ECON Exam #3

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Technological improvements cause:

ATC to shift down

If the products of two firms are homogeneous then they:

are perfect subsitutes

If a perfectly competitive firm is producing a rate of output at which MC exceeds price, then the firm:

can increase its profit by decreasing output

Entrepreneurship:

can result in economic losses

A firm that makes zero economic profits:

covers all its costs as variable

In a competitive market if the market price is equal to the minimum point of the firms ATC curve the firm may seek to earn economic profits by:

decreasing production costs through tech improvements

When the short run marginal cost curve is upward sloping:

diminishing returns occurs with greater output

Suppose a perfectly competitive firm is experiencing zero economic profits. In an effort to increase profits the firm decides to initiate an advertising campaign for its product. The most likely short run result of this campaign ceteris paribus would be:

economic losses for the firm

The demand curve confronting a competitive firm:

equals the marginal revenue curve

In the long run perfectly competitive equilibrium marginal cost:

equals the minimum of the ATC

The maximum amount a firm can lose in the short run is:

fixed cost

When a producer can control the market price fo the good it sells the producer:

has market power

In a competitive market where firms are earning economic losses, which of the following should be expected as the industry moves to long run equilibrium, ceteris paribus? A. higher price and more firms B. higher price and fewer firms C. lower price and more firms D. lower price and fewer firms

higher price and fewer firms

The demand curve for each perfectly competitive firm is:

horizontal

The short run is the time period:

in which some costs are fixed

Suppose the cost of insecticide decreases for broccoli farmers. In order to maximize profits ceteris paribus broccoli farmers should:

increase output

Which of the following is true about a competitive market supply curve? A. it is horizontal B. it is downward sloping to the right C. it is the sum of the marginal cost curves of all firms D. it is vertical

it is the sum of the marginal cost curves of all firms

Economic profit is:

less than accounting profit by the amount of implicit cost

Short run profits are maximized at the rate of output where:

marginal revenue is equal to marginal cost

Which of the following is not a barrier to entry? A. government regulation B. control of essential factors of production C. economies of scale D. perfect information

perfect information

To maximize profits a competitive firm will seek to expand output until:

price equals marginal cost

Profit per unit is equal to

price minus average total cost

A firms total revenue can be determined by:

price times quantity

The market price for t-shirts sold in a perfectly competitive market is determined by:

supply and demand

If the price of ricotta cheese an ingredient in lasagna increases then:

the market supply curve for lasagna will shift to the left

A perfectly competitive firm is a price taker because:

the price of the product is determined by many buyers and sellers

When firms in a competitive market are experiencing zero economic profits this in an indication that:

there is currently no better way to use societys scarce resources

A firm maximizes total profit when:

total revenue exceeds total cost by the greatest amount

Marginal revenue is the change in:

total revenue when output is changed by 1 unit

In making an investment decision an entrepreneur:

treats all costs as variable

Which of the following is characteristic of a perfectly competitive market? A. a small number of firms B. exit of small firms when profits are high for large firms C. zero economic profit in the long run D. marginal revenue lower than price for each firm

zero economic profit in the long run


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