#1
Which of the following is a fixed cost in the context of production?
Rent for factory building
ExplanationCost that remains constant irrespective of production levels.
#2
Which of the following is a characteristic of perfect competition?
Many sellers and identical products
ExplanationNumerous sellers offering indistinguishable products.
#3
What does the short-run average variable cost curve typically exhibit?
U-shaped
ExplanationDecreasing then increasing with production levels.
#4
In the long run, which of the following statements is true for a perfectly competitive firm?
The firm operates at the minimum point of its average total cost curve.
ExplanationOperating at the lowest average cost.
#5
What is the formula for calculating marginal product of labor?
MPL = ∆Q / ∆L
ExplanationChange in output per change in labor input.
#6
What does the law of diminishing returns state in microeconomics?
As more units of a variable input are added to fixed inputs, total output will increase at a decreasing rate.
ExplanationIncreasing input leads to less additional output.
#7
Which cost concept includes both explicit and implicit costs?
Economic cost
ExplanationTotal cost of resources used, both explicit and implicit.
#8
In the short run, a perfectly competitive firm will shut down if:
Total revenue is less than total variable cost.
ExplanationOperating at a loss where variable costs aren't covered.
#9
What is the formula for calculating average fixed cost?
AFC = FC / Q
ExplanationFixed cost per unit of output.
#10
Which cost concept refers to the highest-valued alternative that must be given up to engage in an activity?
Opportunity cost
ExplanationValue of the next best alternative.
#11
What happens to a firm's average variable cost as production increases in the short run?
It increases.
ExplanationRises due to diminishing returns.
#12
What is the relationship between marginal cost and average variable cost in the short run?
Marginal cost initially falls, then rises, and intersects average variable cost at its minimum point.
ExplanationInitial decrease then increase, intersecting at minimum AVC.
#13
What is a characteristic of economies of scale?
Long-run average total cost decreases as output increases.
ExplanationCost per unit decreases with increased production.
#14
What is the relationship between marginal cost and average total cost in the short run?
Marginal cost initially falls, then rises, and intersects average total cost at its minimum point.
ExplanationInitially declining, then increasing, intersecting at minimum ATC.
#15
What is the formula for calculating total fixed cost?
TFC = FC
ExplanationSum of all fixed costs.
#16
What is the relationship between marginal cost and average total cost at the point where marginal cost is at its minimum?
Marginal cost equals average total cost.
ExplanationEquality at minimum marginal cost.
#17
Which of the following best describes diseconomies of scale?
Long-run average total cost increases as output increases.
ExplanationIncreasing per-unit costs with expanding production.