#1
What is the law of demand?
As the price of a good increases, the quantity demanded decreases.
ExplanationInverse relationship between price and quantity demanded.
#2
Which of the following is NOT a determinant of demand?
Price of the good itself
ExplanationPrice of the good is a determinant of demand.
#3
What is the formula for calculating total revenue?
Total Revenue = Price × Quantity
ExplanationPrice multiplied by quantity sold.
#4
In the long run, which factor can a firm adjust to achieve optimal production?
Size of the factory
ExplanationAdjustable factor for optimal production.
#5
What is the main characteristic of a perfectly competitive market?
Homogeneous products
ExplanationUniform goods across competitors.
#6
What is a price ceiling?
A legal maximum price for a good or service.
ExplanationGovernment-set maximum price.
#7
What is marginal cost?
The additional cost of producing one more unit of a good.
ExplanationCost of producing an additional unit.
#8
What is the difference between explicit and implicit costs?
Explicit costs are monetary payments while implicit costs are opportunity costs.
ExplanationExplicit costs involve money; implicit costs are opportunity costs.
#9
What is the definition of economies of scale?
When long-run average total cost decreases as output increases.
ExplanationCost efficiency with increased production.
#10
What is the main difference between perfect competition and monopolistic competition?
Nature of products
ExplanationProduct differentiation.
#11
What does the short-run average variable cost curve represent?
The average variable cost of production at different levels of output.
ExplanationCost of variable inputs per unit of output.
#12
What is the profit-maximizing rule for a perfectly competitive firm in the short run?
Produce where marginal revenue equals marginal cost.
ExplanationEquating additional revenue with additional cost.
#13
What is the relationship between average total cost (ATC) and marginal cost (MC) when ATC is at its minimum?
ATC is equal to MC.
ExplanationMinimum ATC equals MC.
#14
What is the relationship between marginal cost (MC) and average variable cost (AVC) when MC is below AVC?
MC is decreasing.
ExplanationMC falls as AVC declines.
#15
What is the long-run supply curve for a perfectly competitive firm?
A horizontal line at the minimum point of the average total cost curve.
ExplanationHorizontal line at minimum ATC.