Microeconomics Concepts Quiz
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Questions and Answers

What is the formula for average total cost (ATC)?

  • The ratio of change in revenue to change in output
  • Price times quantity sold
  • Total cost (TC) divided by the number of units produced (correct)
  • Change in revenue divided by change in output

    • Under conditions of perfect competition, what is the relationship between price and marginal revenue (MR)?

  • Marginal revenue (MR) is greater than price
  • Price is identical to marginal revenue (MR) (correct)
  • There is no relationship between price and marginal revenue (MR)
  • Marginal revenue (MR) is less than price

    • What is the formula for economic profit?

  • Total revenue (TR) minus total economic cost (correct)
  • Total cost (TC) divided by the number of units produced
  • Total revenue (TR) minus total accounting cost
  • Price times quantity sold

    • What is the breakeven point for a firm in terms of output quantity?

    <p>When average total cost (ATC) equals price</p> Signup and view all the answers

    What is the definition of economies of scale?

    <p>Decreasing long-run cost per unit as output increases</p> Signup and view all the answers

    If the own-price elasticity of demand is equal to negative one, what can be concluded about the demand for the good?

    <p>Demand is unit, or unitary, elastic</p> Signup and view all the answers

    What is the phenomenon that occurs when, as a good’s price falls, more of this good is substituted for other, more expensive goods?

    <p>Substitution effect</p> Signup and view all the answers

    If income elasticity of demand is negative, what type of good does it indicate?

    <p>Inferior good</p> Signup and view all the answers

    What does a positive cross-price elasticity of demand indicate about two goods?

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

    What does a negative income elasticity of demand indicate about a good?

    <p>It is an inferior good</p> Signup and view all the answers

    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?

    <p>Total expenditure increases</p> Signup and view all the answers

    What is the phenomenon that occurs when, as a good’s price falls, more of this good is substituted for other, more expensive goods?

    <p>Substitution effect</p> Signup and view all the answers

    What type of good does a negative income elasticity of demand indicate?

    <p>Inferior good</p> Signup and view all the answers

    What can be concluded about the demand for a good if the own-price elasticity of demand is equal to negative one?

    <p>Demand is unitary elastic</p> Signup and view all the answers

    What does a positive cross-price elasticity of demand indicate about two goods?

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

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