Producer Behavior: Master Production Functions, Costs, and Market Structures

Question 1

Rent paid for a factory building is an example of a(n):

Accepted Answer

Fixed cost

Answer

Variable cost

Answer

Sunk cost

Answer

Opportunity cost

Question 2

Which of the following is **not** a potential barrier to entry in an oligopoly?

Accepted Answer

Low barriers to entry

Answer

Economies of scale

Answer

Government regulations

Answer

Patents and copyrights

Question 3

What is the relationship between price elasticity of demand and the marginal revenue curve?

Accepted Answer

They have opposite shapes

Answer

They have the same shape

Answer

They are inversely related

Answer

They are not related

Question 4

Which of the following factors are crucial when a firm determines its optimal output level to maximize profits?

Accepted Answer

Total revenue

Accepted Answer

Marginal cost

Answer

Fixed cost

Answer

Average variable cost

Question 5

Which of the following is NOT a factor of production, as per the definition used in economics?

Accepted Answer

Demand

Answer

Land

Answer

Labor

Answer

Capital

Question 6

The production function in economics demonstrates the relationship between:

Accepted Answer

Inputs and outputs

Answer

Price and quantity demanded

Answer

Marginal cost and marginal revenue

Answer

Supply and demand

Question 7

Fixed costs, as defined in economics, are characterized by:

Accepted Answer

Remaining constant as output changes

Answer

Increasing as output increases

Answer

Decreasing as output increases

Answer

Fluctuating with output

Question 8

In a perfectly competitive market, as defined in microeconomics, firms are considered:

Accepted Answer

Price takers

Answer

Price setters

Answer

Profit maximizers

Answer

Loss minimizers

Question 9

Which of the following is considered a determinant of market demand, as defined in economics?

Accepted Answer

Consumer preferences

Answer

Firm supply

Answer

Government regulations

Answer

Exchange rates

Question 10

The elasticity of supply in economics measures the:

Accepted Answer

Responsiveness of quantity supplied to a change in price

Answer

Responsiveness of quantity demanded to a change in price

Answer

Responsiveness of price to a change in quantity supplied

Answer

Responsiveness of price to a change in quantity demanded

Question 11

In economics, a positive externality occurs when:

Accepted Answer

The actions of one party benefit others without compensation

Answer

The actions of one party harm others without compensation

Answer

The actions of one party benefit only themselves

Answer

The actions of one party harm only themselves

Question 12

In a monopolistic competition market, firms have:

Accepted Answer

Some market power

Answer

High barriers to entry

Answer

Identical products

Question 13

Which factor does NOT influence the short-run supply curve?

Accepted Answer

The expectations of firms about future economic conditions.

Answer

Input prices, such as wages and raw materials.

Answer

Technological advancements affecting production efficiency.

Answer

The number of firms operating within the industry.

Question 14

Which market structure is characterized by a single dominant firm that possesses exclusive control over a unique product or service?

Accepted Answer

Monopoly

Answer

Perfect competition

Answer

Oligopoly

Answer

Monopolistic competition

Question 15

Which of the following expenses is typically considered a fixed cost?

Accepted Answer

Monthly rent for the factory building.

Answer

Wages paid to production line workers.

Answer

Raw materials used in the production process.

Answer

Advertising campaigns to promote products.

Question 16

Which of the following is NOT a potential benefit of specialization in production?

Accepted Answer

Reduced competition in the market.

Answer

Increased productivity and efficiency.

Answer

Lower production costs.

Answer

Access to a broader range of specialized skills.

Question 17

According to the law of diminishing returns, as more of a variable input is used:

Accepted Answer

The marginal product eventually decreases.

Answer

Total output increases at a constant rate.

Answer

Marginal product always increases.

Question 18

Which of the following is a fixed cost?

Accepted Answer

Rent

Answer

Wages

Answer

Variable costs

Answer

Raw materials

Question 19

Profit maximization occurs at the point where:

Accepted Answer

Marginal revenue equals marginal cost.

Answer

Average revenue is minimized.

Answer

Total costs are minimized.

Answer

Total revenue is maximized.

Question 20

In a perfectly competitive market, producers:

Accepted Answer

Are price takers.

Answer

Produce differentiated products.

Answer

Have market power.

Answer

Face barriers to market entry.

Question 21

The kinked demand curve model suggests that oligopolists will:

Accepted Answer

Be less likely to engage in price wars.

Answer

Have perfect knowledge of each other's strategies.

Answer

Always maximize profits.

Answer

Always set prices at marginal cost.