Final

You sell your good in a perfectly competitive market where the market price is $7.00. When yousell 100 units your total revenue is $700. When you sell 101 units:

total revenue increases by exactly $7.

Signaling Model

validity of info for accurately understanding something isnt easily observed

All of the following statements about asymmetric information are true except: 27) A) Asymmetric information creates market failures because it makes it harder for individuals to engage in transactions that would take place in the presence of perfect information. B) Asymmetric information occurs in the market for used cars and in the insurance market. C) Asymmetric information can only be solved through government intervention. D) Asymmetric information occurs when one party to a transaction has relevant information to the transaction that the other party does not have.

C. Asymmetric information can only be solved through government intervention.

A dominal strategy

Results in a higher pay off chosen by the other player

marginal Cost

The change in total variable cost which accompanies one extra unit of output

Price equals marginal revenue for a competitive firm because

The price doesn't change when the firm changes output

Average Cost = _____________

Total cost divided by output

economic profit is

a firm's total revenue minus its explicit and implicit costs and lower than accounting profit

human capital model

assumes that men and women bring different natural skills to the workplace

Signaling takes place in markets with ________.

asymmetric information

If market price exceeds _________ cost, Profit will be _________

average, positive

People with more education earn higher wages...

both

Economic cost and accounting cost differ because economist include

both explicit and implict cost

In a simultaneous move game...

each player has to make his choice without knowing his rival's choice

In the long run, each firm in an industry will:

earn only enough to cover the opportunity cost

Average fixed cost will...

fall as output rises

if marginal revenue is greater than marginal cost

firm should increase output

Decide whether it is applying to the signaling model, the human capital model, or both... Policies that increase the amount of schooling will increase productivity...

human capital model

A basic distinction between the long run and the short run is that

in the short run, complete adjustment of all inputs is impossible, while in the long run allinputs can be adjusted.

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: 7) ATC = $12; AVC = $10; MC = $15; MR = $16. The firm should

increase output

Game theory is a useful tool to study strategic interactions as they were characterized by:

interdependence

In College Station, there are many coffee shops, each offering nearly identical coffee but each shop 19) is located in a different place around the city. It is likely a coffee shop in College Station operates in A) oligopoly market. B) monopolistically competitive market. C) perfectly competitive market. D) monopoly market.

monopolistically competitive market.

A monopoly creates a deadweight loss because the monopoly

produces less than the efficient quantity.

Offering a warranty is an example of:

signaling

When a student graduates from college, they are no more productive than they started...

signaling

If marginal revenue is less than marginal cost

the firm should decrease output

One requirement for an industry to be perfectly competitive is that A) many firms produce similar, but not identical products. B)sellers and buyers have imperfect information about prices. C) established firms have no advantage over new firms. D) different firms produce widely different products. E)established firms have a significant advantage over new firms.

C

Which of the following is an example of price discrimination? A) Increasing the price of a product when demand for the product increases. B) Reducing the price of a product to reduce excess inventory. C) Bundling complementary products to attract additional sales. D) Charging different prices for a product in different regions of the country due to differences in transportation costs.

C) Bundling complementary products to attract additional sales.

When marginal cost is rising, the average total cost ________

could be rising or falling

The perfectly competitive, profit-maximizing rate of production

occurs at the point at which marginal revenue is equal to marginal cost.

Economic cost and accounting cost differ because accountants include

only explicit cost