Microeconomics

Table of Contents

1. Topic pack - Microeconomics - introduction
2. 1.1 Competitive Markets: Demand and Supply
3. 1.1 Competitive Markets: Demand and Supply - notes
4. 1.1 Competitive markets - questions
5. 1.1 Competitive markets - simulations and activities
6. 1.2 Elasticities
7. 1.2 Elasticities - notes
8. Section 1.2 Elasticities - questions
9. Section 1.2 Elasticities - simulations and activities
10. 1.3 Government intervention
11. 1.3 Government Intervention - notes
12. 1.3 Government intervention - questions
13. 1.3 Government intervention - simulations and activities
14. 1.4 Market failure
15. 1.4 Market failure - notes
16. Section 1.4 Market failure - questions
17. Section 1.4 Market failure - simulations and activities
18. 1.5 Theory of the firm
19. 1.5 Theory of the firm - notes (HL only)
20. Section 1.5 Theory of the firm - questions
    1. Short-run - numerical
    2. Short-run - short-answer
    3. Long-run - short answer
    4. Cost theory - numerical
    5. Cost theory - short-answer
    6. Costs and cost curves - self-test questions
    7. Revenues - numerical
    8. Profit maximisation - short answer
    9. Revenue and profit - self-test questions
    10. Perfect competition - numerical
    11. Perfect competition - short answer
    12. Perfect competition - self-test questions
    13. Monopoly and oligopoly - short answer
    14. Monopoly - short answer
    15. The model of monopoly - self-test questions
    16. Economic efficiency - short answer
    17. Oligopoly - short answer
    18. Price discrimination - short answer
    19. Theory of firm - essay
    20. The big giveaway
    21. Fixing it transparently
21. Section 1.5 Theory of the firm - simulations and activities
22. Print View

Cost theory - short-answer

Question 1

Why can fixed costs be considered as an entry fee?

Question 2

Distinguish between the very short-run, the short-run, the long run and the very long run.

Question 3

Explain the term marginal cost.

Question 4

How would you decide, looking at a firm's average cost curve, if it was capital or labour intensive?

Question 5

How and why do cost curves change with time?

Question 6

Explain how a firm's short run average total cost curve and marginal cost curve are related.

Question 7

Use diagrams to distinguish between the law of diminishing returns and economies of scale.

Interactive questions

The following table of data describes the operation of a firm over a limited output range, and is used for the next 5 questions.

1	Fixed costs The fixed costs for the firm are: a) 100 b) 10 c) 5 d) Not able to be calculated from the data Yes, well done. FC is the costs of 'output zero'. It is the entry cost to production in the short-run.No. Look again, but think first.Your answer has been saved.

2	Average cost The average cost of production when 5 items were made is: a) 55 b) 60 c) 75 d) 86 Yes. Spot on. Answer. AC = TC/output. In this case, for 5 units, 300/5 = 60.No. Look again, but think first.Your answer has been saved.

3	Marginal cost The marginal cost of the 7th unit is: a) 450 b) 600 c) 400 d) 150 Yes. Spot on. It helps to know your definitions. Answer. Marginal cost of 7th = TC of 6th - TC of 7th = 600 - 450 = 150No. Look again, but think first.Your answer has been saved.

4

Diminishing returns The firm exhibits diminishing returns to the variable factor from the: a) 2nd unit made b) 3rd unit made c) 4th unit made d) 5th unit made Yes. Spot on. Diminishing returns = rising AVC. AVC is: at output 1=20, 2=20, 3=20, 4=30, 5=40, 6=58, 7=71. Constant returns up until 3 units and then diminishing.No. Look again, but think first.Your answer has been saved.

5	Variable cost per unit The variable cost per unit when 4 units are made is: a) 20 b) 30 c) 40 d) 58 Yes. Spot on. VC per unit = TVC / Output. From table AVC is at output 3=20, 4=30, 5=40, 6=58. Now read off the answer. It is 30. No. Look again, but think first.Your answer has been saved.