Micro Economics Terms
Which market structure has the fewest obstacles to entry or exit?
Pure competition
_____________________ and development leads to most patentable inventions and products.
Research
_______________and development leads to most patentable inventions and products.
Research
What leads to most patentable inventions and products?
Research and development
How does a monopolist change the price of its product?
By changing the quantity of the product it produces.
Why do costs differ between a purely competitive firm and a pure monopoly?
A factor called "X-inefficiency" Economies of scale
A basic feature of the purely competitive market is the presence of ___________________.
A large number of sellers.
Which of the following is a characteristic of a monopolistically competitive market?
A relatively large number of sellers producing differentiated products.
In a purely competitive market, a firm's demand schedule is also its __________________ schedule.
Average-Revenue
Which of the following explains why a purely competitive firm's demand curve is perfectly elastic?
Because the individual firm is a price taker, the marginal revenue curve coincides with the firm's demand curve.
Which statement is true about costs for purely competitive and monopolistic producers?
Costs for purely competitive and monopolistic producers may not be the same.
Marginal revenue is less than price at every unit of output because the monopolist
Could have sold these prior units at a higher price if it had not produced and sold the extra output.
Price makers are firms with:
Downward-sloping demand curves.
What term is used to describe declining average total costs with added firm size?
Economies of scale
Based on the information given in the table, which of the following statements are true?
Every unit of output up to and including the ninth unit represents greater marginal revenue than marginal cost. The ninth unit of output is the profit-maximizing level of output.
A constant-cost industry is one where __________ will not affect resource prices and production costs.
Expansion or contraction
True or false: A firm is producing 24 units of output. At the 24th unit of output, marginal revenue is $5, and marginal cost is $4; at the 25th unit of output, marginal revenue is $4.50, and marginal cost is $4.50; at the 26th unit of output, marginal revenue is $4, and marginal cost is $5. This firm made the correct choice by producing only 24 units of output and then stopping.
False
True or false: Quantity supplied increases as price decreases, and economic profit is usually higher at lower product prices and output.
False
There is no incentive for firms to enter or exit the industry in the long run when ______ ____.
Firms earn a normal profit Price equals minimum average total cost MR=MC
Which of the following can cause X-inefficiency?
Hiring incompetent relatives Avoiding business risk Maintaining a poorly motivated work force
Which of the following best describes oligopoly?
Involves only a few sellers of a standardized or differentiated product, so each firm is affected by the decisions of its rivals.
Government creates _______________ barriers to entry.
Legal
In this graph, a firm incurs a loss but continues to operate because price is _________ than the lowest average total cost but above the lowest average ___________ cost.
Less; variable
Economies of scale explain the downward sloping part of the ___________ curve.
Long-run average-total-cost
Economies of scale explain the downward-sloping part of the ______________ curve.
Long-run average-total-cost
A firm's decision about what output level to produce is typically a ______________ decision.
Marginal
A firm should produce any unit of output whose ________________
Marginal revenue is greater than marginal cost
The lowest level of output at which a firm can minimize long-run average costs is called ________________.
Minimum efficient scale
Network effects may drive a market toward _________________ because consumers tend to choose standard products that everyone else is using.
Monopoly
A ____________________________________ may occur when only a single firm might be able to achieve the lowest long-run average total cost. (Enter one word in each blank."
Natural ; Monopoly
Which of the following improves as production increases?
Price-marginal cost relationship
Total revenue equals _________ times _______________.
Price; Quantity
In a purely competitive industry, at the profit-maximizing or loss-minimizing level of output, marginal _________ is equal to __________.
Revenue; price Cost; price Revenue; marginal cost
Which of the following are effects of an increase in the price of labor on the cost curves?
The average-fixed-cost curve remains the same. The average-variable-cost, average-total-cost, and marginal-cost curves shift upward.
What is the primary cause of diseconomies of scale?
The difficulty of efficiently controlling and coordinating a firm's operations as it becomes a large-scale producer.
Which of the following best illustrates diseconomies of scale?
The increase in average total costs as a firm expands the size of its plant in the long run.
Multiplying product price by output reveals which of the following?
Total revenue
The equation for determining economic profit or loss is __________ minus ______________.
Total revenue; total cost
How much will a profit-seeking monopolist produce if producing is preferable to shutting down?
Up to the output at which marginal revenue equals marginal cost
When is marginal cost at its minimum?
When marginal product product is at its maximum
When will a firm earn an economic profit?
When price is greater than average total cost.
The monopolist's level of output is not at the minimum point of _____________, meaning it will not be productively efficient.
average total cost
Productive efficiency requires that goods be produced:
in the least costly way.
The marginal-product curve is a mirror image of the ____________ curve.
marginal-cost
A ______________ (one word) is the exclusive right of an inventor to use, or allow another to use, her or his invention.
patent
After all long-run adjustments are completed in a perfectly competitive market, output will occur at each firm's minimum average _____________.
total cost where product price is equal to marginal revenue.