Quiz #2 Attempt Chapter 12 Module 8, Chapter 13 Module 9, Chapter 14 Module 9, Chapter 15 Module 10

Suppose Bev's Bags makes large handbags and small handbags. They sold 70,000 large bags for $45 each and 25,000 small bags for $15 each. If the company had total costs of $2,000,000, what was the profit for this company?

$1525000

In the long run, firms in a perfectly competitive market

All are correct earn zero economic profit, produce a quantity that maximizes profits, choose the level of output thta minimizes average total costs

A good that is perfectly standardized is:

Indistinguishable to others in the market.

If a sandwich shop produces zero sandwiches, which of the following costs will it still incur?

Rented storefront

Chocolate and other flavorings

Variable Cost

Total revenue minus explicit costs is

accounting profit

The price effect is smaller when there

are more firms

Antitrust activities can cause inefficiencies by:

both of these statements are true breaking up a natural monopoly, creating many small firms that cannot capture available economies of scale

When a firm is on the portion of its long run ATC curve that slopes upward, it is experiencing:

diseconomies of scale.

The practice of charging customers different prices for the same good is called:

price discriminiation

You own Drip Painting company, which employs several painters. Your newest employee says "Now that we've bought drop cloths, paint rollers, and other supplies, we should maximize the number of paint jobs we do - that way we'll spread those fixed costs over more production". You reply,

"Hang on, doing more paint jobs also involves hiring more painters - that variable cost is actually much bigger than the fixed cost of equipment."

Chris spends $240 on a lawn mower for her landscaping business. What is her average fixed cost if she mows the following numbers of lawns?

20 lawns $12 30 lawns $8 40 lawns $6 60 lawns $4 80 lawns $3 120 lawns $2

Assume the table shown is for a hat factory, and shows the total production of hats given various numbers of employees. Adding a seventh employee adds:

25 hats to total production.

Molly spends $30 on a large cooler for her lemonade stand, her only fixed cost. What is her average fixed cost if she sells the following numbers of cups of lemonade?

5 cups: $6.00 10 cups: $3.00 15 cups: $2.00 30 cups: $1.00 60 cups: $0.50 120 cups: $0.25

Last year, Jarod left a job that pays $60,000 to run his own bike-repair shop. Jarod's shop charges $65 for a repair, and last year the shop performed 3,000 repairs. Jarod's production costs for the year included rent, wages, and equipment. Jarod spent $50,000 on rent and $100,000 on wages for his employees. Jarod keeps whatever profit the shop earns but does not pay himself an official wage. Jarod used $20,000 of his savings to buy a machine for the business. His savings were earning an annual interest rate of 5 percent. What is Jarod's annual accounting profit? What is Jarod's annual economic profit?

Accounting profit = Total revenue - Explicit costs Accounting profit = ($65 × 3,000) - ($50,000 + $100,000) Accounting profit = $195,000 - $150,000 Accounting profit = $45,000 Economic profit = Total revenue - (Explicit costs + Implicit costs) Economic profit = ($65 × 3,000) - ($50,000 + $100,000 + Forgone interest on savings + Forgone wages) Economic profit = ($65 × 3,000) - [$50,000 + $100,000 + (0.05 × $20,000) + $60,000] Economic profit = $195,000 - $211,000 Economic profit (loss) = −$16,000

Last year, Jarod left a job that pays $60,000 to run his own bike-repair shop. Jarod's shop charges $65 for a repair, and last year the shop performed 4,000 repairs. Jarod's production costs for the year included rent, wages, and equipment. Jarod spent $50,000 on rent and $120,000 on wages for his employees. Jarod keeps whatever profit the shop earns but does not pay himself an official wage. Jarod used $25,000 of his savings to buy a machine for the business. His savings were earning an annual interest rate of 6 percent. What is Jarod's annual accounting profit? What is Jarod's annual economic profit?

