15 Questions
What is the formula for average total cost (ATC)?
Total cost (TC) divided by the number of units produced
Under conditions of perfect competition, what is the relationship between price and marginal revenue (MR)?
Price is identical to marginal revenue (MR)
What is the formula for economic profit?
Total revenue (TR) minus total economic cost
What is the breakeven point for a firm in terms of output quantity?
When average total cost (ATC) equals price
What is the definition of economies of scale?
Decreasing long-run cost per unit as output increases
If the own-price elasticity of demand is equal to negative one, what can be concluded about the demand for the good?
Demand is unit, or unitary, elastic
What is the phenomenon that occurs when, as a good’s price falls, more of this good is substituted for other, more expensive goods?
Substitution effect
If income elasticity of demand is negative, what type of good does it indicate?
Inferior good
What does a positive cross-price elasticity of demand indicate about two goods?
They are substitutes
What does a negative income elasticity of demand indicate about a good?
It is an inferior good
What is the result of a decline in price on total expenditure if own-price elasticity of demand is greater than one in absolute terms?
Total expenditure increases
What is the phenomenon that occurs when, as a good’s price falls, more of this good is substituted for other, more expensive goods?
Substitution effect
What type of good does a negative income elasticity of demand indicate?
Inferior good
What can be concluded about the demand for a good if the own-price elasticity of demand is equal to negative one?
Demand is unitary elastic
What does a positive cross-price elasticity of demand indicate about two goods?
They are substitutes
Test your knowledge of microeconomics concepts such as average total cost, revenue, marginal revenue, and market competition conditions.
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