June P2 Med
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Questions and Answers

What is the primary objective of most businesses?

  • Increasing production capacity
  • Maximizing market share
  • Minimizing losses
  • Profit maximization (correct)

    • What is the effect of higher prices on the supply of a good?

  • Unpredictable effect on production and supply
  • Increased production and supply (correct)
  • No change in production and supply
  • Decreased production and supply

    • What happens to demand when the price of a substitute good increases?

  • Demand becomes unpredictable
  • Demand increases for the other good (correct)
  • Demand remains the same
  • Demand decreases for the substitute good

    • What is the effect of a decrease in the price of a complementary good?

    <p>Demand for the related good increases (A)</p> Signup and view all the answers

    What is the role of relative prices in economics?

    <p>Influencing consumer and producer decisions (A)</p> Signup and view all the answers

    What is the relationship between cost, revenue, and profitability in a business?

    <p>Profitability is determined by the relationship between cost and revenue (A)</p> Signup and view all the answers

    What happens to demand when the price of a good increases, assuming it is an elastic good?

    <p>Demand decreases (B)</p> Signup and view all the answers

    What is the definition of price elasticity of demand?

    <p>It measures how much the quantity demanded of a good responds to a change in the price of that good. (D)</p> Signup and view all the answers

    What is the role of the law of demand in determining economic dynamics?

    <p>It influences consumer decisions about what to buy (D)</p> Signup and view all the answers

    What type of demand is characterized by an elasticity of less than 1?

    <p>Inelastic Demand (D)</p> Signup and view all the answers

    Which of the following factors makes demand more elastic?

    <p>More availability of substitutes (B)</p> Signup and view all the answers

    What is the definition of price elasticity of supply?

    <p>It measures how much the quantity supplied responds to a change in the price of that good. (A)</p> Signup and view all the answers

    When the elasticity of supply is greater than 1, what can suppliers do?

    <p>Increase output without a significant rise in cost (A)</p> Signup and view all the answers

    What is cross elasticity of demand?

    <p>It measures how the quantity demanded of one good responds to the price change of another good. (A)</p> Signup and view all the answers

    What type of goods would have a negative cross elasticity of demand?

    <p>Complementary Goods (A)</p> Signup and view all the answers

    What is income elasticity of demand?

    <p>It measures how the quantity demanded of a good responds to changes in consumer income. (D)</p> Signup and view all the answers

    What type of goods would have a positive income elasticity of demand?

    <p>Normal Goods (A)</p> Signup and view all the answers

    Why is understanding elasticity important for businesses and policymakers?

    <p>It helps them make informed decisions about pricing strategies and production levels. (B)</p> Signup and view all the answers

    What is the main difference between accounting profit and economic profit?

    <p>Economic profit takes into account opportunity costs, while accounting profit does not (C)</p> Signup and view all the answers

    What is the break-even point in a business?

    <p>The point where a business makes just enough profit to continue operating in the market (A)</p> Signup and view all the answers

    What is the formula for calculating Average Fixed Cost (AFC)?

    <p>FC divided by Q (C)</p> Signup and view all the answers

    What occurs when increasing the scale of production leads to a lower cost per unit?

    <p>Economies of scale (D)</p> Signup and view all the answers

    What is the formula for calculating Total Revenue (TR)?

    <p>P x Q (A)</p> Signup and view all the answers

    What is the main difference between marginal cost and average total cost?

    <p>Marginal cost is the change in total cost when one more unit is produced, while average total cost is the total cost divided by the quantity of output (B)</p> Signup and view all the answers

    What is the purpose of calculating marginal revenue?

    <p>To determine the optimal level of output (B)</p> Signup and view all the answers

    What is the definition of decreasing returns to scale?

    <p>Output increases by a smaller proportion than inputs (D)</p> Signup and view all the answers

    What is the purpose of calculating profit?

    <p>To evaluate the financial performance of a business (D)</p> Signup and view all the answers

    What is the main difference between short-run and long-run costs?

