Microeconomics Concepts and Applications

Why are diagrams important in microeconomics essays?

• They are required by examiners.

• They help in visualizing and supporting analysis and evaluation.

• They make the essay look longer.

• They are easier to draw than write.

What does the Monopoly diagram illustrate?

• The difference between monopoly and competitive market outcomes.

• The effects of international trade.

• The impact of government intervention.

• The benefits of competitive markets.

In a monopoly market, what is the result of profit maximization?

• Increased competition.

• Output at qm and price at PM.

• Lower prices.

• Higher consumer surplus.

What is a key evaluation point of monopoly markets?

• They are always productively efficient.

• They can exploit greater economies of scale despite inefficiency.

• They always produce higher quantities.

• They have lower costs than competitive markets.

How can a monopoly achieve lower costs despite inefficiency?

• By reducing output.

• By exploiting greater economies of scale.

• By merging with other firms.

• By increasing prices.

What happens to the AC curve when fixed costs change?

• It remains the same.

• It shifts up or down, but the MC curve remains unchanged.

• It shifts only if variable costs change.

• It shifts along with the MC curve.

What is the impact of a rise in variable costs on the cost curves?

• Neither curve shifts.

• Only the MC curve shifts.

• Both AC and MC curves shift.

• Only the AC curve shifts.

In a perfectly competitive labor market, what determines wages?

• Government policies.

• Firms' decisions.

• Forces of demand and supply.

• Union negotiations.

What is the benefit of workers being paid equal to their MRP?

• It leads to higher profits for firms.

• It ensures efficient wages and fair compensation.

• It reduces the need for labor unions.

• It increases government revenue.

What is the function of higher prices in a market with excess demand?

• They signal the need for more resources and incentivize firms to produce more.

• They discourage firms from producing more.

• They lead to lower wages.

• They reduce consumer demand permanently.