MICROECONOMICS 7TH EDITION NEWEST END TERM EXAM QUESTIONS WITH VERIFIED SOLUTIONS UPDATED 2025/2026 ||A+ GRADED

MICROECONOMICS 7TH EDITION NEWEST END TERM EXAM QUESTIONS WITH VERIFIED SOLUTIONS UPDATED 2025/2026 ||A+ GRADED 1) In economics, a firm that faces no competitors is referred to as _________________. - ANSWER a monopoly 2) The _____________________ curve will always lie below the curve for average cost because average cost includes _____________ in the numerator of the calculation. - ANSWER average variable cost; fixed costs 3) According to the definition of profit, if a profit-maximizing firm will always attempt to produce its desired level of output at the lowest possible cost, then it will - ANSWER do so regardless of what type of competition exists in a market. 4) In order to reduce the harmful affects of recession and carbon emissions, the government provided tax incentives for manufacturing firm's to ___________________ that provide alternative, more efficient methods of combining inputs to produce output. - ANSWER acquire energy efficient production technologies 5) A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production. - ANSWER fixed costs; do not change, 6) If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point? - ANSWER divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be 7) _____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price. - ANSWER total revenue 8) The ______________ of all firms can be broken down into some common underlying patterns. - ANSWER cost structure 9) I'MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was - ANSWER $2.43 10) In order to determine ____________, the firm's total costs must be divided by the quantity of its output. - ANSWER average cost 11) ____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added. - ANSWER Diminishing marginal returns 12) Which of the following falls outside of the classification of business expenditures that fall into the category of variable costs? - ANSWER costs of research and development 13) If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises. - ANSWER decreasing returns to scale 14) The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls. - ANSWER economies of scale 15) Why would labor be treated as a variable cost? - ANSWER producing larger quantities of a good or service generally requires more workers 16) A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production. - ANSWER constant returns to scale 17) Which of the following falls outside of the classification of business expenses that fall into the category of fixed costs? - ANSWER costs incurred in the act of producing 18) The term _____________ is used to describe the additional cost of producing one more unit. - ANSWER marginal cost 19) Free goods - ANSWER Goods that are not scarce and therefore available without limits. Zero opportunity cost e.g. Air 20) Economic goods - ANSWER A consumable item that is useful to people but scarce in relation to its demand 21) Opportunity cost - ANSWER The value of the next best alternative foregone 22) Positive statement - ANSWER An objective statement that can be tested, amended or rejected by referring to available evidence 23) Normative statement - ANSWER A value judgement that is a subjective statement of opinion rather than a fact that can be tested 24) Needs vs Wants - ANSWER Needs are defined as goods or services that are required and cannot be done without. Wants are goods or services that are not a necessity but we desire/wish for 25) Cost-benefit principle - ANSWER Every purchase is a trade-off 26) Rational decision makers - ANSWER An assumption that economic agents weigh the marginal benefit that one receives from a good or service against its marginal cost 27) Economic agents - ANSWER Decision makers that have effects on the economy of a country by buying selling, producing, investing, taxing, etc. Government, firms and households 28) Government - ANSWER Elected representative of the consumers that should act on behalf of the people. The government must decide whether or not to intervene in the economy or leave it as is. 29) Firms - ANSWER An organisation that uses factors of production alongside each other in order to produce output. They produce goods and services demanded by consumers 30) Households - ANSWER A group of consumers that buy goods and services. They also supply their labour to firms to produce goods and services in order to earn the income needed to purchase g+s 31) Factors of production - ANSWER The available resource inputs used in the production process of g+s (Capital, Enterprise, Land and Labour) 32) Capital - ANSWER Man made aids for production; goods used to make other goods 33) Entrepreneurship - ANSWER The willingness of an entrepreneur/individual to take risks and organise production. An entrepreneur is someone who bears the risk of a business and organises production 34) Labour - ANSWER The human resource that is available in the economy; the quantity and quality of human resources 35) Land - ANSWER The natural resources available in the economy; the quantity and quality of natural resources