BEC Economics and Business Cycles 2

Question 1

Which market structure is characterized by a single seller with no close substitutes for its product?

Accepted Answer

Monopoly

Answer

A monopoly consists of a single seller that controls the entire market for a product with no close substitutes, giving it significant pricing power.

Question 2

The law of diminishing marginal returns states that:

Accepted Answer

Adding more of one input while holding others fixed eventually yields smaller incremental output

Answer

The law of diminishing marginal returns holds that beyond some point, adding more of a variable input to fixed inputs will yield progressively smaller additions to output.

Question 3

A trade deficit occurs when a country's:

Accepted Answer

Imports exceed its exports

Answer

A trade deficit (negative balance of trade) occurs when a country imports more goods and services than it exports during a given period.

Question 4

Which of the following best describes stagflation?

Accepted Answer

High inflation combined with high unemployment and slow economic growth

Answer

Stagflation is the unusual combination of stagnant economic growth, high unemployment, and high inflation occurring simultaneously, challenging standard policy responses.

Question 5

The multiplier effect in economics refers to:

Accepted Answer

The magnified impact on total income from an initial change in spending

Answer

The multiplier effect describes how an initial change in spending (e.g., government expenditure) ripples through the economy to produce a larger total change in national income.

BEC - Business Environment and Concepts Practice Test

BEC - Business Environment and Concepts Practice Test

BEC Economics and Business Cycles 2