Questions and Answers
Which branch of economics focuses on the study of individual economic agents, such as households and firms, and their interactions in various markets?
Microeconomics
What is the law of supply and demand?
The price of a product and the quantity supplied of that product are directly related.
What do supply and demand curves visually represent?
The relationship between price and quantity demanded and supplied.
Which of the following is an example of a fixed cost?
Signup and view all the answers
What is the relationship between average variable costs (AVC) and marginal costs (MC) in the short run?
Signup and view all the answers
What is the formula for calculating total costs (TC)?
Signup and view all the answers
In a perfectly competitive market, who has control over pricing?
Signup and view all the answers
Which of the following factors can affect price elasticity of demand?
Signup and view all the answers
Which market structure is characterized by a large number of small, homogeneous firms with no market power?
Signup and view all the answers
Which market structure is characterized by a single firm dominating a market with no close substitute?
Signup and view all the answers
Which market structure is characterized by a small number of interdependent firms dominating the market?
Signup and view all the answers
Which of the following statements about long-run costs is true?
Signup and view all the answers
Which of the following can lead to lower production costs?
Signup and view all the answers
What does the long-run average cost (LRAC) represent?
Signup and view all the answers
Which of the following factors can affect the supply of goods and services?
Signup and view all the answers
What is the definition of price elasticity of demand?
Signup and view all the answers
What does it mean when demand is considered elastic?
Signup and view all the answers
What happens when the price is below the equilibrium level in a market?
Signup and view all the answers
Which of the following market structures is characterized by a large number of firms selling differentiated products?
Signup and view all the answers
Which of the following factors can affect price elasticity of demand?
Signup and view all the answers
Which of the following market structures is characterized by a single firm dominating a market with no close substitute?
Signup and view all the answers
What is the relationship between average variable costs (AVC) and marginal costs (MC) in the short run?
Signup and view all the answers
Which of the following statements accurately describes the law of supply and demand?
Signup and view all the answers
What is the formula for calculating price elasticity of demand?
Signup and view all the answers
Which of the following market structures is characterized by a large number of small, homogeneous firms with no market power?
Signup and view all the answers
Which of the following cost concepts represents the change in total costs resulting from producing one more unit of output?
Signup and view all the answers
In the short run, which of the following cost concepts initially decrease due to increasing returns to scale, but eventually increase due to diminishing marginal returns?
Signup and view all the answers
What is the relationship between average variable costs (AVC) and marginal costs (MC) in the short run?
Signup and view all the answers
What is the formula for calculating total costs (TC)?
Signup and view all the answers
Which of the following factors can affect the demand for goods and services?
Signup and view all the answers
What is the formula for calculating price elasticity of demand?
Signup and view all the answers
What does it mean when demand is considered inelastic?
Signup and view all the answers
What happens when the price is above the equilibrium level in a market?
Signup and view all the answers
Which of the following statements about long-run costs is true?
Signup and view all the answers
What do economies of scale refer to?
Signup and view all the answers
What can lead to lower production costs?
Signup and view all the answers
Study Notes
Microeconomics
- Microeconomics is the branch of economics that focuses on the study of individual economic agents, such as households and firms, and their interactions in various markets.
Law of Supply and Demand
- The law of supply and demand states that the price and quantity of a good or service will adjust to equilibrium, where the quantity supplied equals the quantity demanded.
Supply and Demand Curves
- Supply and demand curves visually represent the relationship between the price of a good or service and the quantity supplied or demanded.
Costs
- Fixed costs are expenses that remain the same even if the firm produces more or less output, such as rent or salaries.
- The relationship between average variable costs (AVC) and marginal costs (MC) in the short run is that AVC is the total variable cost per unit of output, while MC is the additional cost of producing one more unit.
- The formula for calculating total costs (TC) is TC = TFC + TVC, where TFC is total fixed cost and TVC is total variable cost.
Market Structure
- In a perfectly competitive market, no single firm has control over pricing.
- A perfectly competitive market is characterized by a large number of small, homogeneous firms with no market power.
- A monopoly is a market structure characterized by a single firm dominating a market with no close substitute.
- An oligopoly is a market structure characterized by a small number of interdependent firms dominating the market.
- A monopolistically competitive market is characterized by a large number of firms selling differentiated products.
Price Elasticity of Demand
- Price elasticity of demand is a measure of how responsive the quantity demanded of a good or service is to changes in its price.
- The definition of price elasticity of demand is the percentage change in quantity demanded in response to a 1% change in price.
- When demand is considered elastic, a small change in price leads to a large change in quantity demanded.
- When demand is considered inelastic, a large change in price leads to a small change in quantity demanded.
Long-Run Costs
- In the long run, firms can adjust all inputs, including fixed costs, to maximize profits.
- Long-run average cost (LRAC) represents the minimum cost per unit of output in the long run.
- Economies of scale refer to the reduction in long-run average cost due to increased production.
Factors Affecting Supply and Demand
- Factors that can affect the supply of goods and services include changes in production costs, technology, and expectations.
- Factors that can affect the demand for goods and services include changes in price, income, tastes, and expectations.
Equilibrium
- When the price is below the equilibrium level in a market, there is a shortage of the good or service.
- When the price is above the equilibrium level in a market, there is a surplus of the good or service.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
