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Man Eco 3

1. Variable costs change in response to market conditions, such as hiring additional labor when demand rises. 2. Divisoria stalls in Manila demonstrate perfect competition because numerous stores sell identical products. 3. When price is greater than average total cost (P > ATC), a firm earns supernormal profits. 4. Economic efficiency is achieved by producing the chosen level of output at the lowest possible total cost.

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James Angelo Arago
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63 views

Man Eco 3

1. Variable costs change in response to market conditions, such as hiring additional labor when demand rises. 2. Divisoria stalls in Manila demonstrate perfect competition because numerous stores sell identical products. 3. When price is greater than average total cost (P > ATC), a firm earns supernormal profits. 4. Economic efficiency is achieved by producing the chosen level of output at the lowest possible total cost.

Uploaded by

James Angelo Arago
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Question 1

 Which type of cost changes in response to variations of market conditions?


Response: Variable
Feedback: CORRECT! Labor is an example of variable cost. For instance, if the demand for a product
rises, the firm may engage in extended shifts or hire additional workers.
Score: 1 out of 1 Yes

Question 2
 Divisoria stalls in Manila is known for their cheap prices and variety of product offerings,
ranging from simple everyday clothes to home accessories. Despite all these, a
noticeable factor of the place is the presence of many buyers and sellers, as well as the
numerous stores in the area selling similar products. Which characteristic of perfect
competition is being described?
Response: Each firm in the market produces identical products
Feedback: CORRECT! The scenario states that numerous stores in Divisoria sell the same kind of
products, which basically suggests that all firms in the said market produce/sell a standardized or
homogenous commodity.
Score: 1 out of 1 Yes

Question 3
 Which statement can be derived from the symbol P > ATC?
Response: The firm makes supernormal profits.
Feedback: CORRECT! When the price is greater than the average total cost, a firm makes supernormal
profits or excess income above normal levels.
Score: 1 out of 1 Yes

Question 4
 This is achieved when the firm produces its chosen level of output at the lowest possible total cost.
Response: Economic efficiency
Feedback: CORRECT! Managers focus on economic efficiency because profit cannot be maximized
unless the firm’s output is produced at the lowest possible cost.
Score: 1 out of 1 Yes

Question 5
 The emergence of milk tea shops in almost every corner of Manila is believed to be brought by the
increasing popularity of aesthetically pleasing cafés matched with high-priced sugary beverage in all
flavors—a perfect combination for social media posts or simple “chill” moments of millennials, as they
call it. All these prove that a milk tea business is relatively easy to form and establish. Which
characteristic of perfect competition is being described?
Response: Many buyers and sellers in the market
Feedback: INCORRECT. This characteristic of perfect competition states that one (1) firm produces
only a negligible amount of the total quantity of the commodity provided in the market.
Score: 0 out of 1 No

Question 6
 Which type of cost DOES NOT change in response to variations of market conditions?
Response: Fixed
Feedback: CORRECT! Rent expense is an example of fixed cost. Regardless of the volume of
production, a firm will still incur this cost. 
Score: 1 out of 1 Yes

Question 7
 Which statement can be derived from the symbol P = ATC?
Response: The firm breaks even and makes normal profits.
Feedback: CORRECT! When the price is equal to the average total cost, a firm breaks even and makes
normal profits or minimum income gains necessary to sustain operations.  
Score: 1 out of 1 Yes

Question 8
 Hyori is an avid iPhone user since the release of the first-ever smartphone of Apple Inc.
She prefers the unique operating system of this product, which allows her to download
mobile applications seamlessly. She also mentioned that iPhone’s quality outweighs the
premium price of the gadget. Which characteristic of perfect competition is being
described?
Response: Many buyers and sellers in the market
Feedback: INCORRECT. This characteristic of perfect competition states that one (1) firm produces
only a negligible amount of the total quantity of the commodity provided in the market.
Score: 0 out of 1 No

Question 9
 This happens when a firm produces the maximum output possible for a given combination of inputs and
existing technology.
Response: Technical efficiency
Feedback: CORRECT! When a firm is being technically efficient, every input is being utilized to the
fullest extent possible, and there is no other way to get more output without using more of at least one
(1) input.
Score: 1 out of 1 Yes
Question 10
 IU's Fruit Stand is known for its fresh oranges. However, the fruit stand only distributes
an insignificant volume of this commodity compared to the total quantity of oranges
being sold in the market. Which characteristic of perfect competition is being described?
Response: Many buyers and sellers in the market
Feedback: CORRECT! The scenario states that Jade Fruit Stand distributes an insignificant volume of
oranges compared to the total quantity being sold in the market. This statement suggests that perfect
competition has many buyers and sellers, which makes the volume of sellers’ goods insignificant to the
total quantity of goods being supplied in the market.
Score: 1 out of 1

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