand will increase.
D) Supply will decrease.
Correct Option: B
Rationale: A surplus occurs when the quantity supplied exceeds the quantity
demanded at a given price. To eliminate the surplus, prices will decrease, encouraging
an increase in demand and a decrease in supply.
Question 6:
Which of the following factors is considered a determinant of demand?
A) Production costs
B) Consumer income
C) Technology
D) Resource availability
Correct Option: B
Rationale: Consumer income is a key determinant of demand, as higher income
generally increases the quantity demanded of normal goods.
Question 7:
, What does the term "opportunity cost" refer to?
A) The monetary cost of a good
B) The benefit of the next best alternative foregone
C) The cost of production
D) The cost of externalities
Correct Option: B
Rationale: Opportunity cost is the value of the next best alternative that is given up
when making a choice. It emphasizes the trade-offs involved in any decision.
Question 8:
In perfect competition, firms are price takers because:
A) They can set their own prices
B) They have market power
C) There are many buyers and sellers
D) They face federal price controls
Correct Option: C
Rationale: In perfect competition, the presence of many buyers and sellers means that
no single firm can influence the market price; they must accept the market price.
Question 9:
What does a shift of the demand curve to the right indicate?
A) A decrease in the quantity demanded
B) An increase in demand
C) A decrease in supply
D) A surplus
Correct Option: B
Rationale: A rightward shift of the demand curve indicates that at every price level,
consumers are willing to purchase more of the good, indicating an increase in demand.
Question 10:
Which of the following is true of inelastic demand?
A) A small change in price results in a large change in quantity demanded.
B) The price elasticity of demand is greater than one.
C) Quantity demanded remains relatively stable when prices change.
D) Consumers have many substitutes available.
& assignMent study guide | in-depth notes,
graphical analysis, supply & deMand,
elasticity, Market structures, consuMer
theory, production & costs, practice Questions
& step-by-step explanations for university
students
Question 1:
Which of the following best describes the law of demand?
A) As the price of a good increases, the quantity demanded decreases.
B) As the price of a good increases, the quantity demanded increases.
C) The quantity demanded is independent of price changes.
D) The demand curve slopes upwards.
Correct Option: A
Rationale: The law of demand states that, all else being equal, as the price of a good
increases, the quantity demanded decreases. This negative relationship is often
represented graphically by a downward-sloping demand curve.
Question 2:
What is the primary focus of microeconomics?
A) National economic growth
B) Individual consumer behavior and firm decision-making
C) International trade and finance
D) Monetary policy
Correct Option: B
Rationale: Microeconomics focuses on the behavior of individual consumers and firms
in making decisions regarding the allocation of resources. It examines how these
entities interact in the marketplace.
Question 3:
If a product has many substitutes available, what is likely to be the price elasticity
of demand for that product?
A) Perfectly inelastic
B) Elastic
C) Unitary elastic
D) Inelastic
,Correct Option: B
Rationale: When a product has many substitutes, consumers can easily switch to
alternatives if the price rises, leading to a more elastic demand. This means that
quantity demanded is highly responsive to price changes.
Question 4:
Which of the following is an example of a public good?
A) A sandwich
B) National defense
C) A car
D) A smartphone
Correct Option: B
Rationale: Public goods are characterized by non-excludability and non-rivalrous
consumption, which means they are available to all without reducing their availability to
others. National defense is a prime example.
Question 5:
What happens in a market when there is a surplus?
A) Prices will increase.
B) Prices will decrease.
C) Demand will increase.
D) Supply will decrease.
Correct Option: B
Rationale: A surplus occurs when the quantity supplied exceeds the quantity
demanded at a given price. To eliminate the surplus, prices will decrease, encouraging
an increase in demand and a decrease in supply.
Question 6:
Which of the following factors is considered a determinant of demand?
A) Production costs
B) Consumer income
C) Technology
D) Resource availability
Correct Option: B
Rationale: Consumer income is a key determinant of demand, as higher income
generally increases the quantity demanded of normal goods.
Question 7:
, What does the term "opportunity cost" refer to?
A) The monetary cost of a good
B) The benefit of the next best alternative foregone
C) The cost of production
D) The cost of externalities
Correct Option: B
Rationale: Opportunity cost is the value of the next best alternative that is given up
when making a choice. It emphasizes the trade-offs involved in any decision.
Question 8:
In perfect competition, firms are price takers because:
A) They can set their own prices
B) They have market power
C) There are many buyers and sellers
D) They face federal price controls
Correct Option: C
Rationale: In perfect competition, the presence of many buyers and sellers means that
no single firm can influence the market price; they must accept the market price.
Question 9:
What does a shift of the demand curve to the right indicate?
A) A decrease in the quantity demanded
B) An increase in demand
C) A decrease in supply
D) A surplus
Correct Option: B
Rationale: A rightward shift of the demand curve indicates that at every price level,
consumers are willing to purchase more of the good, indicating an increase in demand.
Question 10:
Which of the following is true of inelastic demand?
A) A small change in price results in a large change in quantity demanded.
B) The price elasticity of demand is greater than one.
C) Quantity demanded remains relatively stable when prices change.
D) Consumers have many substitutes available.