Accounting profit = Total revenue - Explicit costs Accounting profit = ($65 × 4,000) - ($50,000 + $120,000) Accounting profit = $260,000 - $170,000 Accounting profit = $90,000 Economic profit = Total revenue - (Explicit costs + Implicit costs) Economic profit = ($65 × 4,000) - ($50,000 + $120,000 + Forgone interest on savings + Forgone wages) Economic profit = ($65 × 4,000) - [$50,000 + $120,000 + (0.06 x $25,000) + $60,000] Economic profit (loss) = $28,500

Compare perfectly competitive markets, monopoly markets, and oligopoly markets on the following economic behavior by indicting in which market structure the behavior is true: Producers maximize profit by producing where MR = MC in all three types of markets . The efficient outcome is to produce where P = MC in all three types of markets . The efficient outcome is achieved in perfectly competitive markets only . Market price is greater than marginal revenue (MR) in monopoly markets and oligopoly markets only . Some form of barriers to entry exist in monopoly markets and oligopoly markets only . If they collude, oligopolies will produce at the same level as monopolies .

All 3 All 3 Perfectly competitive Monopoly markets Monopoly markets Monopolies

If the demand decreases in a perfectly competitive market, firms will likely:

All are correct exit the market in hopes of capturing profits elsewhere, experience zero profits in the long run, experience negative profits in the short run

The total cost curve:

All are correct is parallel to the variable cost curve, is the sum of the variable cost curve and fixed cost curve, is always above the variable cost curve.

When economic profits are negative, accounting profits could be:

All of these are possible zero, positive, negative

For firms that sell one product in a perfectly competitive market, the market price is:

All of these are true equal o average revenue for a firm, constant regardless of quantity sold, equal to marginal revenue for a firm.

If a firm in a monopolistically competitive market has a demand curve that is shifting to the right, it will only stop shifting when:

All of these statements are true other firms have no incentive to leave the market, The firm's price is equal to its average total cost The firm is earning zero economic profits

The process of entry and exit into a monopolistically competitive market continues until:

All of these statements are true price is equal to average total cost, profits are zero, long-run equilibrium is reached

The marginal costs (MC), average variable costs (AVC), and average total costs (ATC) for a firm are shown in the figure below.

At the profit-maximizing level of output, average total cost is $22 and profit is $34

In a perfectly competitive market, MR =

Average revenue price change in total revenue/change in quantity

These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown, area C represents:

Consumer surplus

Suppose that a pharmaceutical company wants to grow in size but is constrained in the short run by its production capacity. What are some of the steps the company can take in the long run to overcome these constraints?

Expand the size of current factories Build more factories

What is wrong (from the perspective of Five Banners' revenue) with charging all visitors the same low admissions price?

Five Banners will get less revenue than it could have from the families, who are willing and able to pay more.

Advertising

Fixed Cost

Office Space

Fixed Cost

Research and Development on new flavors

Fixed Cost

Restaurants offer related but differentiated products to their consumers. In the long run, new restaurants enter the market and imitate the cuisine and atmosphere of successful competitors. With this in mind, which of the following statements would be correct about a restaurant's prices in the long run?

In the long run, restaurants will enter the market as long as there are positive profits, In the long run, profits will be normal for the restaurants in a monopolistically competitive market.

If a firm has economies of scale, increasing the quantity produced will lead to: The efficient scale of production is when:

Lower long run average costs long run average total cost is minimized

The monopolist and the perfectly competitive firm both choose to maximize profts by choosing the level of output where:

MC equals MR and price is equal to AR

The table below shows price and quantity demanded for a market in which there is a single (monopoly) firm. Calculate total, marginal, and average revenue.

