Economics test 3

Which of the following is ALWAYS true for a single-price monopolist?

None of the above answers is correct because none of them is ALWAYS true.

Which of the following must exist for a firm to engage in price discrimination?

The firm must be able to identify and separate its buyers into different dlasses, and the low-price buyers cannot resell the product to the high-price buyers.

A price-discriminating monopoly charges

a different price to different types of buyers for the same product, even though there are no differences in costs.

A firm faces a small number of competitors. This firm is competing in

an oligopoly

lfa few oil-producing countries in the Middle East decide to jointly limit the production of oil,

they are forming a cartel.

firm's fundamental goal is

to maximize profit.

Which of the following describes a barrier to entry?

anything that protects a firm from the arrival of new competitors

Patents

are a legal barrier to entry.

One requirement for an industry to be perfectly competitive is that in the industry there

are many firms for whom the efficient scale of production is small.

When a market has barriers to entry

barriers then in the long run it might be possible for the firms to make a positive economic profit

For a natural monopoly, economies of scale

exist along the long-run average cost curve at least until it crosses the market demand curve

When firms in monopolistic competition incur an economic loss, some firms will

exit the industry, and demand will increase for the firms that remain.

In an oligopoly, there are

few firms and barriers to entry

Competition among rent seekers results in

firms earning normal profits.

For a single-price monopoly, price is

greater than marginal revenue

Normal profit is a(n)cost because

implicit, it represents the cost of not running another firm

Patents

increase the incentive to innovate.

When marginal revenue is postive, fotal revenuew when output increases and demand is

increase; elastic

A firm in monopolistic competition is

inefficient because price exceeds marginal cost.

Price discrimination occurs when a firm

is able to sell different units of a good at different prices.

If perfectly competi tive firms are entering or exiting a market, it must be true that the market

is in the short run.

If a perfectly competitive firm finds that the price exceeds its ATC, then the firm

is making an economic profit.

Peter's Pencils is a perfectly competitive company producing pencils. Suppose Peter is producing 1,000 pencils an hour. If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost then Peter

is maximizing his profit and is making an economic profit.

To produce more output in the short run, a firm must employ more of

its variable resources.

When a dity licenses only 3 taxi firms to serve the market, the city has created a

legal oligopoly.

A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a

less elastic; a higher price than before

The marginal revenue curve facing a monopolistically competitive firm

lies below its demand curve.

Bill is an economics professor who earns $37,000 teaching but decides to leave and fulfill his dream of catering barbecue business is $3,000. Bill also rented an industrial grill/fry truck for $12,000. Bill had an economic supplies. He also paid his wife barbecues. During his year of barbecuing he earned total $10,000 to help serve food. The normal profit for an entrepreneur running a revenue of $60,000. He spent $30,000 on food and

loss of -$32,000.

The possible alternatives for an oligopoly range from the monopoly case with tot the perfectly competitive case with

low output; high output

If a monopoly wants to sell a greater quantity of output, it must

lower its price

A firm's long-run average cost curve shows the average cost at which it is possible to produce each output when the firm has had time to change both its labor force and its plant

lowest, sufficient

In monopolistic competition in the long run, firms

make zero economic profit and have excess capacity.

In the long run in monopolistic competition, firms

make zero economic profit.

In the long run, a perfectly competitive firm will

make zero economic profit.

Entry and exit continue in monopolistic competition until the remaining firms are

making zero economic profit.

The characteristics that describe a perfectly competitive industry include

many firms selling an identical product.

A perfectly competitive firm is a price taker because

many other firms produce the same product

An industry with a large number of firms, differentiated products, and free entry and exit is called

monopolistic competition.

If perfectly competitive firms are making an economic profit, then

new firms enter the market and the equilibrium profit of the firms already in the market decreases

Jennifer's Bakery Shop produces baked goods in a perfectly competitive market. If Jennifer decides to produce

not produce this additional batch.

Which of the following is found ONLY in oligopoly?

one firm's actions affect another firm's profit

A monopoly is a market with

one supplier

We define a monopoly as a market with

one supplier with barriers to entry

When an economist uses th e term "cost" referring to a firm, the economist refers to the

opportunity cost of producing a good or service, which includes both implicit and explicit cost.

Economic profit equals total revenue minus total

opportunity costs.

In which of the following market types do all firms sell products so identical that buyers do not care from which firm they buy?

perfect competition

To increase its profit, a perfectly competitive firm will produce more output when

price is greater than marginal cost

One of the major benefits to society of monopolistic competition is

product differentiation.

Why do publishers print the first edition of a book by a popular author in hard cover and not in paperback?

production print the first edition rewarding Readers who want to read the book as soon as it comes out will be willing to pay a higher price compared to those who can wait for the paperback edition.

A cartel is

profit. economic group of firms acting togethe r to raise price, , decrease output, and increase

Suppose that a monopoly is currently producing the quantity at which marginal revenue is less than marginal cost.

raising its price and decreasing its output .

If a perfectly competitive industry is taken over by a single firm that operates as a single-price monopoly, the price

rise; decrease

If a business owner decided to expand her business but rather than borrowing money from a bank used her own funds, then

she would forego the opportunity to earn interest on the money.

Product differentiation involves making a product that is

slightly different from the products of competing firms.

The main sources of economies of scale are

specialization of resources such as labor and capital

A natural barrier to entry is defined as a barrier that arises because of

technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms.

Marginal cost equals

the change in total cost that results from a one-unit increase in output

For a monopoly, marginal revenue is equal to

the change in total revenue brought about by a one-unit increase in quantity sold

The marginal product of labor is the change in

total output from employing one more worker

If a perfectly competitive wheat farmer is maximizing its profit and then increases its output, the farmers

total revenue increases, but total cost rises by more so that the farmer's total profit decreases.

To maximize its profit, in the short run a perfectly competitive firm decides

what quantity of output to produce.

Under which of the following conditions will a profit-maximizing perfectly competitive firm shut down in the short runi?

when the price is less than its minimum average variable cost

last year was $110,000. The rent on her restaurant was $48,000, her labor costs were Lauren runs a chili restaurant in San Francisco. Her total revenue $42,000, and her materials, food and other variable costs were $20,000. Lauren could have worked as a biologist and earned $50,000 per year. An economist calculates implicit costs as

$50,000.

The U-shape of the average variable, average total, and marginal cost curves reflects

both increasing and decreasing marginal returns.

the firm change the number of workers it employs and change the size of its plant.

can; carn

A perfectly competitive firm is earning an economic profit when total fixed costs increase. Assuming the firm

continue producing the same quantity as before but will make less economic profit

When a firm becomes so large it is difficult to coordinate and control, it is most likely that

diseconomies of scale have begun.

The demand curve for a monopoly is

downward sloping.

For a firm in monopolistic competition, innovation and product development are

economic necessary in order to have a chance of making at least a short-run economic profit.

When a firm's long-run average total cost falls as its output increases, the firm is experiencing

economies of scale

Rent seeking is the act of obtaining special treatment by to create

the government; economic profit

If firms in an oligopolistic industry successfully collude and form a cartel, what price and output will result?

the monopoly price and output

The long run is defined as

the period of time when all resources are variable

The price charged by a perfectly competitive firm is

the same as the market price.

The market supply in the short run for the perfectly competitive industry is

the sum of the supply schedules of all firms.

The short run is

the time frame in which some resources are fixed.

Price discrimination is possible, in part, because

the willingness to pay can vary among groups of buyers.

It would be impossible for members of the fast-food industry to collude to fix prices because

there are too many fast-food firms in the market.