Micro Exam 3 (Chapters 10-13)
A business will charge a(n) ____ price to the group with the relatively more elastic demand and a(n) ____ price to the group with the relatively more inelastic demand.
lower; higher
A company currently producing 10 air conditioners each day has daily total costs of $1,500. Producing an additional air conditioner will increases costs by $250 daily. What are the total daily costs for the firm if they produce the 11th air conditioner?
$1,750
Suppose Carl's Candies sells 100 boxes of candy for $5 each. The total fixed cost of the 100 boxes is $100, and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a profit per unit of:
$2.50
Suppose a snowboard manufacturer increases it output by 1 snowboard per day. As a result, the total cost of producing snowboards each day rises from $120 to $145. The marginal cost of producing an extra snowboard is
$25
In a perfectly competitive market, assume the market price is $10 per unit, and the profit-maximizing quantity is 45 units. If the ATC at 45 units is $8, the profit/loss amount at the profit-maximizing quantity is
$90
In a perfectly competitive market, assume the market price is $5 per unit and the profit-maximizing quantity is 70 units. If the ATC at 70 units is $8, what is the profit/loss amount at the profit-maximizing quantity?
-$210
Which of the following describes collusion?
A situation in which decision makers coordinate their actions to achieve a desired outcome.
In order for a monopolistically competitive firm to produce at a point that is both productively and allocatively efficient, which of the following has to be true about the profit-maximizing quantity?
Demand = Marginal Cost = ATC
Which of the following is true of economic costs?
Economic costs are defined as the sum of explicit and implicit costs.
The profit-maximization rules states that a firm should produce a level of output where:
MR = MC
What is true about firms in monopolistic competition in the short-run?
Monopolistically competitive firms can generate an economic profit, a normal profit, or an economic loss.
Total revenue equals
Price x Quantity
Which of the following is not a characteristic of an oligopoly?
Producers who are price takers
A firm is reducing their output from 2,000 units to 1,000 units. This decision results in a reduction in the long run average cost from $300 to $200. What can be said about this firm?
The firm is experiencing diseconomies of scale.
A firm is planning to increase output in the long run from 100 units to 200 units. The long run average total cost falls from $25 to $20. What can be said about this level of output?
The firm is experiencing economies of scale.
Which of the following measures the percentage of sales by the four largest firms in a particular industry?
The four-firm concentration ratio (CR4)
Which of the following aspects of oligopolistic firms does game theory help us study?
Their strategic behavior
Profit maximization implies that monopolistically competitive firms should expand production up to the point where the marginal revenue equals the marginal cost. (True or False)
True
A situation in which a particular strategy yields the highest payoff, regardless of the other player's strategy, is:
a dominant strategy
An outcome in which, unless the players can collude, neither player has an incentive to change his or her strategy is:
a nash equilibrium
Marginal product is the:
additional output produced as a result of utilizing one more unit of a variable resource.
Marginal revenue is the:
additional revenue associated with the sale of an additional unit of output.
Monopolies do not achieve ____ efficiency because they do not produce in such a way that their price equals their marginal cost.
allocative
When the marginal benefit of the last unit equals the marginal cost of the last unit, production is ____ efficient
allocative
Producing the goods and services that consumers most want in such a way that the marginal benefit equals the marginal cost is:
allocative efficiency
Average revenue is the:
amount of revenue per unit of a product sold.
Laws designed to prevent firms from engaging in behaviors that would lessen competition in a market are called ____ laws
antitrust
Laws designed to prevent firms from engaging in behaviors that would lessen competition in a market are called:
antitrust
The short run is a period of time in which:
at least one input of production is fixed.
A curve showing the ____ total cost for different levels of output when at least one input of production is fixed typically plant capacity is the short-run average cost curve.
average
Because the marginal revenue faced by the firm is equal to price, ____ revenue is also equal to price.
average
Total product divided by the number of units of a resource employed gives the ____ product of the resource.
average
The fixed cost per unit is equal to:
average fixed cost
Total fixed cost divided by the amount of output produced is equal to:
average fixed cost
The amount of output produced per unit of a resource employed is the
average product
The amount of revenue produced per unit of an output sold is the:
average revenue
Total cost divided by the amount of output produced is equal to
average total cost
The demand, the ____ revenue, and the ____ revenue curves for a perfectly competitive firm are the same horizontal line at the market price.
