ECO Final exam

Derived demand refers to:

a type of demand that is specific to resources.

The demand for labor is derived from the:

additional total revenue generated by hiring additional employees or purchasing additional resources.

The perfectly competitive model is the most efficient type of market and is characterized by both productive and _______________ efficient.

allocative

When there are barriers to trade,:

consumers suffer producers gain and total wealth decreases.

Suppose Carl's Candies sells 100 boxes of candy for $4 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:

$.50

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 total profit of:

$250

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 ( 10 X 45 - 8 X 45 )

The ____________ _____________ price occurs when the price is equal to the average total cost.

normal profit

What would happen to a firm's demand in a monopolistically competitive market if there was less competition in the market?

Demand would become more inelastic

What would happen to a firm's demand in a monopolistically competitive market if there was an increase in the number of consumers?

Demand would increase.

Identify the characteristics of a perfectly competitive market

Easy entry and exit for firms A standardized product Producers who are price takers A large number of buyers and sellers

Which of the following will a firm do when it wants to produce additional output?

It will make decisions at the margin, It will hire additional workers.

Which of the following aspects of oligopolistic firms does game theory help us study?

Their strategic behavior

A monopoly is not really a monopoly when there are no ____________

barriers

In the circular flow model, _________ and _________ interact in the resource market and the product market.

firms, households

______________ theory helps us study the strategic behavior of oligopolistic firms.

game

When profit exceeds zero, the firm is:

generating an economic profit.

Monopolies charge prices __________ than those experienced by consumers in purely competitive markets

higher

Barriers to trade reduce the amount of output that can be supplied by foreign companies and, as a result, cause prices in the market to be ______ than they would otherwise be. This results in consumers buying ______ output. For two parties to be willing to trade, the terms of trade must be:

higher, less

The payment name for capital is ____________

interest

Government regulation of natural monopolies can take several forms such as imposing a(n) _____________ profit price or a(n) _____________ price

normal, competitive

In a(n) market ______________ , there are relatively few firms and the product is either standardized or differentiated

oligopolistic

As in a monopoly, in a(n) __________ , the industry has extensive entry barrier

oligopoly

In a(n) ____________, there are a few large producers.

oligopoly

In a(n) ___________________, producers are price makers and behave strategically when making decisions related to the features, prices, and advertising of their products.

oligopoly

As long as the terms of trade are between both countries' ____________costs, trade will benefit both countries.

opportunity

The optimal level of resource utilization increases when the marginal resource cost ___________

decreases

In ___________ -cost industries, the cost of production ____________ with expanded output and the long-run market supply curve slopes downward.

decreasing, decreases

The strategy of distinguishing one firm's product from the competing products of other firms is called product _______________

differentiation

In decreasing-cost industries, the cost of production falls with expanded output and the long-run market supply curve slopes ____________

downward

If the market price is below the average variable cost, the firm is:

losing money in the short run and should shut down.

When firms want to produce additional output, they make decisions at the

margin

Producing output at the lowest possible total cost per unit of production is:

productive efficiency.

In the long run, perfectly competitive firms achieve __________ efficiency by producing at the lowest cost and ____________ efficiency by producing what consumers want.

productive, allocative

The difference between total revenue and total cost is:

profit

Suppose that market conditions change in an area and, as a result, a firm faces an increase in the cost of each additional worker it hires. In this case :

the marginal revenue cost curve shifts upward.

In deciding how many workers a business should employ,:

the marginal revenue product is key.

________________ efficiency is producing output at the lowest possible average total cost of production

productive

The payment name for entrepreneurial ability is

profit

The efficiency loss resulting from a monopolistically competitive market is called ______________ loss

deadweight

Any time the terms of trade change and move closer to a country's opportunity cost, that country is going to benefit _______________ from trade than it did before.

less

Any time the terms of trade change and move closer to a country's opportunity cost, that country is going to benefit ____________from trade than it did before.

less

At the shutdown point, the price is _____ the average variable cost.

less than

The long-run relationship between the price and the quantity supplied is given by the:

long-run supply curve.

Because the marginal _________ equals the market __________ for perfectly competitive firms, they should produce output until the market price equals the marginal cost.

revenue, price

When a tariff is imposed on imports, the price in the market ______ by the full amount of the tariff.

rises

When a tariff is imposed on imports, the price in the market:

rises by the full amount of the tariff.