    <p>Short-run costs are fixed, while long-run costs are variable (C)</p> Signup and view all the answers

    What is the primary way that relative prices influence consumer and producer decisions?

    <p>By affecting resource allocation and production decisions (D)</p> Signup and view all the answers

    Which of the following would lead to an increase in the supply of a good?

    <p>An increase in the price of the good itself (B)</p> Signup and view all the answers

    How do changes in the price of one good affect the demand for a complementary good?

    <p>A decrease in the price of one good typically increases the demand for the complementary good (D)</p> Signup and view all the answers

    What is the main factor that determines the profitability of a firm in the short run?

    <p>The difference between revenue and variable cost (C)</p> Signup and view all the answers

    How do firms respond to changes in market conditions, such as shifts in demand or supply?

    <p>All of the above (D)</p> Signup and view all the answers

    What happens to the demand for a good when there is an increase in the price of a substitute good?

    <p>The demand for the good increases (B)</p> Signup and view all the answers

    How do changes in the price of one good affect the demand for another good in a market?

    <p>The demand for the other good can either increase or decrease, depending on the relationship between the goods (C)</p> Signup and view all the answers

    What is the main difference between the short-run and long-run perspectives in analyzing the dynamics of markets?

    <p>The short run focuses on the firm's ability to adjust its production levels, while the long run focuses on its ability to adjust its production capabilities (A)</p> Signup and view all the answers

    When the price elasticity of demand is exactly 1, what happens to the quantity demanded?

    <p>The percentage change in quantity demanded is equal to the percentage change in price (A)</p> Signup and view all the answers

    Which factor makes demand more inelastic?

    <p>Necessity of the good (D)</p> Signup and view all the answers

    What is the effect of a price increase on the quantity supplied when the price elasticity of supply is greater than 1?

    <p>Suppliers can increase output without a significant rise in cost (A)</p> Signup and view all the answers

    What is the relationship between two goods with a positive cross elasticity of demand?

    <p>They are substitute goods (D)</p> Signup and view all the answers

    What type of goods would have a negative income elasticity of demand?

    <p>Inferior goods (B)</p> Signup and view all the answers

    Why is understanding price elasticity of supply important for businesses?

    <p>To plan production levels (B)</p> Signup and view all the answers

    When the price elasticity of demand is greater than 1, what happens to the quantity demanded in response to a small price change?

    <p>Quantity demanded changes significantly (B)</p> Signup and view all the answers

    What is the effect of an increase in income on the quantity demanded of a normal good?

    <p>Quantity demanded increases (A)</p> Signup and view all the answers

    Why do businesses need to understand the price elasticity of demand?

    <p>To set prices that optimize revenue (C)</p> Signup and view all the answers

    What happens to the demand for a good when the price of a complementary good increases?

    <p>Demand decreases (C)</p> Signup and view all the answers

    What is the main difference between accounting profit and economic profit?

    <p>Accounting profit is calculated by subtracting explicit costs from total revenue, while economic profit is calculated by subtracting both explicit and implicit costs from total revenue (D)</p> Signup and view all the answers

    What is the purpose of calculating marginal cost?

    <p>To determine the optimal level of production (C)</p> Signup and view all the answers

    What is the formula for calculating Average Variable Cost (AVC)?

    <p>VC divided by Q (D)</p> Signup and view all the answers

    What happens to output when there are increasing returns to scale?

    <p>Output increases by a greater proportion than inputs (D)</p> Signup and view all the answers

    What is the main difference between short-run and long-run costs?

    <p>In the short run, all costs are fixed, while in the long run, all costs are variable (C)</p> Signup and view all the answers

    What is the purpose of calculating marginal revenue?

    <p>To determine the optimal level of production (A)</p> Signup and view all the answers

    What is the definition of normal profit?

    <p>The minimum profit needed for sustainability, including opportunity costs (B)</p> Signup and view all the answers

    What is the effect of economies of scale on the cost per unit?