average; marginal
Second-degree price discrimination is also known as
block pricing
Second-degree price discrimination is also known as:
block pricing
The practice of charging different prices per unit for different quantities, or blocks, of a good or service is called:
block pricing and second-degree price discrimination
A group of competing companies that aim to maximize joint profits by coordinating their policies to fix prices, manipulate output, or restrict competition is called a(n) ____
cartel
A group of competing companies that aim to maximize joint profits by coordinating their policies to fix prices, manipulate output, or restrict competition is called a(n):
cartel
A situation in which decision makers coordinate their actions to achieve a desired outcome is called ____
collusion
A market structure characterized by a relatively large number of sellers producing a differentiated product - for which they have some control over the price they charge - in a market with relatively easy market entry and exit is known as monopolistic ____
competition
Perfect ____ is a market structure characterized by the interaction of large numbers of buyers and sellers in which the sellers produce a standardized or homogeneous product.
competition
A ____ cost industry is an industry in which the firms' cost structures do not vary with changes in production.
constant
____ returns to scale occurs when long-run average total cost does not change as output increases.
constant
A condition in which the long-run average total cost of production remains constant as production increases is called:
constant returns to scale
In a perfectly competitive market, we assume the product is identical in the minds of ____
consumers
The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is called:
deadweight loss
The average fixed cost curve:
decreases for all levels of output.
For quantities occurring before the marginal cost curve and average total cost curve intersect, the average total cost curve will be:
decreasing
____ marginal returns are a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is less than that of the previous variable resource.
decreasing
A monopoly will charge consumers the price that they are willing and able to pay for the amount of output available which is shown along the ____ curve.
demand
Because the products of monopolistically competitive firms are ____ from other companies in their industry, these firms are able to have some control over the ____ of their products
differentiated, prices
Explicit costs are also known as
direct costs
____ of scale is a condition in which the long-run average total cost of production increases as production increases.
diseconomies
The total revenue minus the implicit and explicit costs of production is ____ profit
economic
Total revenue minus the explicit and implicit costs of production is ____ profit.
economic
Total revenue minus the implicit and explicit costs of production is ____ profit.
economic
Total revenue minus the implicit costs and explicit costs of production is ____ profit.
economic
Zero ____ profit is when the firm's revenue equals its economic costs without a loss.
economic
____ profit creates an incentive for other monopolistically competitive firms to enter the market.
economic
____ profit creates an incentive for other perfectly competitive firms to enter the market.
economic
When monopolistically competitive firms follow the marginal revenue and the marginal cost rule, the result can be ____ profits, ____ profits, or even losses, depending on market conditions.
economic, normal
____ of scale is a condition in which the long-run average total cost of production decreases as production increases.
economies
A condition in which the long-run average total cost of production decreases as production increases is called:
economies of scale
A business will charge a lower price to the group with the relatively more ____ demand and a higher price to the group with the relatively more ____ demand.
elastic; inelastic
Economic profit creates an incentive for other perfectly competitive firms to ____ the market.
enter
The level of profit that occurs when the total revenue is ____ to the total cost is known as normal profit.
equal
The level of profit that occurs when total revenue is ____ to total cost is known as normal profit.
equal
Profit maximization implies that perfectly competitive firms should expand production up to the point where marginal revenue ____ marginal cost.
equals
Total revenue minus the total _____ costs of production is accounting profit.
explicit
Monetary payments made by individuals, firms ,and governments for the use of others' land, labor, capital, and entrepreneurial ability are
explicit costs
The marginal cost is the:
extra or additional cost associated with the production of an additional unit of output.
The marginal revenue is the
extra or additional revenue associated with the production of an additional unit of output.
By charging consumers the highest price they are willing and able to pay, the pure monopoly:
extracts all surplus from consumers.
The perfect monopoly extracts all surplus from consumers, yielding higher profits than any other pricing method when it employs which of the following?
first-degree price discrimination, personal pricing and perfect price discrimination
A concentration ratio that measures the percentage of sales by the four largest firms in a particular industry is called the:
four-firm concentration ratio.
____ theory helps us study the strategic behavior of oligopolistic firms.
game
The average total cost curve is
greater than the average variable cost curve for all levels of output
The average total cost curve is:
greater than the average variable cost curve for all levels of output.
