Economics Test 2

Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals

$20.00

Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4?

$5.00

What is meant by cartel?

A group of firms that collude to produce the monopoly output and sell at the monopoly price.

What term is used to describe total revenues minus the firm's costs, without taking opportunity cost into account?

Accounting profit

_____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.

An oligopoly

What term is used to describe when the marginal gain in output diminishes as each additional unit of input is added?

Diminishing marginal returns

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.

Diminishing marginal returns

What term is used to describe the additional utility provided by one additional unit of consumption?

Marginal utility

The largest cattle rancher in a given region will be unable to have a __________ when sufficient numbers of smaller cattle ranchers provide sources of competition.

Monopoly

What term is used to describe a game in which if both players pursue their own self-interest, they both end up worse off than if they cooperate?

Prisoner's dilemma

What is meant by marginal cost?

The additional cost of producing one more unit.

If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, the result will be

abnormally high sustained profits.

Refer to the above diagram. In this instance,

all of the above and the consumer can choose any point on or below the budget constraint line BC.

The marginal revenue curve for a monopolist ____________________ the market demand curve.

always lies beneath

Refer to the diagram above. What is the significance of the point marked L1 at the bottom upward-sloping portion of the individual labor supply (2) curve?

as wages increase over this range, the quantity of hours worked also increases.

The _____________________ curve will always lie below the curve for average cost because average cost includes ___________ in the numerator of the calculation.

average variable cost; fixed costs

The slope of the demand curve for a monopoly firm is

downward sloping

The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.

economies of scale

The term "constant returns to scale" describes a situation where

expanding all inputs does not change the average cost of production.

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.

fixed costs; do not change,

The key assumption that accompanies the use of numbers for measuring utility is that

individuals choose based on their preferences.

When Marietta chooses to only purchase a combination of goods that lie within her budget line, she

is maximizing utility

If the CEO of I'MaBigBank is playing prisoner's dilemma then, from his perspective, the gains to be had from cooperation are

larger than the rewards from pursuing self-interest.

When a natural monopoly exists in a given industry, the per-unit costs of production will be

lowest when a single firm generates the entire output of the industry.

What happens in a perfectly competitive industry when economic profit is greater than zero?

new firms may enter the industry and all of the above

Government ______________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for ______________.

patent; a limited time

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it?

physical space for the gallery

Why would labor be treated as a variable cost?

producing larger quantities of a good or service generally requires more workers

A monopolist is able to maximize its profits by

producing output where MR = MC and charging a price along the demand curve.

Refer to the diagram above. In this instance, at the range of output represented at point c,

profits will be maximized.

Idaho farmers can sell as large a quantity of their potato crop as they wish,

provided each is willing to accept the prevailing market price.

Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4?

reflects each of the above

A monopolistically competitive firm may earn abnormally high profits in the

short term, but the process of entry will drive those profits to zero in the long run.

If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________.

shutdown point

The following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist.

the area of rectangle BDEG

If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then,

the firm should keep expanding production.

Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found?

the marginal utility per dollar is the same for both goods

Refer to the diagram above. Based on the information illustrated in the graph, which of the following is correct?

the transition point between where MC is pulling down and pulling up AC always occurs at the minimum point of the AC curve

If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms,

they will be unable to earn higher-than-normal profits in the long run.

If a monopoly or a monopolistic competitor raises their prices, the quantity demanded ____________.

will decline