Q: Which formula is used to calculate percentage change?

$$\frac{new - old}{old} \times 100$$

Question 1

In a perfectly competitive market, which of the following is NOT a condition for perfect competition?

Accepted Answer

Buyers and sellers can influence the market price

Question 2

A firm in a perfectly competitive market will maximize profit by producing the quantity where:

Accepted Answer

$$MR = MC$$

Question 3

If the market price falls below the average variable cost, what should a perfectly competitive firm do in the short run?

Accepted Answer

Shut down production

Question 4

Which formula correctly calculates average total cost (ATC)?

Accepted Answer

$$ATC = \frac{Total\ cost}{Quantity}$$

Question 5

A bakery is deciding whether to shut down in the short run. Its average variable cost is $$5$$, and the market price for bread is $$4. $$What should the bakery do?

Accepted Answer

Shut down because price is less than average variable cost

Question 6

Which of the following best describes the law of diminishing returns?

Accepted Answer

Adding more of one input eventually leads to smaller increases in output

Question 7

If a firm’s total cost is $$1000$$ and it produces $$200$$ units, what is its average total cost?

Accepted Answer

$$ATC = \frac{1000}{200} = 5$$

Question 8

Which of the following is an example of physical capital?

Accepted Answer

A factory building

Question 9

Marginal cost (MC) is defined as:

Accepted Answer

The change in total cost from producing one more unit of output

Question 10

A firm’s total revenue is $$5000$$ and its total cost is $$4000. $$What is its accounting profit?

Accepted Answer

$$Accounting\ profit = 5000 - 4000 = 1000$$

Question 11

Which of the following best describes opportunity cost?

Accepted Answer

The value of the next best alternative forgone

Question 12

If the price elasticity of demand is $$1.5$$, how would you describe the demand?

Accepted Answer

Elastic

Question 13

Which formula is used to calculate percentage change?

Accepted Answer

$$\frac{new - old}{old} 	imes 100$$

Question 14

Producer surplus is best described as:

Accepted Answer

The difference between the market price and the supply curve

Question 15

Which of the following is true about firms in a perfectly competitive market?

Accepted Answer

They are price takers and cannot control the market price

Question 16

If a firm’s marginal cost is $$10$$ and marginal revenue is $$10$$, what should the firm do to maximize profit?

Accepted Answer

Produce at this output level

Question 17

Which of the following is NOT a variable cost?

Accepted Answer

Rent for factory building

Question 18

A firm’s total cost is $$2000$$, fixed cost is $$800$$, and it produces $$400$$ units. What is its average variable cost (AVC)?

Accepted Answer

$$AVC = \frac{2000 - 800}{400} = 3$$

Question 19

Which of the following is an example of specialization in production?

Accepted Answer

Workers focusing on a single task to increase efficiency

Question 20

Which statement about marginal product is correct?

Accepted Answer

It is the additional output produced by one more unit of input

Perfect Competition, Costs, and Profit Maximization in Microeconomics

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