In a perfectly competitive market, we assume the product is _____ in the minds of consumers.
homogeneous
The opportunity costs of using owned resources are
implicit costs
Economic costs can be defined as the sum of _____ and _____ costs
implicit; explicit
Total revenue minus the ____ costs and ____ costs of production is economic profit.
implicit; explicit
Total revenue minus the total _____ and total _____ costs of production is economic profit.
implicit; explicit
Third-degree price discrimination charges different prices to different consumers in order to:
increase profits
As the market price of a good ____, all else held constant, a profit-maximizing firm that produces the good can afford to expand its production.
increases
____ marginal returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource.
increasing
In ____-cost industries, the cost of production ____ with expanded output and the long-run market supply curve slopes upward.
increasing; increases
What is the name of the model where firms operating in an oligopolistic market match only price decreases of other firms in the industry?
kinked demand model
When a firm has a loss, the total revenue is ____ then the total cost.
less
When the total revenue is ____ then the total cost, the level of profit that occurs is a loss.
less
Monopolies produce ____ output then competitive markets and are likely to hire ____ labor.
less; less
A curve showing the lowest average total cost possible for any given level of output when all inputs of production are variable is the ____ - run average cost curve
long
A period of time in which all inputs of production are variable is the
long run
Constant returns to scale occur when:
long-run average total cost does not change as output increases.
The market condition in which firms do not face incentives to enter or exit the market and firms earn a normal profit is known as:
long-run equilibrium
The long-run relationship between the price and the quantity supplied is given by the:
long-run supply curve
If the market price is below the average variable cost, the firm is:
losing money in the short run and should shut down.
The level of profit that occurs when the total revenue is less than the total cost is called an economic ____
loss
Minimum-efficiency scale refers to the:
lowest level of output at which the long-run average total cost is minimized.
Price discrimination is only possible when a firm is a price ____
maker or setter
In game theory, a repeated game is played
many, sometimes an infinite number, times.
Because the ____ revenue faced by the firm is equal to price, average revenue is also constant and equal to price.
marginal
Decreasing ____ returns are a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is less than that of the previous variable resource.
marginal
Increasing ____ returns is a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is greater than that of the previous variable resource.
marginal
The extra or additional revenue associated with the production of an additional unit of output is the ____ revenue.
marginal
The short-run supply curve starts at the minimum average ____ cost.
marginal
The cost associated with an additional unit of output is called
marginal cost
The extra or additional cost associated with the production of an additional unit of output is the:
marginal cost
The marginal cost curve shows the relationship between
marginal cost and output
The marginal cost curve shows the relationship between:
marginal cost and output
When examining the cost curves for a firm, the minimum average variable cost occurs at the output level where:
marginal cost equals average variable cost.
The additional output produced as a result of utilizing one more unit of a variable resource is the
marginal product
Extra or additional revenue associated with the production of an additional unit of output is the:
marginal revenue
A perfectly competitive firm should produce output until the point where:
marginal revenue equals marginal cost.
In a perfectly competitive market, a single firm is a price taker and therefore can only charge the ______ price.
market
The percentage of total market sales accruing to one specific firm is called the ____ share
market
The demand for a perfectly competitive firm's product is a horizontal line originating at the:
market price
A payoff ____ is a table showing the potential outcomes arising from the choices made by decision makers.
matrix
Monopolistically competitive firms are unable to produce enough output to reach the ____ average total cost because of the presence of other monopolistically competitive firms in the industry.
minimum
The lowest level of output at which the long-run average total cost is minimized is called:
minimum-efficiency scale
A ____ produces less output than a competitive firm and therefore is likely to hire less labor.
monopoly
A market structure characterized by a single seller is a ____.
monopoly
A person who invents the ability to time travel will likely operate as a ____ because there would be no substitutes and entering that market would be difficult for anyone else.
monopoly
A pure ____ has the overall demand to itself because it is the only seller in a market.
monopoly
A pure ____ is a price maker engaging in non-price competition.
monopoly
A pure ____ is the only seller in a market.
monopoly
The _____ costs of using owned resources are implicit costs.
opportunity
Costs that do not change with the amount of _____ produced are fixed costs.
output
A table showing the potential outcomes arising from the choices made by decision makers is:
payoff matrix
A market structure characterized by the interaction of large numbers of buyers and sellers in which the sellers produce a standardized or homogeneous product is known as:
perfect competition
The practice of charging each and every consumer the price she is willing and able to pay for a good or service describes:
perfect price discrimination, personal pricing and first-degree price discrimination
Firms that take or accept the market price and have no ability to influence that price are ____ takers.
