Econ Exam 3 ISU

__________ maintains that regulation serves the self-interest of the regulated firm, which results in a high economic profit and an overall deadweight loss.

capture theory

The monopolist produces an output that is __________ the perfectly competitive industry would produce.

less than

A monopolist will maximize profit at the level of output where:

marginal cost equals marginal revenue

Implicit cost

An opportunity cost incurred by a firm when it uses a factor of production for which it does not make a direct money payment.

Economic depreciation

An opportunity cost of a firm using capital that it owns—measured as the change in the market value of capital over a given period.

The short run is a period of time where __________ while the long run is a period of time where __________.

at least one input is fixed, all inputs are variable

Natural monopoly happens when the ________ as it crosses the market demand curve.

average total cost curve is decreasing

In perfectly competitive markets marginal revenue always equals

the price of the good or service being produced.

When graphing a conventional short-run production function, we place __________ on the horizontal axis and __________ on the vertical axis.

the variable input, output

Governments deal with natural monopolies by:

using regulation to protect consumers

In the long run, the monopolist can earn:

zero or positive economic profit

A patent gives its holder the exclusive right to a product for a period of __________ from the date the patent is filed with the government.

20 years

Explicit Cost

A cost paid in money

A monopoly is a market structure that is characterized by:

A single seller of a good or service that does not have a close substitute.

__________ occurs when regulators set the price at a level equal to the average total cost so that the regulated firm makes zero economic profit.

Average cost pricing

Average fixed cost is calculated by

Average total cost - average variable cost

Price discrimination includes the practice of:

Dividing consumers into two or more groups and charging different prices to each group.

In the short-run, the cost that is independent of the amount of output produced is called __________.

Fixed cost

Which of the following is an effect of a monopoly?

Monopoly reduces consumer surplus.

Which of the following statements regarding natural monopoly is true?

Natural monopoly is most likely to occur in markets where fixed costs are large relative to variable costs.

In which of the following market structures is the firm's demand curve the same as the market demand for the product?

Only monopoly

In the short run, the firm should:

Operate if price > average variable cost.

In perfect competition, the marginal revenue is always the same as:

Price

Which of the following rights is given to the holder of a patent?

The exclusive right to a new product

As the market demand decreases, how will the firm's amount of output change?

The firm will decrease its output.

Which of the following is a characteristic of a perfectly competitive market?

There are large numbers of buyers and sellers.

In which of the following situations can a firm be considered a monopoly?

When a firm can ignore the actions of all other firms

When price cap regulation results in a price ceiling that is too high the regulated firm may be required to refund a portion of the customer's payments. This regulation is called __________.

earnings share regulation

The downward sloping part of the long run average total cost curve is where the firm has:

economies of scale

To maximize profit with levels of output,

find where marginal cost is equal to marginal revenue

The monopolist charges a price that is __________ the price that would be set in a perfectly competitive industry.

higher than

When the marginal product of labor is greater than the average product of labor, then the average product of labor must be:

increasing

If the average total cost curve is above the demand curve, then this firm is:

incurring an economic loss

Because the monopolist has a barrier to entry:

it can make an economic profit in the long run

Examples of explicit costs

pay workers, pay utility bills, pay for materials

A firm in perfect competition makes an economic profit if:

price is greater than average total cost

A buyer or seller that is unable to affect the market price is called a __________.

price taker

The relationship between the inputs used by the firm and the maximum output it can produce is known as the:

production function

Regulators may establish a price that enables the regulated firm to earn a specific target percentage return on capital. This type of regulation is called __________.

rate of return regulation

In perfect competition, when a firm is making positive economic profit in the short run, then new firms enter the market causing the market supply curve to __________ and the market price to __________.

shift rightward, decrease

The theory that regulation achieves an efficient allocation of resources is known as __________.

social interest theory