MICROECONOMICS PRINCIPLES FOR A
CHANGING WORLD ACTUAL TEST BANK
TESTED QUESTIONS WITH VERIFIED
SOLUTIONS
●● average fixed cost (AFC)
Answer: Total fixed cost divided by the number of units of output; a per-
unit measure of fixed costs. AFC = FC/Q
●● average total cost (ATC)
Answer: Total cost divided by the number of units of output ATC =
TC/Q or ATC = AFC + AVC
●● average variable cost (AVC)
Answer: variable cost divided by the number of units of output AVC =
VC/Q
●● budget constraint
Answer: the limits imposed on household choices by income, wealth,
and product prices.
●● capital
Answer: goods used to produce other goods
,●● cartel
Answer: a group of firms that gets together and makes joint price and
output decisions to maximize joint profits
●● ceteris paribus
Answer: a devise used to analyze the relationship between two variable
while the values of other variables are held unchanged.
●● clayton act
Answer: act outlawed specific monopolistic behaviors such as tying
contracts
●● command economy
Answer: An economy in which a central government either directly or
indirectly sets output targets, incomes, and prices
●● comparative advantage
Answer: the ability to produce a good at a lower opportunity cost than
another producer
●● complements
Answer: two goods for which an increase in the price of one leads to a
decrease in the demand for the other and vice versa
, ●● consumer goods
Answer: goods produced for present consumption
●● consumer sovereignty
Answer: The idea that consumers ultimately dictate what will be
produced (or not produced) by choosing what to purchase (and what not
to purchase).
●● consumer surplus
Answer: The difference between the maximum amount a person is
willing to pay for a good and its current market price.
●● cross price elasticity of demand
Answer: measures the responsiveness of the quantity demand of a good
to a change in the price of another good.
●● diseconomies of scale
Answer: The property whereby long-run average total cost rises as the
quantity of output increases (right-most upward sloping part of the long-
run ATC)
●● demand curve
CHANGING WORLD ACTUAL TEST BANK
TESTED QUESTIONS WITH VERIFIED
SOLUTIONS
●● average fixed cost (AFC)
Answer: Total fixed cost divided by the number of units of output; a per-
unit measure of fixed costs. AFC = FC/Q
●● average total cost (ATC)
Answer: Total cost divided by the number of units of output ATC =
TC/Q or ATC = AFC + AVC
●● average variable cost (AVC)
Answer: variable cost divided by the number of units of output AVC =
VC/Q
●● budget constraint
Answer: the limits imposed on household choices by income, wealth,
and product prices.
●● capital
Answer: goods used to produce other goods
,●● cartel
Answer: a group of firms that gets together and makes joint price and
output decisions to maximize joint profits
●● ceteris paribus
Answer: a devise used to analyze the relationship between two variable
while the values of other variables are held unchanged.
●● clayton act
Answer: act outlawed specific monopolistic behaviors such as tying
contracts
●● command economy
Answer: An economy in which a central government either directly or
indirectly sets output targets, incomes, and prices
●● comparative advantage
Answer: the ability to produce a good at a lower opportunity cost than
another producer
●● complements
Answer: two goods for which an increase in the price of one leads to a
decrease in the demand for the other and vice versa
, ●● consumer goods
Answer: goods produced for present consumption
●● consumer sovereignty
Answer: The idea that consumers ultimately dictate what will be
produced (or not produced) by choosing what to purchase (and what not
to purchase).
●● consumer surplus
Answer: The difference between the maximum amount a person is
willing to pay for a good and its current market price.
●● cross price elasticity of demand
Answer: measures the responsiveness of the quantity demand of a good
to a change in the price of another good.
●● diseconomies of scale
Answer: The property whereby long-run average total cost rises as the
quantity of output increases (right-most upward sloping part of the long-
run ATC)
●● demand curve