price
In the long run, a monopolistically competitive firm will charge a(n) ____ equal to the average total cost per unit produced.
price
The practice of selling the same good or service to different consumers at different prices is called:
price discrimination
The practice of selling the same good or service to different consumers at different prices is known as:
price discrimination
Compared to an unregulated natural monopoly, what is true about the price charged and quantity produced when a natural monopoly is regulated?
price is lower and quantity is higher
Used in noncollusive oligopolistic markets, the practice of a dominant firm to signal upcoming price changes to other firms in the industry is known as
price leadership.
Total revenue equals:
price times quantity.
Pure monopolies do not achieve allocative efficiency meaning that they do not produce the amount of output that maximizes the sum of ____ and ____ surplus.
producer; consumer
The strategy of distinguishing one firm's product from the competing products of other firms is called ____ differentiation
product
The total amount of output produced with a given amount of resources is known as the total ____
product
Producing output at the lowest possible total cost per unit of production is:
productive efficiency
All firms maximize ____ by producing the quantity of output at which the marginal revenue is equal to the marginal cost.
profit
The difference between total revenue and total cost is:
profit
In the short run, as the price rises,:
quantity supplied rises
Governments usually ____ monopolies when the fixed costs associated with the production of a(n) ____ good or service are relatively high and it may not make sense to have multiple firms duplicating these fixed costs.
regulate; essential
A situation in which a game is played a number of times, sometimes infinitely, is known as a
repeated game.
For the profit-maximizing level of output, the price charged by a monopoly is not just different but greater than marginal ____
revenue
The profit maximization rule states that a firm should produce a level of output where the marginal ____ equals the marginal cost.
revenue
Total ________ equals price times quantity
revenue
A monopolistically competitive firm should produce output until the marginal ____ equals the marginal ____
revenue, cost
A monopoly should produce output until the marginal ____ equals the marginal ____
revenue; cost
All firms maximize profits by producing the quantity of output at which the marginal ____ is equal to the marginal ____.
revenue; cost
In the ____ run, when at least one input is fixed, as the price rises so does the level of output supplied.
short
A period of time in which at least one input of production is fixed is known as the
short run
Game theory is the study of the ____ behavior of decision makers
strategic
A dominant ____ is a situation in which a particular strategy yields the highest payoff, regardless of the other player's strategy.
strategy
The long-run relationship between the price and the quantity supplied is given by the long-run ____ curve.
supply
In a perfectly competitive market, the price the firm should charge is the market price because the firm is a price ____
taker
A concentration index that measures the sum of the squared percentage of sales from all firms in a particular industry is called:
the Herfindahl-Hirschman Index (HHI).
When a pure monopoly practices first-degree price discrimination,:
the demand curve becomes the marginal revenue curve.
When the total revenue earned by a firm is less than the total cost of production,:
the firm faces a loss.
A constant-cost industry is an industry in which:
the firms' cost structures do not vary with changes in production.
In decreasing-cost industries, the cost of production falls with expanded output and:
the long-run market supply curve slopes downward.
The percentage of total market sales accruing to one specific firm is called:
the market share.
Price discrimination is best described as:
the practice of selling the same good or service to different consumers at different prices.
Price leadership refers to
the practice of the dominant firm signaling price changes.
Total product is:
the total amount of output produced with a given amount of resources.
A curve showing the lowest average total cost possible for any given level of output when all inputs of production are ____ is the long-run average cost curve.
variable
____ cost equals total fixed cost plus total variable cost.
total
Total cost equals:
total fixed cost + total variable cost
The price of a good times the number of units sold gives us:
total revenue
The price of a good times the quantity sold equals:
total revenue
Profit equals ____ revenue minus ____ cost.
total; total
Natural monopolies are rare and tend to be regulated by the government.
true
In increasing-cost industries, the cost of production rises with expanded output and the long-run market supply curve slopes
upward
In increasing-cost industries, the cost of production rises with expanded output and the long-run market supply curve slopes ____
upward
The firm's short-run supply curve is an __-sloping curve that begins at __ average variable cost.
upward; minimum
Costs that change with the amount of output produced are _____ costs.
variable
If the market price is below the average variable cost, the business is not bringing in enough revenue to compensate for the ____ costs.
