Econ exam 4
Both a perfectly competitive firm and a monopolist find that
it is best to expand production until the benefit and the cost of the last unit produced are equal
Patents, which confer market power, are intended to
encourage innovation by helping firms recoup the costs of research and development
How many units would be supplied in the market at a price of $14 per unit?
17,500
The most important challenge facing a firm in a perfectly competitive market is deciding
How much to produce
Total revenue minus both explicit and implicit costs defines a firm
Profit
If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to
a decrease in the firms supply
A pure monopoly exists when
a single firm produces a good with no close substitutes
Which of the following is a defining characteristic of all perfectly competitive markets?
all firms sell the same standardized product
A technological innovation that reduces a firm's cost of producing additional units of output will lead to
an increase in the firm's supply
As price increases, firms in a perfectly competitive market find that it is
beneficial to produce more units of output
Price discrimination means charging
different prices to different buyers for essentially the same good or service
Which of the following is NOT a characteristic of a perfectly competitive market?
each firm in the market sells a somewhat different variant of the good
According to the textbook, the most important and enduring sources of market power are
economies of scale
A perfectly price discriminating monopolist charges each buyer
exactly his or her reservation price
An imperfectly competitive firm is one that
has at least some influence over the market price
A price setter is a firm that
has some degree of control over its price.
A price-taker faces a demand curve that is
horizontal at the market price
A rational seller will sell another unit of output
if the cost of making another unit is less than the revenue gained from selling another unit.
For all firms, the additional revenue collected from the sale of one additional unit of output is termed
marginal revenue
The primary objective of an imperfectly competitive firm is to
maximize profit
The primary objective of most private firms is to
maximize profit
One problem with antitrust laws is that they
may prevent companies from achieving economies of scale.
A monopoly that results from economies of scale is called a
natural monopoly
A monopolistically competitive firm is one
of many firms that sell products that are close but not perfect substitutes.
If a firm operates in an oligopoly, it is
one of a small number of firms that produce good that are either close or perfect substitutes
The difference between the price a seller actually receives for a good and the seller's reservation price is
producer surplus
Market power refers to a firm's ability to
raise its price without losing all of its sales
Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will
shift into producing good Y
Economies of scale exist when
the average cost of production falls as output rises.
One problem with government ownership of natural monopolies is that
the government has no reason to set price equal to marginal cost
Individual supply curves generally slope __ because __.
upward; of increasing opportunity costs