ECS2601 – Microeconomics Application | UNISA
Exam Prep 2025–2026, 200+ Practice Questions
with Verified Answers & Rationales, Comprehensive
Study Guide, Test Bank, Notes & Past Papers for
Economics Students
Question 1:
What is the definition of microeconomics?
A) The study of national economic systems
B) The branch of economics that focuses on individual consumers and firms and
their decision-making processes
C) The analysis of international trade
D) The study of government policies
Rationale: Microeconomics is essential for understanding how individual choices
impact supply and demand in markets.
Question 2:
What does the law of demand state?
A) Demand increases as price increases
B) There is an inverse relationship between price and quantity demanded
C) Supply increases as demand increases
D) Demand remains constant regardless of price changes
Rationale: The law of demand illustrates how consumers respond to price changes, a
fundamental concept in microeconomics.
Question 3:
What is meant by "price elasticity of demand"?
A) The responsiveness of supply to price changes
B) The measure of how much the quantity demanded of a good responds to a
change in its price
C) The fixed demand for essential goods
D) The relationship between price and income
Rationale: Price elasticity of demand is crucial for businesses to set prices and
forecast revenues effectively.
Question 4:
What is a "normal good"?
,A) A good with no substitutes
B) A good for which demand increases as consumer income rises
C) A good that is always necessary
D) A good with a fixed price
Rationale: Understanding normal goods helps in analyzing consumer behavior
regarding income changes.
Question 5:
What does "market equilibrium" refer to?
A) The point where supply exceeds demand
B) The situation where quantity supplied equals quantity demanded, resulting in
stable prices
C) The point of maximum profit for firms
D) The point where demand outstrips supply
Rationale: Market equilibrium is fundamental for understanding how prices stabilize in
a competitive market.
Question 6:
What is "consumer surplus"?
A) The total revenue from sales
B) The difference between what consumers are willing to pay and what they
actually pay
C) The cost of production
D) The economic profit of firms
Rationale: Consumer surplus measures the benefit consumers receive from
purchasing goods at lower prices.
Question 7:
What is a "substitute good"?
A) A good that complements another
B) A good that can replace another good in consumption
C) A good that is always necessary
D) A good with a fixed price
Rationale: Understanding substitute goods is essential for predicting changes in
demand when prices fluctuate.
,Question 8:
What does "marginal cost" refer to?
A) The total cost of production
B) The cost of producing one additional unit of a good or service
C) The average cost of production
D) The fixed costs of production
Rationale: Marginal cost helps firms decide how much to produce to maximize profit.
Question 9:
What is "demand shift"?
A) A change in supply
B) A change in demand due to factors other than price, such as consumer
preferences or income
C) A change in market equilibrium
D) A change in production costs
Rationale: Understanding demand shifts is critical for analyzing market dynamics
beyond price changes.
Question 10:
What is "market failure"?
A) A situation where markets operate efficiently
B) A situation where the allocation of goods and services is not efficient, leading to
a loss of economic welfare
C) A decrease in demand
D) An increase in competition
Rationale: Market failure highlights the need for government intervention in certain
circumstances to enhance welfare.
Question 11:
What does "price ceiling" refer to?
A) A maximum allowable price set by the government
B) A minimum allowable price set by the government
C) The market price determined by supply and demand
D) A fixed price set by firms
Rationale: Price ceilings can lead to shortages and are often implemented to protect
consumers.
, Question 12:
What is an "inferior good"?
A) A good with no substitutes
B) A good for which demand decreases as consumer income rises
C) A good that is always necessary
D) A good with a fixed price
Rationale: Inferior goods help economists understand consumer behavior as income
levels change.
Question 13:
What does "producer surplus" measure?
A) The total cost of production
B) The difference between the price producers receive for a good and the minimum
price they would be willing to accept
C) The total revenue from sales
D) The economic profit of firms
Rationale: Producer surplus illustrates the benefit producers receive from selling at
market prices.
Question 14:
What is "monopoly"?
A) A market with many buyers and sellers
B) A market structure where a single seller dominates the market
C) A competitive market
D) A market with perfect information
Rationale: Understanding monopoly is crucial for analyzing market power and pricing
strategies.
Question 15:
What does "cross-price elasticity of demand" measure?
