ch 8

Refer to Figure 8.2. How much profit will the firm earn if price stays at $80?

$1024

marketing analyst

$15

Refer to Figure 8.2. At P = $80, the profit-maximizing output in the short run is

39

Following Example 8.8 in the book, the long-run supply of rental housing in most U.S. communities is more inelastic than the long-run supply of owner-occupied housing. Why?

A and C above are correct

Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this situation violated the

A and C, Price taking consumption and free entry assumption

Which of the following cases are examples of industries that have potentially increasing costs due to scarce inputs?

All of the above

Use the following statements to answer this question: I. An increase in the firm's fixed costs will also shift the firm's short-run supply curve to the left. II. An increase in the firm's fixed costs will not shift the firm's short-run supply curve to the right or left, but it may alter how much of the marginal cost curve is used to form the short-run supply curve

I and II are false

Consider the following statements when answering this question I. In the long-run equilibrium of a perfectly competitive market, a firm's producer surplus equals the sum of the economic rents earned on its inputs to production. II. In the long-run equilibrium of a perfectly competitive market, the amount of economic profit earned can differ across firms, but not the amount of producer surplus.

I is true and II is false

In a constant-cost industry, price always equals

LRMC and minimum LRAC

Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as

P=MC

key differences in anti trust

all

Although the long-run equilibrium price of oil is $80 per barrel, some producers have much lower costs because their oil reserves are relatively close to the surface and are easier to extract. If the low-cost producers have a minimum LAC equal to $20 per barrel, then the difference ($60 per barrel) is:

an economic rent due to the scarcity of low-cost oil reserves

Firms often use patent rights as a:

barrier to entry

NOT tend to increase buying price

collusion

The "perfect information" assumption of perfect competition includes all of the following except one. Which one?

consumers can anticipate price changes

biomed

demand becomes more elastic, lerner index declines

An improvement in technology would result in

downward shifts of MC and increases in output.

Economic rents are typically counted as:

economic costs but not accounting costs.

Average cost for the firm in Table 8.1

is U-shaped

Revenue is equal to

price times quantity

Producer surplus in a perfectly competitive industry is

the difference between revenue and variable cost

An industry analyst observes that in response to a small increase in price, a competitive firm's output sometimes rises a little and sometimes a lot. The best explanation for this finding is that

the firms marginal cost curve is horizontal...

When the price faced by a competitive firm was $5, the firm produced nothing in the short run. However, when the price rose to $10, the firm produced 100 tons of output. From this we can infer that

the minimum value of the firms average variable cost lies between $5 and $10

Scenario 8.2: Yachts are produced by a perfectly competitive industry in Dystopia. Industry output (Q) is currently 30,000 yachts per year. The government, in an attempt to raise revenue, places a $20,000 tax on each yacht. Demand is highly, but not perfectly, elastic. Refer to Scenario 8.2. The more elastic is demand for yachts

the more Q will fall and the less P will rise

Suppose the market demand curve is perfectly elastic in an increasing-cost industry. If an output tax of t per unit is imposed on all producers of the good, what happens to the market equilibrium outcome?

the price paid by buyers does not change and output decreases

If a competitive firm has a U-shaped marginal cost curve then

the profit maximizing output is found where MC=MR and MC is increasing

Marginal revenue, graphically, is

the slope of the total revenue curve at a given point.

If any of the assumptions of perfect competition are violated,

there may still be enough competition...

Suppose the government does not provide an incentive payment to producers under a production quota policy, and the amount that may be produced and sold by firms is limited by law in order to raise the market price to the support price. Do producers still gain surplus value under this version of the production quota policy?

yes, as long....