#1
Which of the following is not a factor of production?
Profit
ExplanationProfit isn't a factor of production.
#2
Which of the following is a characteristic of perfect competition?
Many buyers and many sellers
ExplanationMany buyers and sellers characterize perfect competition.
#3
What is the primary goal of a firm in the long run according to the theory of profit maximization?
To maximize total profit
ExplanationMaximize total profit in the long run.
#4
Which of the following is a characteristic of a monopoly?
Single seller
ExplanationMonopoly: single seller.
#5
Which of the following is a characteristic of a perfectly competitive market?
No barriers to entry
ExplanationPerfect competition: no entry barriers.
#6
In which market structure is there only one seller with complete control over the market?
Monopoly
ExplanationMonopoly: single seller with market control.
#7
What is a production function?
A function that describes how inputs are transformed into outputs in the production process
ExplanationDescribes input-output transformation in production.
#8
What does the law of diminishing returns state?
As the quantity of a factor input increases, the marginal product of that input decreases
ExplanationMarginal product decreases with increased factor input.
#9
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
ExplanationExplicit costs are for factors, implicit are opportunity costs.
#10
Which market structure is characterized by a few large firms dominating the market and having the ability to set prices?
Oligopoly
ExplanationOligopoly: few large firms set prices.
#11
Which of the following is not a characteristic of monopolistic competition?
Price taker
ExplanationMonopolistic competition isn't price-taking.
#12
What is the formula to calculate marginal cost?
Change in total cost divided by change in quantity
ExplanationMarginal cost formula: change in cost over quantity change.
#13
In perfect competition, what happens to economic profit in the long run?
It tends towards zero
ExplanationEconomic profit tends to zero in perfect competition.
#14
What is the formula for average total cost (ATC)?
ATC = TC / Q
ExplanationAverage total cost formula: total cost over quantity.
#15
What does the term 'economies of scale' refer to?
When long-run average total costs decrease as output increases
ExplanationDecreasing long-run average total costs with increased output.
#16
What is the formula for average variable cost (AVC)?
AVC = TVC / Q
ExplanationAverage variable cost formula: total variable cost over quantity.
#17
Which of the following is not a characteristic of a monopolistic competition market?
Price taker
ExplanationMonopolistic competition isn't price-taking.
#18
What does the law of diminishing marginal returns suggest?
As more units of a variable input are added to fixed inputs, marginal product eventually decreases
ExplanationDecreasing marginal product with additional variable input.
#19
What is a characteristic of a perfectly competitive firm in the long run?
Zero economic profits
ExplanationPerfectly competitive firms make zero economic profits in the long run.
#20
What is the formula to calculate profit?
Total revenue minus total cost
ExplanationProfit equals revenue minus cost.
#21
What is the relationship between marginal cost (MC) and average variable cost (AVC) when AVC is at its minimum?
MC = AVC
ExplanationMC equals AVC at its minimum.
#22
What is the relationship between total cost (TC) and total variable cost (TVC)?
TC = TVC + TFC
ExplanationTotal cost equals total variable plus total fixed cost.
#23
What is the formula for total revenue (TR)?
TR = P × Q
ExplanationTotal revenue formula: price times quantity.
#24
What is the profit-maximizing output level for a firm in perfect competition?
Where marginal revenue equals marginal cost
ExplanationProfit maximization: MR equals MC in perfect competition.