    <p>It decreases the cost per unit (D)</p> Signup and view all the answers

    What is the purpose of calculating total revenue?

    <p>To determine the profitability of a business (B)</p> Signup and view all the answers

    What is the relationship between fixed costs and output in the short run?

    <p>Fixed costs remain constant as output increases (D)</p> Signup and view all the answers

    What is the primary factor that influences consumer and producer decisions about what to buy or produce?

    <p>Relative prices (A)</p> Signup and view all the answers

    What happens to the demand for a good when there is an increase in the price of a substitute good?

    <p>Demand increases (D)</p> Signup and view all the answers

    What is the relationship between the law of supply and the price of a good?

    <p>Higher prices increase supply (A)</p> Signup and view all the answers

    What is the effect of a decrease in the price of a complementary good on the demand for another good?

    <p>Demand increases (C)</p> Signup and view all the answers

    What is the main objective of businesses in the economic framework?

    <p>Profit maximization (D)</p> Signup and view all the answers

    What is the key factor that determines the profitability of a firm in the long run?

    <p>Demand and supply relationships (B)</p> Signup and view all the answers

    What is the effect of a change in consumer preferences on the demand for a good?

    <p>Demand increases (D)</p> Signup and view all the answers

    What is the relationship between the law of demand and the price of a good?

    <p>Higher prices decrease demand (A)</p> Signup and view all the answers

    What happens to the quantity demanded of a good when its price elasticity of demand is inelastic?

    <p>It remains relatively unchanged (D)</p> Signup and view all the answers

    Which of the following factors makes the demand for a good more elastic?

    <p>There are more substitutes available (A)</p> Signup and view all the answers

    What is the effect of a price increase on the quantity supplied when the price elasticity of supply is elastic?

    <p>The quantity supplied increases significantly (A)</p> Signup and view all the answers

    What type of goods have a positive cross elasticity of demand?

    <p>Substitute goods (D)</p> Signup and view all the answers

    What is the effect of an increase in income on the quantity demanded of an inferior good?

    <p>It decreases (D)</p> Signup and view all the answers

    Why is understanding the price elasticity of demand important for businesses?

    <p>To set prices that optimize revenue (A)</p> Signup and view all the answers

    What is the effect of a small price change on the quantity demanded when the price elasticity of demand is unit elastic?

    <p>It changes proportionally to the price change (B)</p> Signup and view all the answers

    Which of the following factors makes the supply of a good more elastic?

    <p>The availability of production resources (B)</p> Signup and view all the answers

    What is the effect of an increase in the price of a complementary good on the demand for another good?

    <p>It decreases (C)</p> Signup and view all the answers

    Why is understanding the price elasticity of supply important for businesses?

    <p>To plan production levels (D)</p> Signup and view all the answers

    What is the key difference between accounting profit and economic profit?

    <p>Accounting profit accounts for explicit costs, while economic profit accounts for opportunity costs (C)</p> Signup and view all the answers

    What is the purpose of calculating marginal revenue?

    <p>To determine the profit-maximizing level of output (B)</p> Signup and view all the answers

    What occurs when increasing the scale of production leads to a lower cost per unit?

    <p>Economies of scale (A)</p> Signup and view all the answers

    What is the formula for calculating Total Revenue (TR)?

    <p>TR = Price (P) x Quantity (Q) (D)</p> Signup and view all the answers

    What is the main difference between short-run and long-run costs?

    <p>Short-run costs are fixed, while long-run costs are variable (D)</p> Signup and view all the answers

    What is the purpose of calculating Average Fixed Cost (AFC)?

    <p>To determine the fixed cost per unit of output (D)</p> Signup and view all the answers

    What is the definition of decreasing returns to scale?

    <p>Output increases by a smaller proportion than inputs (D)</p> Signup and view all the answers

    What is the purpose of calculating profit?

    <p>To determine the surplus beyond break-even (D)</p> Signup and view all the answers

    What is the definition of normal profit?