MR = change in revenue/change in quantity AR = revenue/quantity

Madeline quits her job, at which she was earning $20,000 per year. She then takes $50,000 out of savings, on which she was earning 10% interest, and uses it to buy supplies for her business. She also pays $10,000 in rent on the building and $15,000 in additional labor costs. In her first year of operations, Madeline receives $150,000 in revenue from sales. Madeline's accounting cost is Madeline's economic cost is Madeline's accounting profit is Madeline's economic profit is

Madeline's accounting costs are the sum of all the explicit costs: $50,000 + $10,000 + $15,000 = $75,000. Madeline's economic costs include her explicit cost, calculated above, plus her implicit costs, foregone interest and salary. $50,000 + $10,000 + $15,000 + $20,000 + $5,000 = $100,000 Thus her accounting profit is $150,000 - $75,000 = $75,000, and her economic profit is $150,000 - $100,000 = $50,000.

A market is in long-run equilibrium and firms in this market have identical cost structures. Suppose demand in this market decreases. Which of the following are correct descriptions of what happens to the individual firms and the whole market as the market first leaves and then returns to long-run equilibrium?

Market price will decrease in the short-run. Firms will exit the market in the long run. Individual firms' profit-maximizing output will decrease in the short-run. Market quantity will decrease in the long-run.

Mike wants to open his own repair shop, and is considering using his savings of $30,000 to get it started. He is currently earning 3 percent interest on his savings. His friend Bob calls him and asks to borrow $30,000 to start up a bagel shop; Bob offers to pay him 5 percent interest if he loans him the money. If Mike were to use the money to open his own repair shop, how can he accurately account for his costs?

Mike must consider the $1,500 in forgone interest from loaning the money to Bob as an implicit cost. Correct

The manager of the donut shop tells you that he sells donuts for $1 each. If he were to make additional donuts, based on his current level of output, it would cost him $0.80 per donut. Based on this information, the manager should:

NOT continue to produce at the existing output

Suppose that a producer in a previously competitive market is granted the sole right to produce in the market. Given that demand in the market is unchanged, but now all consumers must purchase from the same producer, which of the following statements are correctly describing the producer before and after becoming a monopoly?

Price equals marginal revenue before becoming a monopoly, marginal revenue is less than price after becoming a monopoly, the producer will produce the output where MR = MC both before and after becoming a monopoly, the producer will produce the efficient level of output

Lisa is a self-employed physical therapist who works from a rented space. Lisa charges $250 for a therapy session. She incurred the following costs last month: space and equipment rental, $1,200; wages, $3,500; materials, $1,800. If Lisa's profit last month was $2,000, how many clients did she see?

Profit = Total revenue - Total cost $2,000 = (250 × Q) - $6,500 $8,500 = 250Q 34 = QLisa saw 34 clients.

Lisa is a self-employed physical therapist who works from a rented space. Lisa charges $250 for a therapy session. She incurred the following costs last month: space and equipment rental, $1200; wages, $3500; materials, $1800. If Lisa's profit last month was $2000, how many clients did she see?

Profit = Total revenue - Total cost $2000 = (250 × Q) - $6500 $8500 = 250Q 34 = QLisa saw 34 clients.

Suppose that the market for e-readers is an oligopoly controlled by Amazon.com, Barnes & Noble, Sony, and Apple. Now, Barnes & Noble is considering increasing its output. Which of the following are likely outcomes of this decision?

Profit will decrease for the other oligopolists who did not increase quantity, Barnes and noble would have to decrease price to increase output Barnes & Noble would see an increase in their profits as long as the quantity effect outweighs the price effect.

A sandwich shop has six months left on its lease to its storefront and equipment and currently employs three workers who work on an on-call basis, with no contract. Ingredients are bought daily. How long is the long run for the sandwich shop?

Six months, after which all inputs listed become variable

Suppose you are advising a mayoral candidate in your town. The candidate's platform includes strong opposition to monopoly suppliers because consumer welfare is compromised by monopoly pricing. Which of the following statements would present your candidate with an alternative view about why it may make sense to tolerate the existence of some monopoly firms?

