Which of the following is an illustration of a microeconomic question?

• A. What factors determine the level of gross domestic product (GDP)?
• B. How does government spending affect national unemployment rates?
• C. How does a firm decide the price to charge for its product?
• D. What causes inflation in a country's economy?

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the difference between microeconomics and macroeconomics. Microeconomics focuses on individual agents such as consumers, firms, and markets, while macroeconomics looks at the economy as a whole, including aggregate measures like GDP, inflation, and unemployment rates.
2. Step 2: Analyze each question to determine its scope. Questions about GDP, national unemployment rates, and inflation deal with the overall economy, which are topics in macroeconomics.
3. Step 3: Identify the question that focuses on the behavior of an individual firm or consumer. The question 'How does a firm decide the price to charge for its product?' deals with decision-making at the firm level, which is a microeconomic issue.
4. Step 4: Conclude that the microeconomic question is the one related to individual firm behavior, specifically pricing decisions, because it examines choices made by a single economic agent rather than aggregate economic outcomes.
5. Step 5: Remember that microeconomic questions often involve supply and demand in specific markets, pricing strategies, consumer behavior, and production decisions, distinguishing them from broader macroeconomic questions.