    <p>The minimum profit needed for sustainability (C)</p> Signup and view all the answers

    What is the main difference between marginal cost and average total cost?

    <p>Marginal cost is the cost of producing one additional unit, while average total cost is the total cost divided by quantity (D)</p> Signup and view all the answers

    What is the main difference between accounting profit and economic profit?

    <p>Accounting profit only considers explicit costs, while economic profit also considers opportunity costs (D)</p> Signup and view all the answers

    What is the purpose of calculating marginal cost?

    <p>To decide the optimal level of production (A)</p> Signup and view all the answers

    What occurs when a firm experiences economies of scale?

    <p>The cost per unit decreases (C)</p> Signup and view all the answers

    What is the formula for calculating total revenue?

    <p>Price x Quantity (B)</p> Signup and view all the answers

    What is the main difference between short-run and long-run costs?

    <p>In the long run, all costs become variable, allowing for more flexibility in production (A)</p> Signup and view all the answers

    What is the primary reason why understanding the relationships between markets is crucial in economics?

    <p>To analyze how changes in one market affect others (D)</p> Signup and view all the answers

    What is the purpose of calculating average total cost?

    <p>To compare costs at different levels of output (B)</p> Signup and view all the answers

    What is the main difference between normal profit and economic profit?

    <p>Normal profit represents the break-even point, while economic profit is a true measure of profitability (C)</p> Signup and view all the answers

    Which of the following factors does NOT influence demand?

    <p>Production costs (A)</p> Signup and view all the answers

    What is the formula for calculating marginal revenue?

    <p>Change in total revenue divided by change in quantity (D)</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on its demand, assuming it is an elastic good?

    <p>Demand decreases (B)</p> Signup and view all the answers

    What is the purpose of calculating profit?

    <p>To evaluate the financial performance of a firm (B)</p> Signup and view all the answers

    What is the relationship between the price of a good and its supply, according to the Law of Supply?

    <p>Higher prices encourage supply (D)</p> Signup and view all the answers

    What is the main difference between fixed costs and variable costs?

    <p>Fixed costs do not vary with the level of output, while variable costs do (A)</p> Signup and view all the answers

    What is the effect of a decrease in the price of a good on the demand for its substitute?

    <p>Demand for the substitute increases (D)</p> Signup and view all the answers

    What is the primary objective of a business, according to the economic framework?

    <p>Profit maximization (A)</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on the demand for its complement?

    <p>Demand for the complement increases (A)</p> Signup and view all the answers

    What is the relationship between the cost, revenue, and profitability of a firm?

    <p>Higher revenue leads to higher profitability (B)</p> Signup and view all the answers

    What is the primary objective of measuring price elasticity of demand?

    <p>To understand how quantity demanded responds to a change in price (D)</p> Signup and view all the answers

    What is the characteristic of a good with an elastic demand?

    <p>A small price change leads to a large change in quantity demanded (A)</p> Signup and view all the answers

    What is the effect of an increase in the price of a substitute good on the demand for another good?

    <p>The demand for the other good increases (A)</p> Signup and view all the answers

    What is the primary factor that affects the price elasticity of supply?

    <p>All of the above (D)</p> Signup and view all the answers

    What is the characteristic of a good with a positive income elasticity of demand?

    <p>The quantity demanded increases when income increases (C)</p> Signup and view all the answers

    What is the primary application of understanding price elasticity of demand?

    <p>Setting prices that optimize revenue (B)</p> Signup and view all the answers

    What is the characteristic of a good with an inelastic demand?

    <p>A small price change leads to a small change in quantity demanded (D)</p> Signup and view all the answers

    What is the effect of an increase in the price of a complementary good on the demand for another good?

    <p>The demand for the other good decreases (C)</p> Signup and view all the answers

    What is the primary objective of measuring cross elasticity of demand?

    <p>To highlight the interdependencies between different products (B)</p> Signup and view all the answers

    What is the effect of an increase in the price of a good on the quantity demanded when the price elasticity of demand is unit elastic?