variable
Costs that increase as production increases and decrease as production decreases are
variable costs
Total _____ costs change with output whereas total _____ costs do not.
variable; fixed
A company can break even and meet operating costs without a loss when it earns ____ economic profit.
zero
Normal profit is also known as ____ economic profit.
zero
A firm sustains a loss if:
TR<TC
Total revenue minus the explicit cost of production is
accounting profit
Perfect price discrimination generates the best outcome for which of the following market structures?
monopoly
A market structure characterized by a single seller is a(n) ____
monopoly
For the profit-maximizing level of output, the price charged by a ____ is not just different but greater than marginal revenue.
monopoly
A(n) ____ equilibrium is an outcome in which, unless the players can collude, neither player has an incentive to change his or her strategy.
nash
The kinked demand model occurs when:
noncollusive oligopolistic firms ignore other firms' price increases, but match their price decreases.
The profit maximization rule states that a firm should produce a level of output where the marginal revenue ____ the marginal cost.
equals
The marginal cost curve is:
decreasing for low levels of output, then begins increasing.
Suppose a snowboard manufacturer increases its output by 1 snowboard per day. As a result, the total cost of producing snowboards each day rises from $100 to $110. The marginal cost of producing an extra snowboard is
$10
____ profit is also known as zero economic profit
normal
When there is production efficiency,:
-output is produced using the fewest resources possible to produce a good or a service -output is produced at the lowest possible total cost per unit of production
Price ____ is the practice of selling the same good or service to different consumers at different prices.
discrimination
The practice of selling the same good or service to different consumers at different prices is called price ____
discrimination
If a ____ wants to sell more units it must lower the price for every unit it sells.
monopoly
A pure monopoly is a price maker engaging in ____ competition.
nonprice
The level of profit that occurs when the total revenue is equal to the total cost is known as ____ profit.
normal
The level of profit that occurs when total revenue is equal to total cost is known as ____ profit
normal
The level of profit that occurs when total revenue is equal to total cost is known as ____ profit.
normal
Government regulation of natural monopolies can take several forms such as imposing a(n) ____ profit price or a(n) ____ price.
normal; competitive
The ____ _____ price occurs when the price is equal to the average total cost
normal; profit
As in a monopoly, in a(n) ____ , the industry has extensive entry barriers.
oligopoly
In a ____ market, there are relatively few firms and the product is either standardized or differentiated.
oligopoly
In a ____, producers are price makers and behave strategically when making decisions related to the features, prices, and advertising of their products.
oligopoly
When there are diminishing marginal returns:
the marginal product of the next unit of a variable resource utilized is less than that of the previous variable resource.
Monopolistically competitive firms are able to have some control over the ____ of their products
price
The practice of charging each and every consumer the price that she is willing and able to pay for a good or service describes first-degree ____ discrimination.
price
The strategy of distinguishing one firm's product from the competing products of other firms is called product ____
differentiation
In a monopolistically competitive market - each firm produces a differentiated and unique product - so firms face ____ - sloping demand curves
downward
In decreasing-cost industries, the cost of production falls with expanded output and the long-run market supply curve slopes ____
downward
When the marginal benefit of the last unit equals the marginal cost of the last unit, production is ____ efficient.
allocatively
The demand for a perfectly competitive firm's product is a horizontal line originating at the market ____
price or value
Firms that take or accept the market price and have no ability to influence that price are known as:
price takers
Diseconomies of scale is a condition in which the long-run average total cost of production ____ as production increases
increases
The long-run equilibrium in a monopolistically competitive market results in firms realizing ____ profits, which removes all incentives for firms to enter or exit the industry.
normal
The market condition in which firms do not face incentives to enter or exit the market and firms earn a(n) ____ profit is known as long-run equilibrium.
normal
Total cost per unit is equal to
average total cost
Total cost per unit is equal to:
average total cost
Total variable cost divided by the amount of output produced is equal to:
average variable cost
Variable cost per unit of output produced is
average variable cost
Indicate the two most common numerical indicators of market concentration.
The four-firm concentration ratio (CR4), The Herfindahl-Hirschman Index (HHI)
In addition to total cost, it is useful to calculate ____ cost because it can be compared directly to the price.
average
In addition to total cost, it is useful to calculate ____ cost because it is more useful for managing.
average
Total cost divided by the amount of output produced is equal to:
average total cost
