Production, Cost and Market Structures - One Line Questions

1. A firm in a perfectly competitive market faces: — A perfectly elastic demand curve
2. A natural monopoly arises when: — A single firm can supply the entire market at a lower cost than two or more firms
3. What does the term 'short run' mean in economics concerning production? — A period where at least one factor of production is fixed
4. The law of diminishing marginal returns states that: — As more of a variable input is added to a fixed input, the marginal product of that input will eventually decrease.
5. Diseconomies of scale occur when: — Average cost increases as output increases
6. Economies of scale occur when: — Average cost decreases as output increases
7. What is the Marginal Cost (MC) formula? — Change in Total Cost / Change in Quantity
8. If a firm's Total Revenue exceeds its Total Cost, it is earning: — Economic Profit
9. Which cost is the cost of the next best alternative forgone when a choice is made? — Opportunity Cost
10. What is the primary difference between explicit and implicit costs? — Explicit costs are paid in cash, implicit costs are not.
11. What is the primary characteristic of a perfectly competitive market? — Many buyers and sellers with identical products
12. In the long run, all factors of production are: — Variable
13. What are the two main components of Total Cost? — Fixed Cost and Variable Cost
14. In monopolistic competition, firms have some control over price due to: — Product differentiation
15. Which of the following best describes a characteristic of an oligopoly? — Significant barriers to entry and exit
16. A firm in an oligopoly might engage in non-price competition primarily to: — Avoid price wars and differentiate products
17. Which of the following is a characteristic of a monopoly? — A single seller with no close substitutes
18. The difference between Total Cost and Variable Cost is: — Fixed Cost
19. In the long run, under perfect competition, firms operate at the minimum point of which curve? — Average Total Cost (ATC)
20. What is the relationship between marginal cost (MC) and average total cost (ATC) when ATC is rising? — MC > ATC
21. What is the term for the market structure where there is only one buyer? — Monopsony
22. The 'law of one price' is most closely associated with which market structure? — Perfect Competition
23. Which market structure is characterized by a few dominant firms? — Oligopoly
24. What is the relationship between Total Product (TP) and Marginal Product (MP)? — MP is the slope of the TP curve
25. Which market structure has the highest barriers to entry? — Monopoly
26. Product differentiation is a key characteristic of which market structure? — Monopolistic Competition
27. Which market structure is characterized by widespread advertising and branding? — Monopolistic Competition
28. Cartel behavior, like price fixing, is most likely to occur in which market structure? — Oligopoly
29. The condition MR=MC for profit maximization holds true for which market structures? — All market structures (Perfect Competition, Monopoly, Oligopoly, Monopolistic Competition)
30. A firm operating under monopolistic competition faces a demand curve that is: — Downward sloping and relatively elastic
31. In the short run, a perfectly competitive firm maximizes profit by producing at the output level where: — Marginal Revenue equals Marginal Cost
32. The shutdown point for a firm in the short run occurs when: — Price is less than Average Variable Cost
33. A firm operating in a perfectly competitive market is a: — Price taker
34. Which of the following is a characteristic of monopolistic competition? — Many firms selling similar but differentiated products
35. The point where Marginal Revenue (MR) equals Marginal Cost (MC) is where: — Economic profit is maximized (or loss minimized)
36. The concept of 'shutting down' applies to which time horizon for a firm? — Short run only
37. In the long run, a firm in a perfectly competitive market earns: — Zero economic profit
38. What is the break-even point for a firm? — The point where Total Revenue equals Total Cost
39. What does the Total Product curve represent? — The total output produced by a firm given its inputs
40. In an oligopoly, firms are interdependent because: — Their actions significantly affect each other's profits
41. What is the primary goal of a firm in a perfectly competitive market? — To maximize profit
42. What is the formula for Average Fixed Cost (AFC)? — Fixed Cost / Quantity
43. What is the formula for Average Variable Cost (AVC)? — Variable Cost / Quantity
44. A firm will shut down in the short run if: — Total Revenue is less than Total Variable Cost
45. What situation describes the 'prisoner's dilemma' in game theory, often relevant to oligopolies? — Both firms choosing a strategy that leads to a worse outcome for both than if they had cooperated
46. The shape of the Average Total Cost (ATC) curve is typically: — U-shaped
47. Which cost is not affected by the level of output in the short run? — Fixed Cost
48. Which of the following is an example of a fixed cost? — Rent on a factory building
49. When does Average Product (AP) reach its maximum? — When MP is equal to AP
50. What is the point where Marginal Product (MP) is maximized? — Where Marginal Product starts to decline
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