ECON Exam 2
if the price of the good is $150 then consumer surplus amounts to
$250
Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus is
8,500
which area represents the increase in producer surplus when the price rises from p1 to p2
AHGB
Which area represents producer surplus when the price is P1?
BCG
the average total cost curve for a monopoly firm is depicted by curve
D
Which of the following represents the firm's long-run condition fir exiting a market?
Exit if P<ATC
Producer surplus is the area
above the supply curve and below the price line.
a monopolist
an individual, group, or company that dominates and controls the market for a specific good or service
If marginal cost is equal to average total cost, then
average total cost is at its minimum.
Welfare economics is the study of
how the allocation of resources affects economic well-being
what happens to the price and quantity sold of a drug when its patent runs out
the price will fall
if a firm produces nothing which of the following costs will be zero
variable cost
a sunk cost is one that
was paid in the past and will not change regardless of the present decision.
When marginal cost is below average total cost, average total cost
will be falling,
Which of the following are necessary characteristics of a monopoly? (i)the firm is the sole seller of its product (ii) the firms product does not have close substitutes (iii) the firm generates a large economic profit (iv) the firm is located in a small geographic area
(i) and (ii) only
Refer to Figure 7-18. Suppose the willingness to pay of the marginal buyer of the 3rd unit is $125. Then total surplus is maximized if
3 units of the good are produced and sold.
a seller's opportunity cost measures
value of everything she must give up to produce a good
In a market, the marginal buyer is the buyer
who would be the first to leave the market if the price were any higher
When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?
ABGD
All else equal, what happens to consumer surplus if the price of a good decreases?
Consumer surplus increases.
An industry is a natural monopoly when
III only
One difference between a perfectly competitive firm and a monopoly is that a perfectly competitive firm produces where
Marginal cost equals price, while a monopolist produces where price exceeds marginal cost.
Profit on a typical unit sold for a profit-maximizing monopoly would equal
P3 - P0
For a firm, the production function represents the relationship between
Quantity of inputs and quality of output
One of the defining characteristics of a perfectly competitive market is
a similar product
A monopoly's marginal cost will likely:
be less than the market price of its goods
when total revenue is less than variable costs a firm in a competitive market will
continue to operate as long as average revenue exceeds marginal cost
In the long run Firm A incurs total costs of $1,200 when output is 30 units and $1,400 when output is 40 units. Firm A exhibits
economies of scale because average total cost is falling as output rises.
For a firm in a perfectly competitive market, the price of a good is always
equal to marginal revenue
Patent and copyright laws are major sources of
government-created monopolies
In a perfectly competitive market, the process of entry and exit will end when (i) accounting profits are zero, (ii) economic profits are zero, (iii) price equals minimum marginal cost, (iv) price equals minimum average cost.
iii only
the short run supply curve for a firm in a perfectly competitive market is
marginal cost
Refer to figure 14-1 If the market price is $5.00, the firm will earn
negative economic profits in the short run but remain in business.
Free entry means that
no legal barriers prevent a firm from entering an industry
a monopolist maximizes profits by
producing an output level where marginal revenue equals marginal cost
Which of these curves is the competitive firm's short-run supply curve?
the marginal cost curve above average variable cost
we can say that the allocation of resources is efficient if
total surplus is maximized