Some goods may not exist if it were not for the monopoly profits that a patent ensures to create incentives for research and development Monopolies reduce average total cost when there are very large fixed costs in production Some goods are too dangerous or important to let "just anyone " produce them

Price discrimination is only possible in a monopoly market structure Suppose you are advising Five Banners Amusement Park, which is the only such firm in the state. Two types of visitors are interested in the park: middle-class families with young kids, and teens/college students. b. What is wrong (from the perspective of Five Banners' revenue) with charging all visitors the same high admissions price?

Teens and college students would not be able to visit, even though they would have if the price was lower.

MyJoe is a producer of coffee mugs. Its marginal costs are below: Suppose that the market price of coffee mugs is $10.00. What is MyJoe's profit-maximizing quantity?

The Profit-Maximizing Quantity is where Marginal Cost = Price. 100

Madeline quits her job, at which she was earning $20,000 per year, and takes $50,000 out of savings and uses it to buy inventory for her business. She also pays $10,000 in rent on the building and $15,000 in additional labor costs. Madeline's explicit costs are:

The cost of additional labor The cost of inventory The cost of the building

For a monopoly, when the price effect outweighs the quantity effect of increased production.

The demand must be price inelastic

Suppose a museum charges different entrance fees for children, students, adults, and seniors, but these groups all pay the same amount for souvenirs at the gift shop. Which of the following explains why the museum price discriminates on admission but not souvenirs?

The entrance ticket is individual, while souvenirs are transferable

The table below presents the demand schedule and marginal costs facing a monopolist producer.b. What is the profit-maximizing level of output?What price will the monopolist charge for the quantity in part (b)?

The profit-maximizing decision rule is to increase production as long as MR is > or = MC. This monopolist should produce 3 units. The marginal revenue of increasing production to 3 units is $4 and the marginal cost is $4, so it makes sense to produce 3 units. c. The monopolist will charge the highest price that consumers are willing to pay for 3 units, which is $6 per unit.

The table below presents the demand schedule and marginal costs facing a monopolist producer. What is the profit-maximizing level of output? What price will the monopolist charge for the quantity in part (b)?

The profit-maximizing decision rule is to increase production as long as MR is > or = MC. This monopolist should produce 4 units. The marginal revenue of increasing production to 4 units is $6, while the marginal cost is $5, so it makes sense to produce the 4th unit. c. The monopolist will charge the highest price consumers are willing to pay for 4 units, which is $9 per unit.

Interscope sells the music of Lady Gaga, who promotes a unique public image and fashion style. Given her huge success, it is likely that by the end of the coming year, multiple performers will be imitating or borrowing heavily from her style. Suppose the current period's supply and demand for Lady Gaga MP3s is given in the figure below.

The profit-maximizing price for Lady Gaga MP3s in the short run is $1

Madeline's implicit costs are:

The salary that Madeline could've earned The interest that could have been earned on Madeline's savings.

Suppose Bev's Bags makes two kinds of handbags—large and small. Bev rents an industrial space where she keeps the fabric, the industrial sewing machine, her measuring board and cutting shears, extra needles, thread and buttons, and labels. If Bev were to produce no bags, which of the following is true regarding Bev's costs?

The variable cost of fabric would drop to zero

Webby Inc. is a web development company. Webby's monthly production function for developing websites is given in the table below. Webby pays $3,000 a month in rent for office space and equipment. It pays each programmer $2,000 a month. There are no other production costs. Fill in the table of production costs

The variable costs in this case are only the cost of additional programmers. Total cost = Variable cost + Fixed cost. Fixed cost = $2,000 rent. Average fixed cost = (Fixed cost)/Quantity = (Fixed cost)/(# of websites). Average variable cost = (Variable cost)/Qantity = (Variable cost)/(# of websites). Average total cost = (Total cost)/Quantity = (Total cost)/(# of websites). Marginal cost = (Change in total cost)/(Change in total quantity) For row 2, MC = (5000 - 3000)/(2 - 0) = 1000. For row 3, MC = (7000 - 5000)/(5-2) = 667.

