Micro Revision Quiz 5

A government sets a maximum price below its equilibrium market price. What will be the net effect on the economic welfare of the consumers and producers of the good?

• A

• B

• C

• D

Which of the following is most likely to result in an increase in producer surplus in the market for instant cocoa?

• A successful marketing campaign promoting the health benefits of tea

• A poor cocoa harvest resulting from severe flooding in cocoa-farming regions

• An increase in an indirect tax on cocoa growers

• New technology in the production of instant cocoa

What is necessary for consumer surplus to be zero?

• Perfectly elastic demand

• Perfectly inelastic demand

• Perfectly elastic supply

• Perfectly inelastic supply

• Consumer surplus rises, producer surplus falls

• Consumer surplus rises, producer surplus is unchanged

• Consumer surplus is unchanged, producer surplus falls

• Consumer surplus is unchanged, producer surplus is unchanged

A firm's long run production function shows that a 30% increase in its inputs leads to a 15% increase in output. What is the firm experiencing?

• Decreasing returns to scale

• Diminishing marginal returns

• Increasing marginal returns

• Increasing returns to scale

A firm realises that if it either increases or reduces its level of output then its short-run average cost increases. It must therefore be the case that:

• The firm is maximising its profit at its current level of output

• The firms' marginal costs are minimised at its current level of output

• The firm is producing at the point where marginal cost is equal to average cost

• The firm's total costs are minimised.

What conclusions can be drawn about the characteristics of production in the short run and long run? SRMC = Short run marginal cost.

• Diminishing marginal returns; Increasing returns to scale

• Constant marginal returns; Decreasing returns to scale

• Increasing marginal returns; Increasing returns to scale

• Diminishing marginal returns; Decreasing returns to scale

Which marginal cost curve in diagram 2 would produce the TC curve in diagram 1?

• MC1

• MC2

• MC3

• MC4

A firm experiences an increase in its fixed costs. What is the impact on its AVC and MC?

• AVC will rise; MC will rise

• AVC will rise; MC will fall

• AVC will be unchanged; MC will rise

• AVC will be unchanged; MC will be unchanged

The diagram represents the cost curves for a coffee shop. Which area represents the total fixed cost?

• OF x OC

• OF x BC

• OE x BD

• OE x OD