Ch 3, 6, 8

Consider a graph of a production possibilities curve. If a producer is operating at an inefficient point, then that producer:

can produce more of one good without producing less of the other good.

Like a perfectly competitive firm, a monopolist maximizes profit by

choosing the output level at which marginal revenue equals marginal cost.

A price-taker faces a demand curve that is:

horizontal at the market price.

One problem with antitrust laws is that they:

may prevent firms from achieving economies of scale.

Which of the following is NOT a determinant of demand for gasoline?

The quantity of gasoline supplied.

price taker

a buyer or seller that is unable to affect the market price

imperfectly competitive firm

a firm that has at least some control over the market price of its product

price setter

a firm with at least some latitude to set its own price

normal good

a good for which the demand increases as the income of people rises and decreases as the income of people falls; FANCY RESTAURANT

inferior good

a good that consumers demand less of when their incomes increase; RAMEN

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

Oligopoly

a market structure in which only a few sellers offer similar or identical products

cost-plus regulation

a method of regulation under which the regulated firm is permitted to charge prices that cover explicit costs of production plus a markup to cover the opportunity cost of resources provided by the firm's owners

natural monopoly

a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

fixed factor of production

an input whose quantity can NOT be altered in the short run

variable factor of production

an input whose quantity can be altered in the short run

An imperfectly competitive firm faces a demand curve that is ________, while a perfectly competitive firm faces a demand curve that is ________.

downward sloping; perfectly elastic

A perfectly competitive firm's supply curve

is the segment of the marginal cost curve that lies above the average variable cost curve.

According to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively:

larger and larger quantities of the variable factors of production.

A monopoly that results from economies of scale is called a(n):

natural monopoly.

A seller's reservation price is generally equal to:

opportunity cost

The reason economists consider monopoly to be socially undesirable is that monopolists

produce less than the socially optimal level of output.

The role that prices play in distributing scarce goods and services to those consumers who value them the most highly is known as the ________ function of price.

rationing

Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 can also be called her:

reservation price

market power

the ability to alter the market price of a good or service without losing all of its sales

Law of Supply

the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises

pure monopoly

the only supplier of a unique product with no close substitutes; imperfect competition

Whenever the quantity demanded is not equal to the quantity supplied, the quantity that is actually sold in the market is:

the smaller of the quantity demanded and the quantity supplied.

The socially optimal level of output is ________.

when price equals marginal cost