Economics > QUESTIONS & ANSWERS > ECON 212 - Ch 04 Essential Microeconomics Tools Practice Questions (All)

ECON 212 - Ch 04 Essential Microeconomics Tools Practice Questions

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1 The demand curve for an individual shows how the marginal utility of consuming an extra unit of the good declines as total consumption rises. A) True B) False 2 A firm’s marginal cost curve is... also its supply curve when the firm acts in a perfectly competitive manner. A) True B) False 3 Since the supply curve is the marginal cost curve, the area under the supply curve up to a particular level of output shows the cost of producing that level of output (ignoring fixed costs). A) True B) False 4 The demand curve reflects the marginal utility of consumption since firms set prices equal to marginal cost. A) True B) False 5 The supply curve shows marginal cost since consumers buy goods up to the point where their marginal utility equals the price. A) True B) False 6 Consumer surplus corresponds graphically to the area located below the demand curve and above the cost of purchasing the goods - since this measures that amount of utility people get from consuming the goods in excess of what they pay for the goods. A) True B) False 7) Under perfect competition, the fact that the price is set by the intersection of the supply and demand curves means that the marginal cost of producing an extra unit to the good is exactly equal to the marginal utility of consuming an extra unit. A) True B) False [Show More]

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