#1
Which of the following is a characteristic of a perfectly competitive market?
Presence of a single seller
Product differentiation
Firms are price takers
High barriers to entry
#2
In the short run, a firm's total cost is composed of both fixed costs and:
Variable costs
Opportunity costs
Sunk costs
Average costs
#3
Which of the following is NOT a characteristic of a perfectly competitive market?
Homogeneous products
Many buyers and sellers
Firms have market power
Free entry and exit
#4
What is the relationship between average product and marginal product?
Average product equals marginal product
Average product is greater than marginal product
Average product is less than marginal product
The two are unrelated
#5
Which of the following is NOT a factor of production?
#6
What does the production function represent?
The relationship between inputs and outputs
The cost of production
The revenue of a firm
The market demand for a product
#7
The Law of Diminishing Marginal Returns states that as more units of a variable input are added to fixed inputs, eventually:
Total cost decreases
Average cost decreases
Marginal cost increases
Marginal product decreases
#8
In the long run, a firm can adjust all of its inputs. Therefore, in the long run:
All costs are fixed costs
All costs are variable costs
All costs are sunk costs
All costs are opportunity costs
#9
Economies of scale occur when:
Average total cost decreases as output increases
Average variable cost decreases as output increases
Marginal cost is constant as output increases
Fixed costs remain constant as output increases
#10
What is the shape of the long-run average total cost curve when economies of scale are present?
U-shaped
Downward sloping
Upward sloping
Horizontal
#11
Which of the following is true about a firm operating at the minimum of its average total cost curve?
It is maximizing its total revenue
It is minimizing its losses
It is maximizing its profit
It is maximizing its marginal revenue
#12
What is the relationship between marginal cost and average total cost when marginal cost is below average total cost?
Marginal cost equals average total cost
Marginal cost is less than average total cost
Marginal cost is greater than average total cost
The two are equalized
#13
The slope of the production function measures the:
Total cost of production
Marginal product of the variable input
Average product of the variable input
Opportunity cost of production
#14
What is the term used to describe the situation where a firm's average total cost decreases as it produces more output?
Economies of scale
Diseconomies of scale
Constant returns to scale
Marginal returns to scale
#15
When does a firm experience diseconomies of scale?
When long-run average total cost decreases as output increases
When long-run average total cost remains constant as output increases
When long-run average total cost increases as output increases
When long-run average total cost is minimized
#16
When marginal cost is less than average total cost, what happens to average total cost?
It decreases.
It increases.
It remains constant.
It equals marginal cost.
#17
What is the shape of the marginal cost curve when a firm experiences diminishing marginal returns?
U-shaped
Downward sloping
Upward sloping
Horizontal