Microeconomics 5 Diagrams Quiz

Why are diagrams important in essays?

• They help in backing up analysis and evaluation.

• They are easier to draw than write.

• They are required by examiners.

• They make the essay look longer.

In a Monopoly diagram, what does the area of deadweight loss represent?

• The profit of the monopoly.

• The cost of production.

• The loss of consumer and producer surplus.

• The total revenue of the monopoly.

How can a monopoly exploit greater economies of scale compared to small firms?

• By hiring more employees.

• By increasing prices.

• Due to its larger size and ability to lower costs.

• By reducing output.

What is the impact of a change in fixed costs on cost curves?

• It shifts both AC and MC curves.

• It only shifts the AC curve.

• It only shifts the MC curve.

• It does not affect any cost curves.

What happens to the AC and MC curves when variable costs change?

• Only the AC curve shifts.

• Neither curve shifts.

• Only the MC curve shifts.

• Both AC and MC curves shift.

In a perfectly competitive labor market, what determines wages?

• Labor unions.

• The forces of demand and supply.

• Individual firms.

• Government policies.

What is the significance of efficient wages in a competitive labor market?

• They are lower than the market equilibrium.

• They are higher than the market equilibrium.

• They are equal to the marginal revenue product of labor.

• They are set by the government.

What is the role of higher prices in the price mechanism?

• They discourage firms from producing more.

• They signal excess demand and incentivize firms to produce more.

• They lead to a decrease in supply.

• They have no impact on market equilibrium.

What happens when there is a shift in the demand curve at the original price?

• It creates a new equilibrium immediately.

• It has no effect on the market.

• It causes a disequilibrium that leads to price changes.

• It shifts the supply curve as well.