#1
Which of the following is a characteristic of perfect competition?
Many buyers and many sellers
ExplanationPerfect competition involves numerous buyers and sellers.
#2
What does the term 'opportunity cost' refer to?
The highest-valued alternative that must be sacrificed to choose an option
ExplanationOpportunity cost signifies the value of the next best alternative foregone.
#3
In economics, what is the 'marginal cost'?
The additional cost of producing one more unit of a good
ExplanationMarginal cost represents the extra expense incurred to produce one additional unit.
#4
What does the term 'diminishing marginal returns' indicate?
As production increases, the marginal product of an input decreases
ExplanationDiminishing marginal returns suggests that adding more of a factor results in reduced per unit output.
#5
What is the formula to calculate total revenue?
Total revenue = Price × Quantity
ExplanationTotal revenue equals the price per unit multiplied by the quantity sold.
#6
In the long run, a perfectly competitive firm will earn...
Normal profit
ExplanationPerfectly competitive firms attain normal profits in the long run.
#7
What is the formula to calculate average fixed cost?
Average fixed cost = Total fixed cost / Quantity
ExplanationAverage fixed cost is total fixed cost divided by the quantity produced.
#8
Which of the following is a characteristic of a monopolistic competition market structure?
Many buyers and many sellers
ExplanationMonopolistic competition involves multiple buyers and sellers with differentiated products.
#9
What does the 'average variable cost' represent?
The variable cost per unit of output
ExplanationAverage variable cost denotes the cost per unit that varies with output.
#10
Which of the following is NOT a characteristic of a perfectly competitive market?
Product differentiation
ExplanationPerfect competition lacks product differentiation among sellers.
#11
What is the relationship between marginal cost (MC) and average variable cost (AVC) when AVC is at its minimum?
MC = AVC
ExplanationWhen AVC reaches its minimum, MC equals AVC.
#12
What is the primary characteristic of an oligopoly market structure?
Few sellers and significant barriers to entry
ExplanationOligopoly is characterized by a small number of firms and high entry barriers.
#13
In a perfectly competitive market, what happens to economic profit in the long run?
It decreases to zero
ExplanationEconomic profit dwindles to zero in the long run for perfectly competitive firms.