introduction to micro economics section 8 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (d)

The Law of demand states that consumers buy more of a good when its price is lower and less when its price is higher. It states that the quantity demanded and the prices of a commodity are inversely related, other things remaining constant.

That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in the number of goods demanded by the consumer will be negatively correlated to the change in the price of the good.

Answer: (c)

The average cost is the per-unit cost incurred in the production of a good or service. It is specified as the total cost divided by the quantity of output.

The marginal cost (the additional, cost of producing one more unit of output) and average cost are related. So when the average total cost rises, marginal cost also rises; when the average cost curve falls with the increase in output, the marginal cost also rises.