A) The responsiveness of quantity demanded to changes in income
B) The responsiveness of the quantity demanded of one good to a change in the
price of another good
C) The responsiveness of supply to changes in price
D) The fixed demand for essential goods
Exam Prep 2025–2026, 200+ Practice Questions
with Verified Answers & Rationales, Comprehensive
Study Guide, Test Bank, Notes & Past Papers for
Economics Students
Question 1:
What is the definition of microeconomics?
A) The study of national economic systems
B) The branch of economics that focuses on individual consumers and firms and
their decision-making processes
C) The analysis of international trade
D) The study of government policies
Rationale: Microeconomics is essential for understanding how individual choices
impact supply and demand in markets.
Question 2:
What does the law of demand state?
A) Demand increases as price increases
B) There is an inverse relationship between price and quantity demanded
C) Supply increases as demand increases
D) Demand remains constant regardless of price changes
Rationale: The law of demand illustrates how consumers respond to price changes, a
fundamental concept in microeconomics.
Question 3:
What is meant by "price elasticity of demand"?
A) The responsiveness of supply to price changes
B) The measure of how much the quantity demanded of a good responds to a
change in its price
C) The fixed demand for essential goods
D) The relationship between price and income
Rationale: Price elasticity of demand is crucial for businesses to set prices and
forecast revenues effectively.
Question 4:
What is a "normal good"?
,A) A good with no substitutes
B) A good for which demand increases as consumer income rises
C) A good that is always necessary
D) A good with a fixed price
Rationale: Understanding normal goods helps in analyzing consumer behavior
regarding income changes.
Question 5:
What does "market equilibrium" refer to?
A) The point where supply exceeds demand
B) The situation where quantity supplied equals quantity demanded, resulting in
stable prices
C) The point of maximum profit for firms
D) The point where demand outstrips supply
Rationale: Market equilibrium is fundamental for understanding how prices stabilize in
a competitive market.
Question 6:
What is "consumer surplus"?
A) The total revenue from sales
B) The difference between what consumers are willing to pay and what they
actually pay
C) The cost of production
D) The economic profit of firms
Rationale: Consumer surplus measures the benefit consumers receive from
purchasing goods at lower prices.
Question 7:
What is a "substitute good"?
A) A good that complements another
B) A good that can replace another good in consumption
C) A good that is always necessary
D) A good with a fixed price
Rationale: Understanding substitute goods is essential for predicting changes in
demand when prices fluctuate.
,Question 8:
What does "marginal cost" refer to?
A) The total cost of production
B) The cost of producing one additional unit of a good or service
C) The average cost of production
D) The fixed costs of production
Rationale: Marginal cost helps firms decide how much to produce to maximize profit.
Question 9:
What is "demand shift"?
A) A change in supply
B) A change in demand due to factors other than price, such as consumer
preferences or income
C) A change in market equilibrium
D) A change in production costs
Rationale: Understanding demand shifts is critical for analyzing market dynamics
beyond price changes.
Question 10:
What is "market failure"?
A) A situation where markets operate efficiently
B) A situation where the allocation of goods and services is not efficient, leading to
a loss of economic welfare
C) A decrease in demand
D) An increase in competition
Rationale: Market failure highlights the need for government intervention in certain
circumstances to enhance welfare.
Question 11:
What does "price ceiling" refer to?
A) A maximum allowable price set by the government
B) A minimum allowable price set by the government
C) The market price determined by supply and demand
D) A fixed price set by firms
Rationale: Price ceilings can lead to shortages and are often implemented to protect
consumers.
, Question 12:
What is an "inferior good"?
A) A good with no substitutes
B) A good for which demand decreases as consumer income rises
C) A good that is always necessary
D) A good with a fixed price
Rationale: Inferior goods help economists understand consumer behavior as income
levels change.
Question 13:
What does "producer surplus" measure?
A) The total cost of production
B) The difference between the price producers receive for a good and the minimum
price they would be willing to accept
C) The total revenue from sales
D) The economic profit of firms
Rationale: Producer surplus illustrates the benefit producers receive from selling at
market prices.
Question 14:
What is "monopoly"?
A) A market with many buyers and sellers
B) A market structure where a single seller dominates the market
C) A competitive market
D) A market with perfect information
Rationale: Understanding monopoly is crucial for analyzing market power and pricing
strategies.
Question 15:
What does "cross-price elasticity of demand" measure?
A) The responsiveness of quantity demanded to changes in income
B) The responsiveness of the quantity demanded of one good to a change in the
price of another good
C) The responsiveness of supply to changes in price
D) The fixed demand for essential goods
