Practice Questions
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In a perfectly competitive market, what effect does a decrease in production costs have on the supply curve?
When production costs go down, it becomes cheaper for companies to make products. Other options are incorrect because Some might think that higher cos...
How does an increase in marginal cost affect the market equilibrium price and quantity in a competitive market?
When the cost to produce one more item goes up, companies raise prices. Other options are incorrect because Some might think higher costs mean lower p...
How do diseconomies of scale affect market equilibrium when production levels increase?
When a company grows too big, it can become less efficient. Other options are incorrect because Some might think that higher production means more sup...
In a monopoly market, if the marginal cost of production increases, how is price elasticity of demand likely to affect the final price consumers pay?
When production costs go up, a monopolist may raise prices. Other options are incorrect because Some might think prices won't change at all; It's a co...
How does an increase in variable costs due to government intervention in the form of a tax on production affect total production levels, considering potential negative externalities?
When production costs go up, companies might make less. Other options are incorrect because This idea suggests that consumers will just pay more; This...
What happens to a firm's average total cost when it experiences an increase in fixed costs while maintaining the same level of production?
When fixed costs go up, the average total cost also goes up. Other options are incorrect because Some might think that costs go down when you produce ...
What happens to the variable costs of a company when it increases its production level?
When a company makes more products, it needs more materials and labor. Other options are incorrect because Some might think costs go down when making ...
What happens to the marginal cost when a company increases its production level beyond the optimal point?
When a company makes more products than the best amount, the cost to make each extra item goes up. Other options are incorrect because Some might thin...
If a firm reduces its marginal cost due to technological advancements, which of the following outcomes is most likely in a perfectly competitive market?
When a firm lowers its marginal cost, it can produce more goods without raising prices. Other options are incorrect because Some might think that lowe...
A firm that produces organic fruits has recently implemented a new technology that significantly reduces its variable costs. In a perfectly competitive market, how should the firm adjust its production levels and pricing strategy in response to this cost reduction?
When costs go down, the firm can produce more without raising prices. Other options are incorrect because This idea suggests that lowering costs means...
If a firm experiences a significant reduction in its marginal cost due to technological advancements, what is the most likely outcome for its production levels in a perfectly competitive market?
When a firm lowers its marginal cost, it can produce more at the same price. Other options are incorrect because Some might think lowering costs means...
When a firm experiences a reduction in its marginal cost due to technological advancements, it can increase its output level while maintaining its price as a price taker in a perfectly competitive market. This change primarily affects the firm's _____ costs.
Variable costs change with the amount produced. Other options are incorrect because Fixed costs do not change with production levels; Average costs ar...
Arrange the following steps that illustrate the impact of a technological breakthrough on a firm’s production costs and output level in a perfectly competitive market: A) The firm experiences a reduction in marginal cost due to the new technology. B) The firm increases its output level while maintaining its price. C) The firm's variable costs decrease as a result of the technological advancement. D) The market equilibrium reflects the new output levels and costs.
First, the new technology lowers the cost of making each product. Other options are incorrect because This option suggests costs decrease before under...
Joyce's firm has implemented a new technology that reduces the marginal cost of producing peaches. How would you classify the impact of this technological advancement on the firm's production decisions?
When the cost to make each peach goes down, the firm can make more peaches without raising prices. Other options are incorrect because Some might thin...
Reduction in marginal cost due to technological advancement is to increased output as: A. Price competition is to decreased market share B. Higher fixed costs are to lower variable costs C. Improved efficiency is to higher production costs D. Increased demand is to higher prices
When companies compete on price, they often lose market share. Other options are incorrect because Higher fixed costs do not automatically lead to low...
How does a technological advancement that reduces marginal costs affect a firm in a perfectly competitive market?
When a firm can produce goods at a lower cost, it can make more products without raising prices. Other options are incorrect because Some might think ...
Which of the following statements accurately describe the impact of a technological advancement that reduces marginal costs for a firm in a perfectly competitive market? Select all that apply.
In a perfectly competitive market, all firms face the same prices. Other options are incorrect because Some might think that lowering costs lets a fir...
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