Economic Production and Cost Analysis Quiz

Perfect competition involves numerous buyers and sellers with no individual entity having significant market control.

Total cost encompasses both fixed and variable costs incurred in production.

Fixed costs remain constant irrespective of production levels, like rent for factory space.

Variable costs fluctuate with production levels, such as expenses for raw materials.

Fixed costs remain constant irrespective of production volume, such as salaries for permanent staff.

Average variable cost represents the variable cost per unit of output and is computed by dividing total variable cost by the quantity of output.

Marginal cost signifies the additional cost incurred in producing one extra unit of a good.

Average total cost rises with increased output due to fixed costs being spread over a smaller quantity of output.

The U-shape of the average total cost curve reflects economies and diseconomies of scale.

As the marginal product of labor decreases, marginal cost tends to rise, and vice versa.

The long-run average cost curve indicates the most cost-efficient production level for various output quantities.

Accounting profit considers only tangible costs, whereas economic profit factors in both tangible and opportunity costs.

Economies of scale imply cost advantages gained as production levels increase, leading to lower per-unit costs.

Diseconomies of scale signify a situation where per-unit costs rise as production expands beyond a certain level.

Economies of scale allow larger firms to spread costs over higher production volumes, leading to lower per-unit costs.

At the profit-maximizing level of output, marginal cost is equal to marginal revenue, ensuring maximum profit.

Monopolistic competition involves differentiated products, meaning they are not perfect substitutes.

The law indicates that adding more of a variable input eventually leads to smaller increases in output, resulting in diminishing marginal returns.