Intro To Industry And Market Concentration - Economies; Costs

Explanation
An economy where decisions are made by the price mechanism is referred to as Laissez-Faire. In this type of economy, the government does not intervene in economic activities and allows the market forces of supply and demand to determine prices, allocate resources, and make decisions. This approach promotes free markets, private property rights, and individual freedom, with minimal government regulation or control.

Explanation
A command economy is an economic system where decisions regarding production, distribution, and resource allocation are made by the government. In this system, the government has complete control over the economy and determines what goods and services are produced, how they are produced, and who receives them. This is in contrast to a laissez-faire economy, where the government has minimal interference and allows market forces to determine these decisions. Therefore, the correct answer for this question is command.

Explanation
A modified market economy refers to an economic system where decisions are made through a combination of market forces (price mechanism) and government intervention. In this type of economy, the government plays a role in regulating and controlling certain aspects of the market, such as imposing regulations, providing public goods and services, and redistributing income. This allows for a balance between market efficiency and the need for government intervention to address market failures and ensure social welfare.

Explanation
A traditional economy is an economic system where production and distribution are based on customs, traditions, and cultural beliefs. It relies heavily on agriculture, hunting, fishing, and gathering, and the production is mainly for the purpose of meeting the basic needs of the community. In a traditional economy, there is little to no involvement of government or market forces in determining what goods and services are produced and how they are allocated. Instead, decisions are made based on long-standing customs and traditions passed down through generations.

Explanation
Fixed costs are costs that do not change regardless of the production quantities. These costs remain constant over a specific period and are not affected by changes in production levels or sales volume. Fixed costs include expenses such as rent, salaries, insurance, and depreciation. These costs are necessary for the operation of a business, regardless of the level of output.

Explanation
Variable costs are costs that change in direct proportion to the level of production. As production quantities increase or decrease, variable costs also increase or decrease accordingly. This is because variable costs are directly tied to the amount of resources or inputs required to produce each unit. Examples of variable costs include the cost of raw materials, direct labor, and utilities. In contrast, fixed costs remain constant regardless of production quantities. Marginal costs refer to the additional cost incurred by producing one more unit, while average costs represent the total cost per unit produced.

Explanation
The correct answer is average costs. Average costs refer to the total costs (fixed plus variable) divided by the number of units produced. This calculation provides an average measure of the cost per unit produced, taking into account both fixed and variable costs. It is a useful metric for businesses to assess their overall cost efficiency and profitability.

Explanation
Marginal costs refer to the additional cost incurred for producing one more unit of a product. It takes into account the increase in variable costs, such as raw materials and labor, that are directly associated with the production of an additional unit. Fixed costs, on the other hand, do not change with the production level. Average costs represent the total cost divided by the number of units produced, whereas marginal costs focus on the cost of producing one additional unit. Thus, the correct answer is marginal costs.