Competition - AP Microeconomics

Variable costs associated with production are costs that change in proportion to the level of production. By contrast, fixed costs are costs that are not dependent on production level. Fixed costs and variable costs make up a good's total cost of production.

In this case, the total cost of producing zero units is 12. The total variable cost of producing zero units is 0, which means that 12 must be the fixed cost associated with producing this good.

The total cost of producing 5 units is 33. Since total costs subtracted by fixed costs equals its variable costs, the variable cost of producing 5 units must be 21.

Imposing a minimum wage usually causes a price floor in the market. Thus, the labor market for coal miners will likely see a surplus, which typically occurs when there is a price floor. The price will be higher than the equilibrium, which means that the labor supply will be greater than demand.

Marginal product of labor describes how the total product of labor changes when more labor is hired. If the total product of labor is rising as labor increases, then the marginal product of labor must be increasing.

The marginal product of labor is the change in output that results from an additional unit of labor. In this case, the marginal product of the fourth unit of labor would be the difference between the total output of production with four units of labor and the total output of production with three units of labor, which is 5 units.

To maximize profits, a perfectly competitive firm will hire until its marginal revenue of labor equals its marginal cost of labor. The marginal cost of labor equals the wage rate, which is $14 per hour.

The marginal revenue of labor is the marginal product of labor multiplied by the price of the good. Since the marginal product at the profit maximizing level is 7 units per hour, the market price of the good must be $2 (7 units multiplied by $2 equals $14).

Coal and natural gas are substitutes for each other based on the description given in the question. Therefore, an interruption in the supply of coal will lead to an increase in the demand for natural gas. This will increase both the price and quantity of natural gas.

Some, or even many, people may love both music and art, but that does not suggest that music books and artwork are regularly purchased together. The other examples are goods that clearly work better together.

An increase in the cost of iron ore will make steel production more expensive.

Because production costs increase, steelmakers will be less willing to produce steel at any given price. Therefore, the market price of steel will increase, and less steel will be traded on the market.

We need to choose the scenario that results in a higher equilibrium price. This will result from an increase in demand and a decrease in supply. Only one answer choice matches this scenario. The other choices create a lower equilibrium price or an ambiguous change.

Perfectly competitive markets are characterized by their LACK of entry and exit barriers, which makes it easy for firms to enter or leave the market as conditions change.

Although few real-life markets meet the characteristics of perfect competition exactly, the lack of perfect (or even equal) information about the goods being traded stands out in the used car market. When dealing in used cars, the seller typically has much more information about the quality of the car than the buyer.

The other answers more or less fit the perfect competition model. There are many buyers and sellers, the property rights of the buyer and seller are well defined, there are limited returns to scale (i.e. small used car sellers have not been competed out of existence), and factors of production (labor, land) can be put to other uses.

Hot dogs and hot dog buns are a model pair of complementary goods. Few people buy one without buying the other. You can graph the situation described using supply and demand curves for each market.

In the hot dog market, a significant decrease in supply will result in an inward shift of the supply curve which results in a higher price and fewer hot dogs being bought and sold.

The resulting effect in the market for hot dog buns, with fewer hot dogs being sold, is an inward shift in the demand curve, which results in a decrease in both the market price and quantity sold of hot dog buns.

Among the available choices, only poorly defined property rights is likely to result in an externality. For example, poorly defined intellectual property rights could result in firms not reaping the full benefit of their research and development and therefore doing less than is socially optimal.

Graph supply and demand curves to represent the market for cotton. The changes described would result in an outward shift of both the supply and demand curves. The new equilibrium would clearly have an increase in the quantity traded, but the equilibrium price would depend on the slope of the curves. Therefore, without more information, the effect on the market price is indeterminate.

Keeping your yard clean and maintained is a positive quality that residents and visitors in your neighborhood will also benefit from. Some of the other answers are also positive, but they only have a private benefits, not public ones.

Trashing your room really only affects you. Only littering, which affects the general public, is clearly a negative externality.

The total cost of producing 7 units is $49. Since the total cost of producing 6 units is $38, the marginal cost of producing the 7th unit must be $11.

Marginal revenue equals marginal cost at $6 for the 5th unit produced. Total revenue equals total cost at both the 4th and 5th unit, but this is not the determining factor.

A sugar beet crop failure would result in an inward shift of the supply curve in the market for sugar beets, resulting in a higher equilibrium price.

Since sugar beets and sugar cane are substitutes, this would result in greater demand for sugar cane, which would result in a higher price for sugar cane as well.

First, an increase in the supply of sugar beet results in a lower market price, and therefore lower demand for sugar cane, since they are substitutes. This translates into a lower market price and lower quantity traded for sugar cane.

Second, the increased supply of sugar cane would result in a lower market price and higher quantity traded in sugar cane. Therefore, the market price would definitely decrease, but the direction of the change in quantity cannot be determined.