Test questions

Question 0

Fixed cost?

Answer 0

Cost that stay constant as production/ output increases. Rent

Question 1

Economic cost

Answer 1

The opportunity cost of producing

Question 2

Semi variable cost?

Answer 2

A cost that can be fixed and variable. E.g salary with overtime.

Question 3

Variable cost?

Answer 3

Costs that change with output/production. Materials

Question 4

Average fixed cost formula?

Answer 4

AFC : fixed cost % Output

Question 5

Total cost

Answer 5

Total cost = VC + FC

Question 6

Average Variable Cost formula

Answer 6

AVC = total variable cost % output

Question 7

Marginal cost

Answer 7

The increase in cost to producing one extra unit

Question 8

How do economist distinguish between the short term and long term?

Answer 8

In the short term at least one factor of production is fixed. In the long run none are fixed

Question 9

Law of diminishing returns?

Answer 9

As workers are added to a factory. There becomes a point by which people start getting in each others way or equipment becomes scarce. Therefore there becomes a point where the the marginal product from adding an extra worker begins to reduce (less than the previous one)

Question 10

Total product

Answer 10

Total output % workers

Question 11

Marginal product

Answer 11

Amount of extra product from one more unit of labour

Question 12

Where does productive efficiency occur on the ATC curve?

Answer 12

Where it crosses the average total cost curve.

Question 13

Where will the MC curve cut the ATC curve?

Answer 13

The lowest point

Question 14

Explain 3 internal economies of scale

Answer 14

Bulk buying.
Technical economies of scale (increased dimension of containers)
Financial (banks lending more generously to big businesses)
Technological (machinery)
Diversification

Question 15

Internal economies of scale?

Answer 15

A reduction in average cost resulting from an action undertaken by a firm itself

Question 16

Name some internal diseconomies of scale

Answer 16

Poor communication
Lack of motivation
Alienation

Question 17

Some external economies of scale and a definition

Answer 17

Economies from external sources. 
Good infrastructure. 
Research from universities
Local skilled labour/businesses etc
Local courses
Hospitals

Question 18

External did economy of scale examples

Answer 18

Poor transportation.
Congestion
Rent
Cooperation tax

Question 19

Normal profit definition?

Answer 19

When a firm is making enough money to cover its cost operating in the long run.

Question 20

Abnormal profit definition

Answer 20

Profit above normal profit. Over and above.

Question 21

Marginal revenue definition

Answer 21

The addition to TR of one extra unit sold.

Question 22

Cost plus pricing?

Answer 22

A technique adopted by firms of fixing a price for their products by adding a fixed percentage profit margin to the long run average cost of production.

Question 23

Profit satisficing? (Spelt correctly)

Answer 23

Making sufficient profit to satisfy the demands of shareholders.