A college student is thinking about running an ice-cream truck over the summer. What would economists say is the student's main objective?

To maximize his profit

What would you expect to happen to market supply if variable costs decreased for individual firms in the market?

Total market supply would increase because MR would equal MC at a higher quantity for each firm.

A hair salon offers three services: haircuts, color treatment, and styling. The salon charges $40 for a cut, $65 for color, and $25 for styling. Last month, the salon sold 68 haircuts, 34 color treatments, and 22 styling sessions. If the salon's costs for the month totaled $2848, what was its profit?

Total revenue = (Q1 × P1) + (Q2 × P2) + ... + (Qn × Pn) Profit = Total revenue - Total cost For the hair salon, then: Profit = [(68 × $40) + (34 × $65) + (22 × $25)] - $2848 Profit = ($2720 + $2210 + $550) - $2848 Profit = $5480 - $2848 Profit = $2632

Darla sells roses in a competitive market where the price of a rose is $15. Use this information to fill out the revenue columns in the table below.

Total revenue = Price × Quantity. Average revenue = (Total revenue)/Q. Marginal revenue has multiple definitions in a competitive market:MR = (Change in total revenue)/(Change in Q).Marginal revenue of third rose = (45 - 30)/(3 - 2) = $15.MR = Price = $15.MR = Average revenue = $15.

Electricity

Variable Cost

Milk for making Ice Cream

Variable Cost

Suppose a new product is developed and is supplied by a monopolist with a patent. Compared with the monopoly outcome, indicate whether consumer surplus, producer surplus, and total surplus increase, decrease, or remain the same under the following scenarios.

a. Consumer surplus, producer surplus, and total surplus all stay the same. A colluding duopoly has the same outcomes as a monopoly.b. Consumer surplus increases; producer surplus decreases; total surplus increases.c. Consumer surplus increases; producer surplus decreases; total surplus increases.

The table below shows the monthly demand schedule for a good in a duopoly market. The two producers in this market each face $6000 of fixed costs per month. There are no marginal costs. . If they evenly split the quantity a monopolist would produce, the monthly profit for each duopolist is If duopolist A decides to increase production by 200 units, the monthly profit for duopolist A is $ 3,000 and for duopolist B $ 0 .

a. The monopoly outcome is to produce a quantity of 800 and charge a price of $20. If the duopolists split production, each produces 400 and charges $20 per unit for a total revenue of $8,000. Each firm faces a fixed cost of $6000, so profit is $8,000 − $6000 = $2000 for each duopolist. b. If duopolist A increases production by 200 units, price will fall to $15 for all units. Duopolist A will be producing 600 at a price of $15 for a total revenue of $9,000. Profit for duopolist A will be $9,000 − $6000 = $3000. Duopolist B is still producing 400, so total revenue for duopolist B will be 400 × 15 = $6,000. Duopolist B will have profits of $6,000 − $6000 = $0.

Economies of scale refers to when:

an increase in the quantity of output decreases average total cost in the long run.

Diseconomies of scale refers to when in the long run:

an increase in the quantity of output increases average total cost.

Knowing that Coke controls 80 percent of the cola market and Pepsi controls 20 percent, we can conclude the cola market is:

an oligopoly

The key difference between supply in the short run and supply in the long run is that we assume that firms:

are able to enter and exit the market in the long run.

Constant returns to scale refers to when:

average total cost does not depend on the quantity of output in the long run.

The table below presents the demand schedule and marginal costs facing a monopolist producer. What is the profit-maximizing level of output? What price will the monopolist charge for the quantity in part (b)?

b. The profit-maximizing decision rule is to increase production as long as MR is > or = MC. This monopolist should produce 4 units. The marginal revenue of increasing production to 4 units is $3, while the marginal cost is $2, so it makes sense to produce the fourth unit. However, the marginal revenue of increasing to 5 units is $1, while the marginal cost is $2. The monopolist should not increase to 5 units. c. The monopolist will charge the highest price consumers are willing to pay for 4 units, which is $6 per unit.

