#1
What does the law of supply state?
As prices increase, quantity supplied increases.
ExplanationHigher prices incentivize producers to supply more goods.
#2
Which of the following is a fixed cost for a business?
Rent for factory space
ExplanationRent for factory space remains constant regardless of production levels.
#3
What is the formula to calculate total cost?
Total Cost = Fixed Cost + Variable Cost
ExplanationTotal cost is the sum of fixed and variable costs in production.
#4
Which of the following is NOT a determinant of supply?
Consumer preferences
ExplanationSupply determinants do not include consumer preferences.
#5
What is the difference between explicit costs and implicit costs?
Explicit costs are monetary payments, while implicit costs are non-monetary opportunity costs.
ExplanationExplicit costs involve actual payments, while implicit costs represent forgone opportunities.
#6
What is the Law of Diminishing Marginal Returns?
As input increases, marginal product decreases.
ExplanationIncreasing input leads to diminishing additional output.
#7
How does a subsidy affect supply?
It increases supply by lowering costs.
ExplanationSubsidies reduce costs for producers, boosting supply.
#8
What is the concept of 'marginal cost'?
The additional cost of producing one more unit of a good.
ExplanationMarginal cost is the incremental cost of producing an additional unit.
#9
What is the relationship between average variable cost (AVC) and marginal cost (MC)?
AVC < MC
ExplanationAverage variable cost is less than marginal cost.
#10
What is the concept of 'economies of scale'?
A situation where average total cost decreases as the quantity of output increases.
ExplanationIncreased production leads to lower average cost.
#11
What is the relationship between marginal cost (MC) and average total cost (ATC) at the minimum point of ATC?
MC is equal to ATC at the minimum point of ATC.
ExplanationAt the minimum point of average total cost, marginal cost equals it.
#12
In the short run, a firm will shut down if price falls below what level?
Average variable cost
ExplanationIf price drops below average variable cost, a firm may cease operations in the short run.