#1
Which of the following is a characteristic of a perfectly competitive market?
Homogeneous products
ExplanationProducts are identical, promoting price competition.
#2
In the short run, if a perfectly competitive firm is making a loss, what decision should it make?
Shut down in the short run
ExplanationMinimizing losses by ceasing operations.
#3
What is the main purpose of the production function in microeconomic analysis?
To study the relationship between inputs and outputs
ExplanationAnalyzing how inputs affect output levels.
#4
In the short run, a firm's variable costs typically include:
Raw material expenses
ExplanationCosts that vary with production, like raw materials.
#5
What is the relationship between average total cost (ATC) and marginal cost (MC) when ATC is at its minimum?
ATC is equal to MC
ExplanationCosts per unit are minimized.
#6
What is the main characteristic of a natural monopoly?
High barriers to entry
ExplanationObstacles prevent easy entry of new competitors.
#7
What is the key difference between explicit costs and implicit costs in production?
Explicit costs involve cash payments, while implicit costs represent forgone opportunities
ExplanationTangible expenses vs. non-monetary opportunity costs.
#8
In a monopolistically competitive market, firms differentiate their products to gain a competitive edge. What does this imply for the demand curve faced by each firm?
Relatively elastic
ExplanationConsumers have alternatives, making demand more elastic.
#9
What is the law of diminishing marginal returns in production?
As input increases, total output increases at a decreasing rate
ExplanationEach additional input yields less additional output.
#10
In the long run, a firm can adjust all of the following except:
Fixed costs
ExplanationAdjustments possible for variable costs, not fixed costs.
#11
In the long run, if a firm experiences economies of scale, it means that:
Average total cost decreases as output increases
ExplanationEfficiencies lead to cost reduction as production increases.
#12
If a firm is operating at the point where marginal cost equals marginal revenue, what can be said about its profit?
It is maximizing profit
ExplanationProfit is optimized at this equilibrium point.
#13
What is the slope of the total product curve in the short run when diminishing marginal returns set in?
Negative
ExplanationOutput growth rate declines, resulting in a negative slope.
#14
How does a technological improvement impact a firm's cost structure in the long run?
It decreases average total cost
ExplanationEfficiency gains lead to lower average costs.