Introduction to Economics 1

Yanıt Açıklaması: Market demand is the sum of all the quantities of a product demanded per period by all the buyers in the market.

Yanıt Açıklaması: If the price is less than the average variable cost at its lowest point, the firm will not be able to continue to produce. The rational strategy for the firm would be to shut down operation, so the optimal output level at all price levels below the lowest AVC is zero. The lowest point on the AVC is called the shut-down point.

Yanıt Açıklaması: If two goods are perfect substitutes, the marginal rate of substitution of one good for the other is constant. Therefore indifference curve will be a negatively sloped linear line. The answer is B.

Yanıt Açıklaması: Traditionally, four types of market structures have been defined based on the characteristics of the market, the number of firms in the market, the degree of product differentiation and the ease of entry and exit of firms into and out of the market. The correct answer is C.

Yanıt Açıklaması: The firms earn a zero level of profit when the price equals average cost. The situation refers to a break-even point where the firm earns a normal profit. The correct answer is B.

Yanıt Açıklaması: Given the wage rate, a higher average product of labor (APL) implies a lower average variable cost (AVC) and vice versa. So, as APL increases, AVC decreases and hits its minimum when APL is at its maximum. Once APL starts to fall, AVC begins to rise and generate a U shape. Therefore, the correct option is C.

Yanıt Açıklaması: The Average variable cost (AC) measures the variable cost per unit of the output produced. Its behavior is connected to the behavior of the total variable cost and is normally U shaped. The average variable cost is calculated as the total variable cost divided by the quantity of the total output produced. The property given in option D belongs to the marginal cost. Therefore, the correct option is D.

Yanıt Açıklaması: Since there are only few firms, we cannot assume that each firm takes the market price as given as we have assumed in perfect competition. The Correct Answer is B.

Yanıt Açıklaması: First four options are the properties of monopolistic competition, not the last one. Product differentiation makes the profit maximization problem of a monopolistically competitive firm similar to that of a monopoly. The correct answer is E.

Yanıt Açıklaması: Investment can be considered as a factor what determines the productivity level of a country. It is actually a recipe to increase economywide productivity levels of a country. This can be achieved by investing in physical capital (all machinery and equipment used in production) and human capital (improvement of people’s productive skills through education and training). However, the increase in the general price level (or overall level of prices) in the economy within a given period of time is the description of inflation. The correct answer is B.

Yanıt Açıklaması: By market equilibrium, economists think of the price level at which demand and supply curves meet. At that price level the quantity demanded will be equal to the quantity supplied. As it is understood from the information given the correct answer is "C".

Yanıt Açıklaması: Marginal Revenue: The additional revenue that a firm earns when it increases production by one more unit

Yanıt Açıklaması: Two goods are perfect substitutes when the marginal rate of substitution of one good for the other is constant. The consumer can perfectly substitute apple juice with orange juice. This means that a perfect substitute is a good that functions just the same as the good it is being compared to. Some examples are: Coke vs Pepsi, BP Oil vs Exxon Oil, etc. The indifference curve for a perfect substitute would have no convexity because it makes no difference for consumers.

Yanıt Açıklaması: Profit is defined as the difference between total revenue and total cost, and the objective of a firm that produces a good or service to sell is to maximize its profit.

Yanıt Açıklaması: The last one is not an example of price discrimination. People pay more for business class tickets.  The airline companies can charge a much higher price to business class tickets because of the customers’ high willingness to pay for air travel. The Correct Answer is A.

Yanıt Açıklaması: I. A significant factor generating variations in a land's rent can be where the land is located. (True) II. Similar to wages and interest, rent is another cost of production for an individual firm. (True) III. For a piece of land demanded for production of agricultural product there can be no alternative cost. (False, A piece of land is not just demanded for production of agricultural products. First of all, people also demand it to build houses on. A government might also plan to build a highway. Finally, businesses may want to build a factory site or a warehouse. In other words, an opportunity cost that is the forsaken production from the next best use of the resource, rises from alternative uses of land.) The answer is C

Yanıt Açıklaması: Natural resources are resources such as land, metals, coal, oil, gas, etc. provided by nature. Labor is the work time and physical and mental effort devoted to producing goods and services in exchange for a wage. Capital or capital goods are the goods such as machinery, equipment, buildings, etc., that are used in the production of other goods or services.

Yanıt Açıklaması: Implicit Costs: Costs a firm incurs when it gives up the next best alternative action or project. Therefore, the correct option is D.

Yanıt Açıklaması: The Türk Telekom, for example, is a monopoly in internet infrastructure. All the other internet providers have to use Telekom’s infrastructure. The asnwer is E.

Yanıt Açıklaması: Collusion is an agreement among the firms of a market about the prices to charge or output supplied.