The ____________ price occurs when the price is equal to the marginal cost

regulated

Allocative efficiency occurs when the goods and services that are most wanted by consumers are produced in such a way that their marginal ______________ equals their marginal ______________

benefit, costs

Monopolies do not achieve allocative efficiency because they do not produce in such a way that their price or marginal ____________ equals their marginal ______________

benefit, revenue

marginal revenue ?

change in total revenue/change in output

In an __________ market, there are relatively few firms and the product is either standardized or differentiated.

competitive

The allocatively efficient price creates a dilemma for regulators because the average total cost associated with the __________ quantity is higher than the price the natural monopoly is able to charge for it.

competitive

Governments usually regulate monopolies because they want to achieve a(n) ___________ outcome or _____________ prices.

competitive, low

The additional cost incurred as a result of utilizing one more unit of a variable resource is called the marginal resource:

cost

Zero ____________ profit is when the firm's revenue equals its operating costs without a loss.

economic

The regulated competitive price is allocatively ___________

efficient

The payment name for _________ _________ is profits or losses.

entrepreneurial skills

In ____________ cost industries, the cost of production ______________ with expanded output and the long-run market supply curve slopes upward.

increasing, increases

The payment name for __________ is rent.

land

For two parties to be willing to trade, the terms of trade must be:

less than the buyer's opportunity cost, but greater than the seller's opportunity cost.

Monopolies maximize profits by choosing levels of output ___________ than those found in purely competitive markets.

lower

When firms want to produce additional output, they make decisions at the ___________

margin

The _____________ revenue product represents the additional revenue generated from using an additional unit of a resource.

marginal

The additional cost incurred as a result of utilizing one more unit of a variable resource is called the ___________ resource cost

marginal

The additional output produced as a result of utilizing one more unit of a variable resource is the ___________ product.

marginal

A firm tends to emphasize ___________ when deciding how many workers to employ.

marginal revenue product

The __________ supply curve is equal to the sum of the short-run supply curves for all the firms in the _______________

market, industry

A pure ____________ is a price maker engaging in nonprice competition.

monopoly

The country that benefits ____________ from trade is the one that trades at or near the other country's opportunity cost.

most

total revenue ?

multiply the price by the quantity

When a regulated price results in a loss, the government is likely to subsidize a(n) _____________ monopoly.

natural

Government regulation of ____________ ___________can take several forms, such as imposing a normal profit price or a competitive price.

natural monopolies

A pure monopoly is a price maker engaging in ___________ competition

nonprice

If the government forces the monopoly to sell at a price equal to the average total cost, the natural monopoly would make a(n) __________ profit.

normal

If the government forces the monopoly to sell at a price equal to the average total cost, the natural monopoly would make a(n) ___________ profit

normal

The price that occurs where the demand and the average total cost curves cross is called the:

normal profit price.

If the terms of trade are the same as your ______________ cost, you will receive no gains from the trade.

opportunity

With trade, the person who benefits more is the person who trades at or near the other person's _________ cost

opportunity

The _____________ competition model is the most efficient type of market and is characterized by both productive and allocative

perfect

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 marginal revenue ___________ represents the additional revenue generated from using an additional unit of a resource.

product

The strategy of distinguishing one firm's product from the competing products of other firms is called _______________ differentiation.

product

The additional cost incurred as a result of utilizing one more unit of a variable resource is called the ____________ marginal cost

resource

In the circular-flow model, the two markets are the __________ market and the ___________ market

resource, product

The circular-flow model shows how households and firms interact in two key markets: the _________market and the _________ market.

resource, product

The marginal ____________ product represents the additional revenue generated from using an additional unit of a resource.

revenue

When a regulated price results in a loss, the government is likely to ________ a natural monopoly.

subsidize

Producers generally ______, while consumers generally ______.

support exports; oppose exports

Because perfectly competitive firms are price _____________ , the marginal revenue is equal to the market price.

takers

The allocatively efficient price can create a dilemma for regulators when:

the average total cost associated with the competitive quantity is higher than the price the natural monopoly is able to charge for it.

The marginal revenue product is equal to:

the change in the total revenue divided by the change in the resource quantity.

A production decision at the margin includes:

the decision to increase output.

Terms of trade are:

the price of one good in terms of another.

A person benefits less from trade than he or she did before if:

the terms of trade move closer to the person's opportunity cost.

Profit equals __________ revenue minus _________ cost.

total, total

In increasing-cost industries, the cost of production rises with expanded output and the long-run market supply curve slopes ____________

upward

If labor costs increase, a firm's marginal cost curve will shift ____________

upwards

Productive efficiency is:

using the fewest resources possible to produce a good or a service.

At the shutdown point, the price is equal to the average __________ cost

variable

At the shutdown point, the price is equal to the average _______________ cost

variable

If the market price is below the average variable cost, the business is not bringing in enough revenue to compensate for the _________________ cost

variable

Normal profit is also known as _____________ economic profit.

zero