BUSINESS ECONOMICS EXAM
QUESTIONS WITH 100% VERIFIED
ANSWERS
\Q\.oligopoly - ANSWER-✔a market structure in which a few large firms dominate a market
\Q\.total cost - ANSWER-✔total costs of producing a particular output
\Q\.average cost - ANSWER-✔total cost / quantity of output
\Q\.marginal cost - ANSWER-✔the additional cost of producing one extra unit of output
\Q\.fixed cost - ANSWER-✔a cost that does not vary with output
\Q\.variable cost - ANSWER-✔a cost that varies with output
\Q\.average fixed cost - ANSWER-✔total fixed cost / quantity of output
\Q\.average variable cost - ANSWER-✔total variable cost / quantity of output
\Q\.examples of fixed costs (5) - ANSWER-✔- rent
- interest on borrowed money
- some salaries
,- advertising
- research and development
\Q\.examples of variable costs (4) - ANSWER-✔- raw materials
- electricity
- most salaries
- fuel
\Q\.MC and AC curves - ANSWER-✔the marginal cost curve goes through the vertex of the
average cost curve
\Q\.AC and TC curves - ANSWER-✔start in the same place but total cost is higher than the
average cost from that point on wards
\Q\.Economies of scale - ANSWER-✔Factors that cause a producer's average cost per unit to fall
as output rises
\Q\.7 types of economies of scale: - ANSWER-✔1) the spreading of fixed costs over a larger
output
2) technical economies
- ratios of length/area/volume
- invisibility of factors
3) division of labour/specialization
4) bulk purchasing
5) marketing economies
- advertising
- distribution
, 6) financial economies
7) managerial economies
\Q\.diseconomies of scale - ANSWER-✔increase in average cost when the quantity of output
increases
\Q\.3 reasons for diseconomies of scale - ANSWER-✔1) problems with cooperation and morale
2) increased demand for factors of production -> their price rises
3) the Law of Diminishing Returns
\Q\.total output (TP) - ANSWER-✔a firm's total output in a given period of time
\Q\.average output (AP) - ANSWER-✔total output / units of variable factor
\Q\.marginal product (MP) - ANSWER-✔the addition to total output resulting from the addition
of one extra unit of the variable factor
\Q\.the law of diminishing returns - ANSWER-✔as units of variable factor (e.g. workers) are
added to a fixed factor (e.g. land), after a point first the marginal and then the average product
of the variable factor will diminish
\Q\.the long run - ANSWER-✔the period when all factors of production can be varied
\Q\.the short run - ANSWER-✔at least one factor of production can be varied
\Q\.the graph of long/short run - ANSWER-✔when a firm has to increase or decrease their
output in a short run, the costs are above the long term average cost
QUESTIONS WITH 100% VERIFIED
ANSWERS
\Q\.oligopoly - ANSWER-✔a market structure in which a few large firms dominate a market
\Q\.total cost - ANSWER-✔total costs of producing a particular output
\Q\.average cost - ANSWER-✔total cost / quantity of output
\Q\.marginal cost - ANSWER-✔the additional cost of producing one extra unit of output
\Q\.fixed cost - ANSWER-✔a cost that does not vary with output
\Q\.variable cost - ANSWER-✔a cost that varies with output
\Q\.average fixed cost - ANSWER-✔total fixed cost / quantity of output
\Q\.average variable cost - ANSWER-✔total variable cost / quantity of output
\Q\.examples of fixed costs (5) - ANSWER-✔- rent
- interest on borrowed money
- some salaries
,- advertising
- research and development
\Q\.examples of variable costs (4) - ANSWER-✔- raw materials
- electricity
- most salaries
- fuel
\Q\.MC and AC curves - ANSWER-✔the marginal cost curve goes through the vertex of the
average cost curve
\Q\.AC and TC curves - ANSWER-✔start in the same place but total cost is higher than the
average cost from that point on wards
\Q\.Economies of scale - ANSWER-✔Factors that cause a producer's average cost per unit to fall
as output rises
\Q\.7 types of economies of scale: - ANSWER-✔1) the spreading of fixed costs over a larger
output
2) technical economies
- ratios of length/area/volume
- invisibility of factors
3) division of labour/specialization
4) bulk purchasing
5) marketing economies
- advertising
- distribution
, 6) financial economies
7) managerial economies
\Q\.diseconomies of scale - ANSWER-✔increase in average cost when the quantity of output
increases
\Q\.3 reasons for diseconomies of scale - ANSWER-✔1) problems with cooperation and morale
2) increased demand for factors of production -> their price rises
3) the Law of Diminishing Returns
\Q\.total output (TP) - ANSWER-✔a firm's total output in a given period of time
\Q\.average output (AP) - ANSWER-✔total output / units of variable factor
\Q\.marginal product (MP) - ANSWER-✔the addition to total output resulting from the addition
of one extra unit of the variable factor
\Q\.the law of diminishing returns - ANSWER-✔as units of variable factor (e.g. workers) are
added to a fixed factor (e.g. land), after a point first the marginal and then the average product
of the variable factor will diminish
\Q\.the long run - ANSWER-✔the period when all factors of production can be varied
\Q\.the short run - ANSWER-✔at least one factor of production can be varied
\Q\.the graph of long/short run - ANSWER-✔when a firm has to increase or decrease their
output in a short run, the costs are above the long term average cost