    <p>The percentage change in quantity demanded is equal to the percentage change in price (B)</p> Signup and view all the answers

    What is the primary influence on consumer and producer decisions regarding what to buy or produce?

    <p>Relative prices (D)</p> Signup and view all the answers

    Which of the following factors does not directly affect demand?

    <p>Production costs (B)</p> Signup and view all the answers

    What is the result of an increase in the price of a complementary good?

    <p>Decreased demand for the other good (D)</p> Signup and view all the answers

    What is the key factor in determining how changes in one market affect others?

    <p>Supply and demand relationships (C)</p> Signup and view all the answers

    Which of the following is a consequence of dynamic relative prices?

    <p>Resource allocation shifts (B)</p> Signup and view all the answers

    What is the primary objective of firms in the economic framework?

    <p>Profit maximization (A)</p> Signup and view all the answers

    What happens to demand when the price of a substitute good decreases?

    <p>Demand decreases (B)</p> Signup and view all the answers

    Which of the following best describes the relationship between cost, revenue, and profitability?

    <p>Cost, revenue, and profitability are interrelated (C)</p> Signup and view all the answers

    When the price elasticity of demand is greater than 1, what happens to the quantity demanded in response to a small price change?

    <p>There is a significant decrease in quantity demanded (C)</p> Signup and view all the answers

    What is the effect of an increase in income on the quantity demanded of an inferior good?

    <p>The quantity demanded decreases (B)</p> Signup and view all the answers

    What is the effect of a price increase on the quantity supplied when the price elasticity of supply is less than 1?

    <p>The quantity supplied increases slightly (A)</p> Signup and view all the answers

    Which of the following factors makes demand more elastic?

    <p>Availability of substitutes (A)</p> Signup and view all the answers

    What is the effect of a price decrease on the quantity demanded of a normal good?

    <p>The quantity demanded increases (A)</p> Signup and view all the answers

    What is the relationship between two goods with a negative cross elasticity of demand?

    <p>They are complementary goods (C)</p> Signup and view all the answers

    When the price elasticity of supply is exactly 1, what happens to the quantity supplied in response to a price change?

    <p>The quantity supplied increases proportionally (B)</p> Signup and view all the answers

    Why is understanding price elasticity of demand important for businesses?

    <p>To set the optimal price and maximize revenue (B)</p> Signup and view all the answers

    What is the effect of an increase in the price of a substitute good on the demand for another good?

    <p>The demand for the other good increases (D)</p> Signup and view all the answers

    Which of the following factors affects the price elasticity of supply?

    <p>Production capacity (B)</p> Signup and view all the answers

    What is the main difference between economic profit and normal profit?

    <p>Economic profit includes opportunity costs, while normal profit does not. (B)</p> Signup and view all the answers

    What is the purpose of calculating marginal cost?

    <p>To make decisions about production levels. (D)</p> Signup and view all the answers

    What is the effect of economies of scale on the cost per unit?

    <p>It decreases the cost per unit. (B)</p> Signup and view all the answers

    What is the formula for calculating total revenue?

    <p>Price x Quantity (B)</p> Signup and view all the answers

    What is the main difference between short-run and long-run costs?

    <p>Short-run costs are fixed and variable, while long-run costs are only variable. (C)</p> Signup and view all the answers

    What is the purpose of calculating average total cost?

    <p>To determine the most efficient production levels. (D)</p> Signup and view all the answers

    What is the effect of increasing returns to scale on output?

    <p>Output increases by a greater proportion than inputs. (C)</p> Signup and view all the answers

    What is the purpose of calculating marginal revenue?

    <p>To make decisions about production levels. (D)</p> Signup and view all the answers

    What is the main difference between fixed costs and variable costs?

    <p>Fixed costs do not vary with the level of output, while variable costs do. (A)</p> Signup and view all the answers

    What is the purpose of calculating profit?

    <p>To determine the financial health of a business. (B)</p> Signup and view all the answers

    What is the result of a decrease in the price of a good on its demand, assuming the good is inelastic?

