#1
Which of the following is a characteristic of a perfectly competitive market?
Many buyers and many sellers
ExplanationCharacterized by a large number of buyers and sellers with homogeneous products.
#2
What does the term 'opportunity cost' refer to in economics?
The cost of choosing one alternative over another
ExplanationRefers to the value of the next best alternative forgone when a decision is made.
#3
What is a characteristic of a monopolistic competition market structure?
Many buyers and many sellers
ExplanationCharacterized by many firms selling similar but not identical products.
#4
Which of the following is a characteristic of a perfectly elastic demand curve?
The demand curve is horizontal
ExplanationThe demand curve is perfectly elastic when the quantity demanded changes infinitely with no change in price.
#5
Which of the following is a characteristic of a monopolistic market structure?
One seller and many buyers
ExplanationCharacterized by a single seller with significant control over the market.
#6
In economics, what does the law of diminishing marginal returns state?
Additional inputs lead to decreasing additional outputs
ExplanationStates that adding more units of a variable input to fixed inputs eventually leads to smaller increases in output.
#7
What is the formula to calculate average fixed cost (AFC)?
Total fixed cost divided by quantity produced
ExplanationAFC equals the total fixed cost divided by the quantity produced.
#8
In the long run, what happens to all inputs in the production process?
All inputs are variable
ExplanationAll inputs can be adjusted in the long run.
#9
What is the relationship between marginal product (MP) and total product (TP) when MP is decreasing?
MP is less than TP
ExplanationWhen marginal product decreases, it is less than the total product.
#10
In economics, what is the formula for calculating total cost (TC)?
TC = TFC + TVC
ExplanationTotal cost equals the sum of total fixed cost and total variable cost.
#11
What is the primary factor that determines the shape of the long-run average cost curve?
The presence of economies of scale
ExplanationThe long-run average cost curve reflects the firm's lowest possible average total cost at each level of output.
#12
Which of the following represents economies of scale?
Average total cost decreases as output increases
ExplanationOccurs when the average total cost of production decreases as the level of output increases.
#13
What is the relationship between marginal cost (MC) and average total cost (ATC) when MC is below ATC?
MC is less than ATC
ExplanationMC is below ATC when the average total cost is decreasing.
#14
When does a firm experience diseconomies of scale?
When total cost increases at an increasing rate as output increases
ExplanationOccurs when increasing production leads to higher per-unit costs.
#15
What does the concept of 'marginal analysis' involve?
Comparing the benefits of one additional unit with its additional cost
ExplanationExamines the effect of a small change in an economic variable on a decision.
#16
In economics, what is the relationship between average variable cost (AVC) and marginal cost (MC) when AVC is rising?
AVC is greater than MC
ExplanationWhen average variable cost is rising, marginal cost is below it.
#17
What is the concept of 'diseconomies of scale' in production?
When total cost increases at an increasing rate as output increases
ExplanationOccurs when production costs increase as output increases.