modul 12

Question 1

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

Answer 1

Short-run costs are costs that can be adjusted in the short term, while long-run costs are costs that can be adjusted in the long term.

Question 2

How can total variable costs be computed?

Answer 2

Total variable costs can be computed by multiplying the wage per worker by the number of workers employed.

Question 3

What is the relationship between marginal cost and total cost?

Answer 3

Marginal cost is the slope of the total cost curve

Question 4

What is the formula for total cost?

Answer 4

Total cost (TC) = Total variable cost (TVC) + Total fixed cost (TFC)

Question 5

What are fixed costs?

Answer 5

Fixed costs are costs that do not vary with output.

Question 6

What is the relationship between marginal cost and average total cost/average variable cost?

Answer 6

Marginal cost is always greater than average total cost/average variable cost

Question 7

What is the main assumption of the model of perfect competition?

Answer 7

Easy entry and exit

Question 8

What are the basic assumptions of the model of perfect competition?

Answer 8

Price-taking behavior and identical products

Question 9

What are the characteristics of goods in a perfectly competitive market?

Answer 9

Goods in a perfectly competitive market are homogeneous, meaning they are identical or indistinguishable from one another. This ensures that buyers have no preference for one seller’s product over another.

Question 10

What do economists mean by perfect competition?

Answer 10

Perfect competition refers to a market structure where there are many buyers and sellers, homogeneous products, perfect information, ease of entry and exit, and no individual firm has the ability to influence the market price.

Question 11

What is the U-shaped pattern of short-run average total cost and average variable cost curves?

Answer 11

The curves fall, then rise

Question 12

What is the total variable cost (TVC)?

Answer 12

Cost that varies with the level of output

Question 13

What are the costs associated with the use of variable and fixed factors of production?

Answer 13

Costs that vary with output and costs that do not vary with output

Question 14

What is average variable cost (AVC)?

Answer 14

The firm’s variable cost per unit of output

Question 15

Define total variable cost (TVC), total fixed cost (TFC), and total cost (TC).

Answer 15

Total variable cost (TVC) is the sum of all variable costs, total fixed cost (TFC) is the sum of all fixed costs, and total cost (TC) is the sum of total variable cost and total fixed cost.

Question 16

What is the relationship between total cost and total variable cost curves in the range of increasing marginal returns?

Answer 16

They become flatter and flatter

Question 17

What is the relationship between quantity of output and total cost?

Answer 17

Total cost increases as quantity of output increases

Question 18

What does the marginal cost curve show?

Answer 18

The additional cost of each additional unit of output

Question 19

What is the relationship between a firm’s total product curve and its total costs?

Answer 19

They are directly related

Question 20

What is one of the basic assumptions of the model of perfect competition?

Answer 20

There is easy entry and exit in the industry

Question 21

What is the central characteristic of the model of perfect competition?

Answer 21

Price is determined by demand and supply

Question 22

What is the main characteristic of goods in a perfectly competitive market?

Answer 22

They are all alike and cannot be differentiated

Question 23

What does the assumption of easy entry and exit imply in a perfectly competitive market?

Answer 23

There is a high degree of competition

Question 24

What is the role of competition in serving consumer interests?

Answer 24

Competition benefits consumers by reducing economic profits

Question 25

How does the number of buyers and sellers affect market competition?

Answer 25

The more buyers and sellers there are in a market, the more competitive the market becomes.

Question 26

What is perfect competition?

Answer 26

A market with many firms selling identical products

Question 27

What is price-taking behavior and why does it result from the assumptions of perfect competition?

Answer 27

Price-taking behavior refers to the fact that firms in a perfectly competitive market have no control over the market price and must accept the price determined by the market forces of supply and demand. This results from the assumption of a large number of buyers and sellers, where no individual firm can influence the market price.

Question 28

Why do the assumptions of perfect competition imply price-taking behavior?

Answer 28

Because individual buyers and sellers have no influence over the market price

Question 29

What is the role of competition in a perfectly competitive market?

Answer 29

To serve consumer interests and reduce economic profits

Question 30

What is the relationship between the number of buyers and sellers and market competition?

Answer 30

More buyers and sellers lead to more competition

Question 31

How does the number of buyers and sellers in a perfectly competitive market affect market price?

Answer 31

Buyers and sellers have no influence on market price

Question 32

What factors contribute to easy entry and exit in a market?

Answer 32

Low barriers to entry and exit

Question 33

Why is ease of entry and exit important in a perfectly competitive market?

Answer 33

Ease of entry and exit allows new firms to enter the market when there are economic profits to be made, and existing firms to exit the market when there are economic losses. This ensures that there is no long-term abnormal profit or loss in the market.