What is the focus of microeconomics?

• A. The study of international trade
• B. The study of how households and firms make decisions
• C. The analysis of government policy
• D. The examination of global markets

Answer: (B)

The focus of microeconomics is on the study of how households and firms make decisions. This branch of economics zooms in on individual economic agents, such as consumers and producers, and examines how they interact in markets. Microeconomics analyzes how these groups respond to changes in prices, products, and economic policies, which in turn affects supply and demand dynamics.

Understanding the decision-making processes of households includes looking at their consumption choices, how they allocate their budget, and what factors influence their purchasing behavior. Similarly, examining firms encompasses their production decisions, cost management, and pricing strategies. This detailed analysis helps to better understand market structures, competition, and the distribution of resources within an economy, which are essential for comprehending broader economic concepts.

Factors like international trade, government policy analysis, and global markets are typically addressed in macroeconomics or other specialized fields rather than the microeconomic framework, which is primarily concerned with the internal mechanisms of local markets and individual economic participants.