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27 exam-style questions with model answers, plus 30 quick multi-choice questions — every question on the site for this standard, grouped by the 9 pages of notes they come from.
Write a full answer before you reveal the model one — that comparison is where the marks come from. Every block links back to the notes that teach it.
Explain the difference between a fixed cost and a variable cost, giving an example of each.
Explain in detail why the marginal cost curve intersects the average cost curve at the minimum point of average cost.
Compare and contrast the revenue curves of a perfectly competitive firm and a monopoly, and explain how the difference between them affects each firm's pricing decision. Refer to cost and revenue models in your answer.
A firm is producing at an output where MR < MC. Using marginal analysis, explain what the firm should do.
Explain in detail how a monopoly determines its profit maximising price and quantity, and why the price it charges is above marginal cost.
Demand falls for a monopoly. Using marginal analysis, compare and contrast what happens to the firm's output, price and profit in the short run and in the long run. Refer to a cost and revenue model in your answer.
State the four characteristics of a perfectly competitive market, and explain how ONE of them makes the firm a price taker.
An illustrative perfectly competitive firm faces a market price of $12. At its profit maximising output of 4,000 units, average cost is $15.
Calculate the firm's profit or loss, and explain in detail why the firm continues to produce in the short run despite this result.
Severe weather damages crops across a perfectly competitive agricultural market, reducing the quantity each grower can supply.
Compare and contrast the impact on the market and on an individual firm's output, price and profit. Refer to supply and demand and cost and revenue models in your answer.
Explain what happens in a perfectly competitive industry when firms are making subnormal profit.
Explain in detail why a perfectly competitive firm ends up producing at the minimum of its average cost curve in the long run.
An increase in fixed costs hits every firm in a perfectly competitive industry.
Compare and contrast the short run and long run impact on an individual firm's output, price and profit. Refer to cost and revenue models in your answer.
A firm's fixed costs increase. Explain what happens to its marginal cost curve and to its profit maximising output.
Explain in detail the difference in the short run profit maximising output for a perfectly competitive firm following an increase in fixed costs compared with an increase in variable costs. Refer to the cost curve shifts in your answer.
Council rates (a fixed cost) rise for every farm in a perfectly competitive industry.
Compare and contrast the short run and long run profit maximising positions for a farm, referring to the characteristics of perfect competition, marginal analysis, and output, price and profit. Refer to a cost and revenue model in your answer.
Explain how a monopoly determines its profit maximising price, referring to the marginal revenue, marginal cost and average revenue curves.
Explain in detail why a monopoly's short run price, output and profit are the same as in the long run, referring to the characteristics of a monopoly.
Demand increases for a monopoly.
Using marginal analysis, explain the impact on the monopoly's output, price and profit, and compare and contrast this with what would happen to a perfectly competitive firm facing an increase in market demand. Refer to cost and revenue models in your answer.
Explain why a monopoly is not allocatively efficient.
Explain in detail where the deadweight loss caused by a monopoly is located on the cost and revenue model, and why those units are not produced.
Compare and contrast the efficiency of a monopoly and a perfectly competitive market, assuming both have the same cost curves. Refer to cost and revenue models in your answer.
Explain why a natural monopoly has a downward sloping average cost curve.
Explain in detail why a government might not encourage competition in a natural monopoly market, despite the inefficiencies the natural monopoly creates. Refer to the characteristics of a natural monopoly.
Compare and contrast the cost structure and the efficiency of a natural monopoly with those of a perfectly competitive firm, and explain what this means for the kind of government intervention each market needs. Refer to cost and revenue models in your answer.
Explain which of the three pricing options for a natural monopoly makes consumers best off, and which makes the market most efficient.
Explain in detail why consumer surplus is largest under marginal cost pricing and smallest under profit maximising pricing for a natural monopoly.
A government is deciding how to regulate a natural monopoly supplying an essential service.
Compare and contrast the effectiveness of average cost pricing and marginal cost pricing as policies to improve the efficiency of this market, and make a justified recommendation. Refer to a cost and revenue model in your answer.