    <p>Demand will increase slightly (B)</p> Signup and view all the answers

    What is the effect of an increase in the price of a complementary good on the demand for another good?

    <p>Demand for the other good will decrease (D)</p> Signup and view all the answers

    What happens to the supply of a good when the price of a substitute good increases?

    <p>Supply of the good will increase (D)</p> Signup and view all the answers

    What is the main factor that determines the profitability of a firm in the long run?

    <p>Scale of production (A)</p> Signup and view all the answers

    What happens to the demand for a normal good when income increases?

    <p>Demand will increase (A)</p> Signup and view all the answers

    What is the relationship between two goods with a negative cross elasticity of demand?

    <p>They are substitutes (B)</p> Signup and view all the answers

    What is the result of an increase in production costs on a firm's profitability in the short run?

    <p>Profitability will decrease (C)</p> Signup and view all the answers

    What is the effect of a decrease in the price of a good on its supply, assuming the good has an elasticity of supply greater than 1?

    <p>Supply will increase greatly (B)</p> Signup and view all the answers

    What is the primary difference between accounting profit and economic profit?

    <p>Economic profit includes implicit costs, while accounting profit does not (A)</p> Signup and view all the answers

    What is the purpose of calculating marginal cost?

    <p>To decide the optimal level of production (D)</p> Signup and view all the answers

    What is the effect of economies of scale on a firm's cost per unit?

    <p>It decreases the cost per unit (B)</p> Signup and view all the answers

    What is the formula for calculating total revenue?

    <p>Price x Quantity (A)</p> Signup and view all the answers

    What is the purpose of calculating profit?

    <p>To evaluate the financial performance of a business (B)</p> Signup and view all the answers

    What is the main difference between short-run and long-run costs?

    <p>In the short run, all costs are fixed, while in the long run, all costs are variable (A)</p> Signup and view all the answers

    What is the effect of increasing returns to scale on a firm's output?

    <p>Output increases by a greater proportion than inputs (A)</p> Signup and view all the answers

    What is the effect of a price increase on the quantity demanded when the price elasticity of demand is less than 1?

    <p>Quantity demanded remains relatively unchanged (C)</p> Signup and view all the answers

    What is the purpose of calculating average total cost?

    <p>To evaluate the efficiency of a business (D)</p> Signup and view all the answers

    Which factor affects the price elasticity of demand for a good?

    <p>Both a and b (C)</p> Signup and view all the answers

    What is the effect of a change in the price of a substitute good on the demand for another good?

    <p>The demand for the other good increases (B)</p> Signup and view all the answers

    What is the effect of an increase in income on the quantity demanded of an inferior good?

    <p>Quantity demanded decreases (D)</p> Signup and view all the answers

    What is the main difference between marginal revenue and average revenue?

    <p>Marginal revenue is calculated as the change in total revenue, while average revenue is calculated as total revenue divided by quantity (B)</p> Signup and view all the answers

    Why is understanding price elasticity of supply important for businesses?

    <p>To plan production levels (D)</p> Signup and view all the answers

    What is the effect of a change in the price of a complementary good on the quantity demanded of another good?

    <p>Quantity demanded changes in the opposite direction (D)</p> Signup and view all the answers

    Which type of goods have a positive cross elasticity of demand?

    <p>Substitute goods (C)</p> Signup and view all the answers

    What happens to the quantity supplied when the price elasticity of supply is greater than 1?

    <p>Quantity supplied increases significantly (D)</p> Signup and view all the answers

    Why do businesses need to understand the price elasticity of demand?

    <p>All of the above (D)</p> Signup and view all the answers

    What is the effect of a decrease in the price of a good on the quantity demanded when the price elasticity of demand is exactly 1?

    <p>Quantity demanded increases proportionally to the price change (B)</p> Signup and view all the answers

    What is the purpose of understanding elasticity in economics?

