ECON 1010 INTRODUCTION TO
MICROECONOMICS TEST BANK UPDATED
QUESTIONS AND DETAILED ANSWERS
2026 GRADED A+
⩥ 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. Answer: a graph that shows the amount of a product
that would be bought at all possible prices in the market
⩥ depreciation. Answer: the decline in an asset's economic value over
time
⩥ diminishing marginal utility. Answer: the point reached when an
additional unit of a product consumed is less satisfying than the one
before
⩥ economic theory. Answer: A statement or set of related statements
about cause and effect, action and reaction
⩥ economics. Answer: the study of how individuals and nations make
choices about ways to use scarce resources to fulfill their needs and
wants
MICROECONOMICS TEST BANK UPDATED
QUESTIONS AND DETAILED ANSWERS
2026 GRADED A+
⩥ 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. Answer: a graph that shows the amount of a product
that would be bought at all possible prices in the market
⩥ depreciation. Answer: the decline in an asset's economic value over
time
⩥ diminishing marginal utility. Answer: the point reached when an
additional unit of a product consumed is less satisfying than the one
before
⩥ economic theory. Answer: A statement or set of related statements
about cause and effect, action and reaction
⩥ economics. Answer: the study of how individuals and nations make
choices about ways to use scarce resources to fulfill their needs and
wants