If a firm in a perfectly competitive market faces the curves in the graph shown and observes a market price of $16, the firm:

can make positive profits by producing where MC = MR

The long run outcome of the monopolistically competitive firm:

creates welfare loss

Suppose that the airline industry is in long-run equilibrium when the price of gasoline increases, raising the cost of operating airplanes. In the long run, the number of airlines in business should:

decrease

The owner of Central Cupcake Shop finds that when she doubles the amount of flour she buys, but makes no other changes, cupcake output rises by 60%. This is an example of

decreasing marginal returns

The owner of Sour Sandwiches knows he faces constant returns to scale. He doubles all of his inputs - the amount of workers, ingredients, kitchen space, etc. Sandwich output will

double

Imagine you're in a meeting with the owner of a restaurant who is trying to decide whether to keep his restaurant open or to invest his time and money another way. In order to make the correct decision, the restaurant owner needs to consider his

economic profit

Economic profit is smaller than accounting profit because:

economic profit accounts for explicit and implicit costs

In some industries, competition between two or more firms simply doesn't make much sense because:

economies of scale are so powerful.

Protecting intellectual property rights

encourages research and development

Due to high demand and high prices, profits in the carpet-painting industry are at all-time highs. Since the carpet-painting industry is perfectly competitive, this will cause firms to BLANK in the long run You observe high profits in the perfectly competitive pencil eraser industry. In the long run, you expect those profits to BLANK

enter fall

If a firm experiences diminishing marginal product, then it means that total output decreases with additional variable inputs.

false

The monopoly can choose any price it wants

false

Suppose that a perfectly competitive industry is in long-run equilibrium. Every firm is producing at minimum average total cost, and all firms are identical. Demand in this industry decreases. Which of the following will not occur in the short run? Which of the following will occur in the long run?

firms will exit the industry firms will exit the industry

A price taker is a buyer or seller who:

has no control over setting the market price.

Most countries:

have laws against firms making agreements about prices or quantities

The industry in the figure below consists of many firms with identical cost structures, and the industry experiences constant returns to scale. Consider a change in demand from D1 to D2, which increases price from $20 to $30 in the short run.

he new equilibrium price will be $ 20 and the new equilibrium quantity will be 40

The public policies designed to mitigate the effects of monopolies are

highly debated issues

In a perfectly competitive market int he short run, an increase in demand causes equilibrium price to::

increase and the equilibrium quantity to increase

The owner of Central Cupcake Shop finds that when she doubles all of her inputs - ingredients, ovens, workers, etc - her output of cupcakes more than doubles. This is an example of

increasing returns to scale

The advantages of maintaining monopolies

is a normative argument that has no right answer

When marginal product __________ average product, average product must be ______________.

is greater than; increasing

For a onopolist the quantity effect

is the increase in revenues from selling a greater quantity at a lower price

a. Littleburg has 6 restaurants, which collectively serve 300 bowls of noodles per day. Then, 5 of the restaurants accidentally burn down, leaving only Nelly's Noodle Hut intact. Now, Nelly's will serve BLANK 300 bowls of noodles per day, and the price will be BLANK . b. Philpot Industries Inc. is the only producer of left-handed coffee mugs. Currently, they are making very little profit. You tell them they could raise their profits by BLANK of the mugs they produce.

less than, higher, decreasing the number

As long as market price remains above the average total cost, and the firm chooses the profit-maximizing level of output, it will:

make profits

Economists assume the central goal of any business is to:

maximize profit

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.

maximized at 3 units of output

The two types of market structures that are imperfectly competitive are:

monopolistic competition and oligopoly

f Five Banners engages in price discrimination, the number of people visiting the park will be more than if they charged everyone the same high monopoly price; and will be the same as the socially optimal number of visitors that would happen in a perfectly competitive market.

more than the same as

In the real world, the long-run supply curve may slope upward because:

newer firms with higher costs will be attracted to enter a market with higher prices.

