Economic Analysis of Production and Profit Quiz

Test your knowledge on production functions, market structures, and profit calculation. Explore economic concepts efficiently!

Practice Learn Test

Which of the following is not a factor of production?

Land

Labor

Capital

Profit

Which of the following is a characteristic of perfect competition?

Many buyers and one seller

One buyer and many sellers

Few buyers and few sellers

Many buyers and many sellers

What is the primary goal of a firm in the long run according to the theory of profit maximization?

To maximize total revenue

To maximize total profit

To maximize total output

To minimize total cost

Which of the following is a characteristic of a monopoly?

Many buyers and many sellers

Product differentiation

No barriers to entry

Single seller

What is a production function?

A function that describes how inputs are transformed into outputs in the production process

A function that describes how outputs are transformed into inputs in the production process

A function that describes how prices are determined in the market

A function that describes how firms maximize profits

What does the law of diminishing returns state?

As the quantity of a factor input increases, the marginal product of that input decreases

As the quantity of a factor input increases, the marginal product of that input increases

As the quantity of a factor input increases, the average product of that input decreases

As the quantity of a factor input increases, the average product of that input increases

What is the difference between explicit and implicit costs?

Explicit costs are incurred for factors of production, while implicit costs are the opportunity costs of using self-owned resources

Implicit costs are incurred for factors of production, while explicit costs are the opportunity costs of using self-owned resources

Explicit costs are associated with self-owned resources, while implicit costs are associated with factors of production

There is no difference between explicit and implicit costs

Which market structure is characterized by a few large firms dominating the market and having the ability to set prices?

Perfect competition

Monopoly

Monopolistic competition

Oligopoly

What is the formula to calculate profit?

Total revenue minus total cost

Total revenue divided by total cost

Total cost minus total revenue

Total cost divided by total revenue

#10

What is the relationship between marginal cost (MC) and average variable cost (AVC) when AVC is at its minimum?

MC < AVC

MC = AVC

MC > AVC

MC is undefined at the minimum point of AVC

#11

What is the relationship between total cost (TC) and total variable cost (TVC)?

TC = TVC + TFC

TC = TVC - TFC

TC = TVC / TFC

TC = TVC * TFC

#12

What is the formula for total revenue (TR)?

TR = P × Q

TR = TC - TVC

TR = AVC × Q

TR = TC / Q