Economics Exam both of micreconomics and macroeconomics for students and teachers

it is about economics mcqs and exams

1. Economics Exam 1 Topics in microeconomics By Dr. Hassan

2. Difference between Short Run and Long Run in Economics In Economics, short run is a time period in which at least one of the factor of production is constant. As we know we do have 4 factors of production. And in these 4 factors of production, land, capital, and equipment) cannot be adjusted while only the numbers of labor can increase or decrease . On the other hand, Long-run is a time period in which firms are able to change all four factors of production in order to adjust output. Other things firms can do in the long-run is to have free choice if they want to enter, exit the industry, they do have enough time to acquire new technologies, build new factories, and physical expansion in facilities.

3. 2. Fixed Costs and Variable Costs Fixed costs Fixed costs are those costs, which do not change if we increase or decrease the total production. A firm has to bear this cost if they are producing something or not even if it is zero production. Variable costs Variable costs on the other hand are directly proportional to the level of output, the more you produce, and the higher is the associated cost. If a firm is producing nothing, it will have zero variable cost.

4. 3. Difference between Monopolistic Competition and Pure Monopoly Monopolistic Competition: There are many firms competing in the market. Products are differentiated, meaning each firm offers a product that is slightly different from the others. There is some degree of market power due to product differentiation. Firms can freely enter and exit the market relatively easily .

5. Continue… Pure Monopoly: a) The whole market is dominated by a single firm. b) There are no close product substitutes. c) The firm has significant market power and can influence prices. d) Barriers to entry are high, preventing other firms from entering the market. Examples: Patented pharmaceuticals, Utility companies (in some regions),.

6. 4. Cost of Producing 50 Apples Given that the cost to produce 10 apples is $125, we can assume the costs are variable and increase proportionally with the number of apples produced. If the costs vary linearly: Cost to produce 10 apples = $125 Cost per apple = $125 / 10 = $12.50 per apple Therefore, the cost to produce 50 apples: Cost to produce 50 apples = 50 * $12.50 = $ 625

7. 5. Characteristics of Profit Maximization in the Short Run In the short run, profit maximization for a business usually includes: Marginal Cost (MC) and Marginal Revenue (MR) Equality: The firm maximizes profit by creating the amount of production where marginal cost equals marginal revenue (MC=MR). This is the point at which the added cost of manufacturing one more unit equals the increased income generated by selling that unit. Production Decisions: Firms will produce up to the point where the revenue from the last unit produced is equal to the cost of producing it. If MR > MC, the firm can increase profit by producing more. If MC > MR, the firm can increase profit by producing less .

8. Characteristics of Profit Maximization in the Short Run Firms will create until the revenue from the final unit produced equals their cost of production. If MR exceeds MC, the company may enhance profits by manufacturing more. If MC > MR, the company may boost profits by producing less. Fixed and Variable Costs Considerations: In the short term, businesses must pay their variable expenses in order to maintain operations. If total revenue (TR) exceeds or equals total variable costs (TVC), the business will continue to produce in the near term, even if the loss is smaller than fixed costs.

9. Characteristics of Profit Maximization in the Short Run Shutdown Point: If the price falls below the average variable cost (AVC) at the profit-maximizing output level, the firm will shut down in the short run. The shutdown point is where price equals AVC. Profit Calculation: Short-run profit can be calculated as total revenue minus total cost (TR - TC). Positive profit occurs when TR > TC, and a loss occurs when TR < TC .