Econ 190 test #3

If new firms enter a perfectly competitive industry, the market supply

increases.

If a firm shuts down, it

incurs an economic loss equal to its total fixed cost.

In the long run, a perfectly competitive firm will

make zero economic profit.

If a perfectly competitive firm's average total cost is less than the price, then the firm

makes an economic profit.

The perfectly competitive firm's supply curve is its

marginal cost curve above the average variable cost curve.

For a perfectly competitive firm, profit maximization occurs when output is such that

marginal revenue (MR) = marginal cost (MC).

Gross Domestic Product is equal to the market value of all the final goods and services ________ in a given period of time.

produced within a country

Each firm in a perfectly competitive industry

produces a good that is identical to that of the other firms.

A perfectly competitive firm

sells a product that has perfect substitutes.

When new firms enter the perfectly competitive Miami bagel market, the market

supply curve shifts rightward.

Which of the following is the best example of a natural monopoly?

the cable television company in your hometown

A perfectly competitive market arises when

the market demand is very large relative to the output of one seller.

The table above gives the production and prices for a small nation that produces only bread and soda. The base year is 2010. What is real GDP in 2010?

$510

The table gives data for a nation. What is the amount of the country's GDP?

$6,200 billion

The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot Pillows, a single-price monopoly producer of pillows stuffed with parrot feathers. When Paul maximizes his profit, the price per pillow is

$70.

The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot pillows, a single-price monopoly producer of pillows stuffed with parrot feathers. When Paul maximizes his profit, the price is ________ per pillow and the marginal cost is ________ per pillow.

$70; $40

The figure above shows a natural monopoly that the government must regulate. If the government uses ________, the firm produces ________ units per week.

an average cost pricing rule; 30

A restaurant buys fish to offer as a daily menu special. The purchase of the fish by the restaurant is

an intermediate good.

Natural barriers to entry arise when, over the relevant range of output, there

are economies of scale.

One requirement for an industry to be perfectly competitive is that in the industry there

are many firms for whom the efficient scale of production is small.

How are final goods and services valued when measuring nominal GDP?

at current market prices

The figure above shows a natural monopoly that the government must regulate. Which of the following pairs most likely results in similar outcomes?

average cost pricing and rate of return regulation

A perfectly competitive firm will shut down when the price is just below the minimum point on the

average variable cost curve.

In the short run, a perfectly competitive firm

can possibly make an economic profit or possibly incur an economic loss

Arnie's Airlines is a monopoly airline that is able to price discriminate. If Arnie's decides to price discriminate, then

consumer surplus decreases.

The expenditure approach to measuring GDP is done by using data on only

consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services.

When a firm adopts new technology, generally its

cost curves shift downward.

If a firm does not sell all of the goods that it produces in a given time period, then the goods

count positively in GDP as inventory investment.

A permanent decrease in demand definitely

decreases the number of firms in the industry.

The market demand curve in a perfectly competitive market is ________ and the demand curve for a perfectly competitive firm's output is ________.

downward sloping; horizontal

For a perfectly competitive firm, marginal revenue is

equal to the change in profit from selling one more unit.

One bag of coffee beans is sold for $7 to a cafe that uses it to brew coffee which it sells to customers for a total of $15. A second bag of coffee is sold directly to Joan for $7, who uses it to brew coffee for her family every morning. What is the contribution to GDP from the purchases of coffee beans and coffee?

$22

The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot pillows, a single-price monopoly producer of pillows stuffed with parrot feathers. When Paul maximizes his profit, the difference between marginal cost and price

$30.

The table above gives the production and prices for a small nation that produces only bread and soda. The base year is 2009. What is nominal GDP in 2009?

$450

The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot Pillows, a single-price monopoly producer of pillows stuffed with parrot feathers. When Paul maximizes his profit, he produces ________ pillows per hour.

3,000

Which of the following correctly describes a final good?

A final good is bought by its final consumer.

Measuring total production by valuing items at their market value allows us to

add together the value of different goods that have different prices.

Which of the following would be included in Germany's GNP?

Answers A and C are correct.

To measure GDP by using the income approach, we must add all incomes and then ________ depreciation and ________ net taxes less subsidies.

add; add

In the circular flow, how are the "value of production," "income," and "expenditures" related?

Expenditures on GDP equals the value of production which equals income.

The total production within an economy is measured as

Gross Domestic Product.

Price discrimination is possible, in part, because

The willingness to pay can vary among groups of buyers.

Which of the following is a characteristic of monopoly?

There are barriers to enter the market.

Which of the following is directly included in the U.S. GDP for 2013?

a 2013 Cadillac Escalade produced and sold as a new car in the United States in 2031

A price-discriminating monopoly charges

a different price to different types of buyers for the same product, even though there are no differences in costs.

For a perfectly competitive firm, the market price of a good is

a given which the firm cannot change. equal to the firm's marginal revenue. Answers A and C are correct.

Compared to a perfectly competitive market, a single-price monopoly sets

a higher price.

A perfectly competitive firm definitely makes an economic profit in the short run if price is

greater than average total cost.

The marginal revenue curve for a perfectly competitive firm is

horizontal.

Recently, the government made adjustments to how GDP is calculated that included placing software purchases into the category of

investment and now directly counts software purchases as part of GDP.

We know that a perfectly competitive firm is a price taker because

its demand curve is horizontal.

In States where the government runs liquor stores, the monopoly results from

legal restrictions.

The demand curve facing a single-price monopoly

lies above the marginal revenue curve.

The firm's over-riding objective is to

maximize economic profit.

With perfect price discrimination, a monopoly can extract the ________ price each customer is willing to pay and thereby obtain the entire ________ surplus.

maximum; consumer

The above figure shows a perfectly competitive firm. If the market price is $5, the firm

might shut down but more information is needed about the AVC.

Adding wages, interest, rent, and profits yields

net domestic product at factor cost.

Investment is defined as the purchase of

new capital goods and additions to inventories.

If perfectly competitive lawn care firms are making an economic profit, then

new firms will enter the industry.

A monopoly is a market with

one supplier.

produces a good that is identical to that of the other firms.

only perfectly competition.

If you make dinner for yourself,

only the market value of ingredients that you purchased this year is added to GDP.

Because perfectly competitive firms are price takers, each firm faces a demand that is

perfectly elastic.

A perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the

price is at least equal to the minimum average variable cost.

In a perfectly competitive market, the type of decision a firm has to make is different in the short run than in the long run. Which of the following is an example of a perfectly competitive firm's short-run decision?

the profit-maximizing level of output

Normal profit is

the return to entrepreneurship.

Last year U.S. net exports of goods and services was negative. This fact means that last year

the value of U.S. exports was less than the value of U.S. imports.

To calculate GDP it is necessary to

use the market price to place a dollar value on each good produced.

Net exports of goods and services are defined as the

value of exports minus the value of imports.

The income approach to measuring GDP is based on summing

wages, interest, rent, and profits.