Econ Exam 2

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in the short run, a perfectly competitive firm will earn economic profit as long as

P > ATC

long run for a firm in monopolistic competition

P=ATC

why do economists say that monopoly is inefficient?

P>MC

best describes typical average total cost?

decreases initially when output increases, but then increases

When new firms enter a monopolistically competitive industry, each existing firm's

demand curve shifts leftward

Price discrimination is the practice of charging different prices to

different customers even though the cost of selling to each is the same

collusions or cartel agreements are bound to fail because

each firm will earn higher profit by breaking from the cartel agreement

in the long run, the equilibrium in the perfectly competitive market

the economic profit for each firm equals zero

what happens in the long run if competitive forms earn excess profits?

the entrance of new firms and the loss of short run profits

What happens in the long-run if competitive firms suffer economic losses?

the exit of some firms and the elimination of he short run losses

what is marginal cost?

the extra cost of producing one more unit of output?

if a monopoly is operating along the portion of its demand curve where marginal positive is

total revenue increases when price decreases

economic profit is equal to

total revenue minus opportunity cost

an economic profit for a self employed entrepreneur is

total revenue that exceeds the opportunity cost

in the long run, perfectly competitive firms earn zero economic profit. this result is due mainly to which of the following assumptions?

unrestricted entry and exit

in the long run, a competitive firm decides

what plant size, inputs and technology to choose; whether to enter or exit an industry

when should a profit-maximizing firm increase production?

when marginal revenue exceeds marginal cost

in the short run, a competitive firm decides

whether to produce or shut down

in a perfect competition, the demand curve facing a single firm is

horizontal

when will a perfectly competitive firm shut down?

in the short run, when price falls below average variable cost

the marginal product of labor is equal to the

increase in the total product that results from hiring one more worker

a monopolist

is a price setter

Brand name drugs are chemically identical to their generic counterparts. Yet, consumers often prefer the brand name product to the generic product. Making consumers think that a brand name drug differs from its generic counterpart is an example of

product differentiation

a firm in monopolistic competition can determine what price to charge for its product because of

product differentiation

one benefit of monopolistic competition over perfect competition is

product variety

a firm's basic goal is to maximize

profit

economies of scale refer to the range of output over which

the average cost falls as output increases

a firm in monopolist competition produces where

MR=MC

a firm incurs implicit costs when

a company uses capital equipment in which it owns

how to monopoly outcomes differ from competitive outcomes?

a monopoly limits its output and charges a higher price for its product

a barrier to entry is

a natural or legal impediment that makes it difficult for new firms to enter a market

the long run is a period of time in which

all factors of production are variable

a natural monopoly is defined as

an industry in which one firm can supply the entire market at a lower price than two or more firms

the distinguishing features of oligopoly are __________ and a __________ in the industry

barriers to entry; few firms

perfect price discrimination

converts all consumer surplus into economic profit

what are variable costs?

costs that change as output changes

explicit costs differ from implicit costs in that

explicit costs are paid in money, but implicit costs are often non-paid opportunity costs

opportunity cost equals

explicit costs plus implicit costs

in the long run equilibrium in the perfectly competitive market

firms produce at the lowest average cost per unit

in a perfectly competitive industry

firms take the price as given

for a single priced monopolist, price is ________________ marginal revenue

greater than

A single-price monopolist is inefficient because

it creates a deadweight loss since P>MC

a perfectly competitive firm maximizes profit when

its marginal revenue equals its marginal cost

A single-price monopolist produces a ________ quantity than a perfectly competitive industry and charges a ________ price than the perfectly competitive industry.

lesser, higher

a single price monopolist maximizes profits by producing output at which

marginal revenue equals marginal cost

Small pizza parlors exist in just about every town. Anyone can open a pizza parlor, and the pizzas from one parlor typically have different tastes and sizes than pizzas from another parlor. Thus, the pizza industry is an example of

monopolistic competition

which is a fixed cost on a bike company?

mortgage payment on the property

small number of firms, competition between the firms

oligopoly

if a monopolist can perfectly price discriminate, then

price equas marginal cost for the last unit it sells

the period of time in which the quantity of at least one factor of production is used by a firm is fixed is called

short run

In the long run, monopolistically competitive firms are ________ to perfectly competitive firms because ________

similar; both firms earn zero economic profit

what is total cost?

sum of total variable cost and total fixed cost

cost, as measured by an accountant, generally does not include

the opportunity cost of the firm

an industry is perfectly competitive if

there are many firms in it, each selling an identical product

in a perfectly competitive industry

there are no barriers to entry; there are many firms in it, each selling an identical product

which of the following is true about a perfect price discriminating monopolist?

there is no consumer surplus


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