ECO 120 Test 2
Variable cost
A cost that varies with the rate of output
Is a competitive firm with no market power
A firm that must take whatever price the market offers for its goods
Investment decision
A long run situation in which the decision to build, buy or lease plant and equipment is possible
Charges a higher price than a competitive firm, ceteris paribus
A monopolist
MR = MC
A monopolist maximises profit when
Demand, marginal revenue and marginal cost
A monopolist sets price at a point on the " " curve, corresponding to the rate of output determined by the intersection of " "
It has n no control over the selling price of its product
A perfectly competitive firm is a price taker because
Natural monopoly
A single firm that can produce the entire market more efficiently than any large number of firms
Market supply of labor
All the hours people are willing to work at various wages
A natural monopoly
An industry in which one firm can achieve economies of scale over the entire range of output is referred to as
Quantity of labor supplied and the wage rate are directly related
An upward sloping supply curve of labor illustrates that the
Total profit
Average profit × quantity sold
Total cost / total output
Average total cost (ATC) equation
The labor supply curve shifts to the right
Ceteris paribus, if the cost of daycare increases causing some workers to leave the labor market and stay home with their children
Marginal physical product of a variable input declines as more of it is used
Ceteris paribus, the law of diminishing returns states that the
Marginal physical product
Change in total revenue associated with one additional unit of output
Production decision
Choice of how intensively to use available plant and equipment
Less pressure to reduce costs and less incentive to improve quality
Compared to a competitive market with the same long run costs and market demand, a monopolist has
Their individual production is insignificant relative to the production of the industry
Competitive firms cannot individually affect market prices because
Variable costs
Costs of production that change with the rate of output are
Fixed cost
Costs that do not vary with rate of output
Derived demand
Demand for labor and other factors of production results from the demand for final goods and services produced by these factors
Economic profit
Difference between total revenue and total economic costs
Price setter
Sales will not fall to zero if prices are set a little higher than other sellers prices
Price taker
Taking the market price of a good as a fact of life and doing the best within that constraint
U shaped
The ATC curve is
Supply
The ability and willingness to sell specific quantities of a good at alternative prices in a given period of time, ceteris paribus, defines
Market power
The ability to alter market price of a good or service
A monopoly may have no clear incentive to pursue new research and development
The argument that concentration of market power enhances research and development efforts may be weak because
Marginal physical product (MPP)
The change in total output that occurs when the worker is employed
Marginal physical product
The change in total output that results from one additional unit of input is the
Horizontal
The demand curve facing a perfectly competitive firm is
Diminishing marginal returns to labor
The demand for labor is downward sloping because of
Profit
The difference between total revenue and total cost
Economic cost
The dollar value of all resources used in the production process
Demand for labor increases and the supply of labor is constant
The equilibrium wage will definitely rise if
Land labor capital entrepreneurship
The factors of production include
Maximise total profit
The goal of most business firms is to
Downward, falls
The labor demand curve is " " sloping to the right which means that the quantity of labor will increase as the wage rate " "
Number of available workers
The market supply of labor depends on the
Total costs
The market value of all resources used in producing a good or service is expressed by
The production function
The maximum output that can be produced from a set of inputs is measured by
Maximizes total profit
The most desirable rate of output is one that
Market structure
The number and relative size of firms in an industry
Short run
The planning period over which at least one resource input is in fixed quantity is
Total revenue
The price of a good multiplied by the quantity sold equals
Demand for labor
The quantities of labor employers are willing and able to hire at alternative wages is the
Total cost
The sum of fixed cost and variable cost at any rate of output is equal to
Supply of labor
The willingness and ability to work specific amounts of time at alternative wage rates in a given time period, ceteris paribus
Total profit
Total revenue - total cost
They are protected from competition so they can have greater ability to pursue research and development
What is an argument in support of monopolies?
The change in total revenue divided by the change in quantity of labor
What is the correct formula for calculating the marginal revenue product of labor
Decreases, increases
When new forms enter the industry, price " " and industry output " "
Surplus of labor
When people are standing in line for jobs and there are more applicants than jobs, then the job market is characterized by a
Profits are maximized
When price equals MC
Output should not be increased
When price is less than MC
Labor constraint
Worker reduce total output by increasing congestion on the factory floor, access to the sewing machine, and just plain getting in the way
Total cost
Dollar figure for all the resources used in production
Explicit cost + implicit costs
Economic costs equation
Total revenue - total economic cost
Economic profit equitation
Profit
Economists assume that the principal motivation of production is
Price at which the quantity demanded of a good equals the quantity supplied
Equilibrium price refers to
Monopoly
Firm that produces the entire supply of a particular good or service
Competitive firms
Firms that have no power over the price of goods they produce
Inhibit economic growth
Firms that have significant market power tend to
The short run supply curve for an individual firm
For a competitive firm, the marginal cost curve
Economies of sale
Reductions in minimum average costs that come about through increases in the size of plant and equipment
Marginal costs
Refer to the additional costs incurred to harvest one more basket of fish
Marginal cost
Refers to the change in total costs when one or more unit of output is produced
Patent
Gives a firm the exclusive right to produce or licence a product
Production decision
How much output to sell at the going price
Economies of scale
If an increase in the size of a factory results in reductions in minimum average costs, this is known as
Can increase without a decrease in the number of jobs
If labor productivity rises, then wages
Reduce the price of all units sold
In order to sell one additional unit of output, a profit maximising monopolist must
Downward sloping
In the perfectly competitive catfish market, the market demand curve is
Horizontal
Individual perfectly competitive firm demand curve is
Change in total output / change in input quantity
MPP equation
Change in total revenue / change in quantity of labor
MPP equation
Law of diminishing returns
MPP is diminishing
Maximum efficiency
Making the best possible use of scarce resources
Change in total cost / change in total output
Marginal cost
May initially decline and then increases as more output is produced
Marginal costs
Are the additional costs incurred in producing one more unit of output
Marginal costs:
Downward sloping
Market demand curve for a product is always
Is the ability to alter the market price of a good or service
Market power
Perfect competition, monopolistic competition, oligopoly, duopoly, monopoly
Market structure order
Makers, but perfectly competitive firms are price takers
Monopolists are price
Competitive market
No single producer or consumer has any control over the price or quantity of the market
Barriers to entry
Obstacles that make it difficult or impossible for would be producers to enter a market are known as
Barriers to entry
Obstacles that make it difficult or impossible for would be producers to enter a particular market
Long run
Period in which the quantity of all inputs van change
Short run
Period in which the quantity of some inputs cannot be changed
Price - ATC
Profit per unit equitation
Demand for labor
Quantities of labor employers are willing and able to hire at alternative wage rates in a given time period, ceteris paribus