ECON100 PASS Midsession Practice
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ECON100 PASS Midsession Practice

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Questions and Answers

Equilibrium in a competitive market results in the economically efficient level of output where

  • marginal benefit is zero
  • marginal benefit is greater than the marginal cost
  • marginal benefit equals marginal cost (correct)
  • marginal cost is zero

    • What explains why the ATC and marginal cost curves are U-shaped in the short run

  • The ATC and marginal cost curves are U-shaped in the short run because of the gravitational pull affecting production efficiency.
  • The law of diminishing returns states that as production increases, marginal costs initially decrease due to specialization and increasing returns to scale. However, beyond a certain point, diminishing returns set in, causing marginal costs to rise, hence the U-shape of the curves. (correct)
  • It's due to the fluctuating prices of unicorn tears, which impact production costs and create the U-shape.
  • The difference between average total cost and average variable cost to get smaller as output increases

    • A market demand curve reflects the:

  • aggregate preferences of consumers for a product. (correct)
  • government-imposed taxes on consuming a product.
  • the total revenue generated from consuming a product.
  • individual preferences of consumers for a product.

    • Which of the following statements about monopoly is true?

    <p>Monopoly causes a reduction in consumer surplus.</p> Signup and view all the answers

    Why might private producers be disinclined to supply public goods?

    <p>Government subsidies for public goods are generally excessive, discouraging private involvement due to reduced potential profits.</p> Signup and view all the answers

    Lattes are priced at $4.00 each, and chocolate chip cookies are priced at $2.00 each. What is the opportunity cost of buying a latte?

    <p>2 chocolate chip cookies</p> Signup and view all the answers

    What could lead to an inward movement of a nation's production possibility frontier?

    <p>A decrease in the availability of raw materials</p> Signup and view all the answers

    When do you have a comparative advantage?

    <p>If you can produce something at a lower opportunity cost than others</p> Signup and view all the answers

    The profit-maximising level of output is

    <p>where the difference between total revenue and total cost is the greatest</p> Signup and view all the answers

    Australia has a comparative advantage in the production of

    <p>Laptops</p> Signup and view all the answers

    Study Notes

    Market Equilibrium and Efficiency

    • Equilibrium in a competitive market results in the economically efficient level of output.

    Cost Curves

    • The Average Total Cost (ATC) and Marginal Cost (MC) curves are U-shaped in the short run due to diminishing returns and increasing marginal costs.

    Demand Curve

    • A market demand curve reflects the quantity of a good or service that all consumers are willing and able to purchase at a given price level.

    Monopoly

    • One true statement about monopoly is that a single firm produces the entire market output.

    Public Goods

    • Private producers may be disinclined to supply public goods because they are non-rivalrous and non-excludable, making it difficult to charge for them and recover production costs.

    Opportunity Cost

    • The opportunity cost of buying a latte is the next best alternative that is given up, which is the value of the chocolate chip cookie that could have been purchased instead (in this case, 2 cookies).

    Production Possibility Frontier

    • An inward movement of a nation's production possibility frontier can be caused by a decline in factors of production, technological regress, or an increase in unemployment.

    Comparative Advantage

    • You have a comparative advantage when you can produce a good or service at a lower opportunity cost than someone else.
    • Australia has a comparative advantage in the production of goods such as minerals, coal, and agricultural products.

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    Description

    Test your knowledge on how equilibrium in a competitive market leads to the economically efficient level of output. Explore the concept of market equilibrium and its impact on the allocation of resources.

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