    <p>To make informed decisions regarding pricing strategies and production levels (C)</p> Signup and view all the answers

    How do consumer preferences influence demand?

    <p>An increase in preferences leads to an increase in demand. (C)</p> Signup and view all the answers

    What happens to resource allocation when relative prices change?

    <p>Resources are reallocated according to the new relative prices. (D)</p> Signup and view all the answers

    How do changes in the price of a good affect the demand for a substitute good?

    <p>An increase in price leads to an increase in demand for the substitute. (A)</p> Signup and view all the answers

    What is the relationship between profit and cost in a business?

    <p>Lower costs lead to higher profits. (D)</p> Signup and view all the answers

    How do changes in market size influence demand?

    <p>An increase in market size leads to an increase in demand. (C)</p> Signup and view all the answers

    What happens to demand when the price of a complementary good decreases?

    <p>Demand for the good increases. (C)</p> Signup and view all the answers

    In what way do firms respond to changes in market conditions?

    <p>They adjust production according to changes in demand or supply. (D)</p> Signup and view all the answers

    What is the primary objective of most businesses in terms of profit?

    <p>To maximize profit. (A)</p> Signup and view all the answers

    What is the key difference between accounting profit and economic profit?

    <p>Accounting profit accounts for opportunity costs, while economic profit does not (D)</p> Signup and view all the answers

    In the short run, what type of costs do not vary with the level of output?

    <p>Fixed costs (D)</p> Signup and view all the answers

    What is the formula for calculating Marginal Cost (MC)?

    <p>Change in Total Cost (TC) when one more unit is produced (C)</p> Signup and view all the answers

    What occurs when a firm experiences economies of scale?

    <p>The average cost per unit decreases (A)</p> Signup and view all the answers

    What is the purpose of calculating Average Total Cost (ATC)?

    <p>To identify the most efficient production level (D)</p> Signup and view all the answers

    What type of costs become variable in the long run?

    <p>All costs (A)</p> Signup and view all the answers

    What is the formula for calculating Total Revenue (TR)?

    <p>Price (P) times Quantity (Q) (D)</p> Signup and view all the answers

    What is the purpose of calculating Marginal Revenue (MR)?

    <p>To identify the optimal level of output (A)</p> Signup and view all the answers

    What happens to output when there are constant returns to scale?

    <p>Output increases proportionally to inputs (A)</p> Signup and view all the answers

    What is the purpose of calculating Profit?

    <p>To evaluate the financial performance of a firm (A)</p> Signup and view all the answers

    When the price elasticity of demand is less than 1, what is the response of quantity demanded to a price change?

    <p>Quantity demanded is relatively insensitive to price changes. (A)</p> Signup and view all the answers

    What makes the demand for a good more elastic?

    <p>Availability of substitutes (B)</p> Signup and view all the answers

    What type of goods have a positive cross elasticity of demand?

    <p>Substitute goods (A)</p> Signup and view all the answers

    What is the effect of an increase in consumer income on the quantity demanded of an inferior good?

    <p>Quantity demanded decreases (A)</p> Signup and view all the answers

    When the price elasticity of supply is greater than 1, what can suppliers do?

    <p>Increase output without a significant rise in cost (A)</p> Signup and view all the answers

    What is the purpose of understanding elasticity in business and policy decisions?

    <p>To make more informed decisions regarding pricing strategies and production levels (A)</p> Signup and view all the answers

    What happens to the quantity demanded when the price elasticity of demand is exactly 1?

    <p>The percentage change in quantity demanded is equal to the percentage change in price (B)</p> Signup and view all the answers

    What is the effect of an increase in the price of a substitute good on the demand for another good?

    <p>Demand for the other good increases (D)</p> Signup and view all the answers

    What makes the supply of a good more elastic?

    <p>Increase in production capacity (C)</p> Signup and view all the answers

    When the price elasticity of demand is greater than 1, what happens to the quantity demanded in response to a small price change?

    <p>Quantity demanded changes significantly (B)</p> Signup and view all the answers

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