Many small business owners worry how their business will be affected by changes in the overall economy. Which branch of economics primarily studies the behavior of individual firms and households?

• A. Microeconomics
• B. Econometrics
• C. International economics
• D. Macroeconomics

Answer: (A)

Verified step by step guidance

1. Understand that economics is broadly divided into two main branches: Microeconomics and Macroeconomics.
2. Recognize that Microeconomics focuses on the behavior and decision-making of individual units such as firms and households.
3. Know that Macroeconomics studies the economy as a whole, including aggregate measures like GDP, inflation, and unemployment.
4. Identify that Econometrics is a branch that applies statistical methods to economic data, not specifically focused on individual firms or households.
5. Conclude that since the question asks about the behavior of individual firms and households, the correct branch is Microeconomics.