A market that consists of only a few large firms is probably a(n):

oligopoly

The U.S. Postal Service (USPS) has a government monopoly on home mail delivery, but several private companies, such as FedEx, UPS, and DHL, compete with the USPS for other types of delivery service. In each of the following scenarios, rate producer and consumer surplus and overall social welfare compared with the other scenarios:

photo

he U.S. Postal Service (USPS) has a government monopoly on home mail delivery, but several private companies, such as FedEx, UPS, and DHL, compete with the USPS for other types of delivery service. In each of the following scenarios, rate producer and consumer surplus and overall social welfare compared with the other scenarios:

photo

The figure below shows the monthly demand curve for a good in a duopoly market. There are no fixed costs. If the duopolists evenly split the quantity a monopolist would produce, the monthly profit for each duopolist is $and the deadweight loss to society is$ if duopolist A decides the DWL

photo a. The monopoly outcome is to produce a quantity of 40 and charge a price of $30. If the duopolists evenly split production, each will produce 20 and charge $30 for a total revenue of $600. Marginal costs are $10 per unit, so the cost of producing 20 units would be $200. Profit for each duopolist would therefore be $600 - $200 = $400. DWL = 0.5(30 - 10)(80 - 40) = $400. b. If duopolist A increases production by 10, price for all units will fall to $25. Duopolist A will charge $25 for 30 units (the original 20 + 10 extra units) for a total revenue of $750. Marginal costs are $10 per unit, so $10 × 30 = $300. Profit for duopolist A will be $750 - $300 = $450. Duopolist B's total revenue will be $25 × 20 = $500. Duopolist B's profit will be $500 - $200 = $300. Therefore, if duopolist A increases production by 10 units, profits increase for duopolist A but decrease for duopolist B. If duopolist A increases production by 10 units, DWL decreases to 0.5(25 - 10)(80 - 50) = $225.

The graph below shows the monopolistically competitive market for laptops.a. This producer is earning positive profits in the short run.b. In the long run, economic profits will decrease for this producer.

positive decrease

n a monopoly or in competitive or collusive oligopolies, there is deadweight loss caused by the transactions that did not take place because the market equilibrium was at a higher price Correctand lower quantity Correctthan would be efficient.

price quantity

Total revenue is:

price x quantity.

In a monopolized market

producer surplus is higher than in a competitive market, while consumer surplus is lower

Offering goods that are similar to competitors' products but more attractive in some ways is called:

product differentiation

The process of entry and exit into a monopolistically competitive market continues until:

profits are zero

Firms who effectively differentiate their product from their competitors' products do so by having:

real or perceived differences in product design

The owner of Sour Sandwiches knows that he faces decreasing marginal returns in sandwich production. He doubles the amount of workers he employs, and makes no other changes. Sandwich output will

rise but not double

If a perfectly competitive firm faces a market price of $3 per unit, and it decides to produce 30,000 units, the market price will likely:

stay the same

Examples of price discrimination include:

student discounts, child discounts, senior discoutns

The monopolist is always constrained by:

the amount demanders are willing to buy at any given price

If a monopolistically competitive firm is earning profits in the short run:

the entry of competing firms will shift the firm's demand to the left.

A shopkeeper explains to you that she keeps down the cost of running her business because her husband works in the shop for free. The consequence of the shopkeeper not paying her husband is that:

the explicit cost is kept down, but not the implicit.

An essential characterisitic of a monopoly is

the good must have no close substitutes

A firm's variable cost is zero when:

the quantity produced is zero.

Diamonds are expensive because

the seller of most diamonds in the world restricts output.

As more firms enter the market:

the short-run market supply curve shifts to the right.

Consider Jimmy Choo designer shoes. Jimmy Choo faces many competitors, while in another way Jimmy Choo faces no competitors. This contradiction can be explained by:

the substitutability between Jimmy Choo shoes and other shoes.

Suppose a small town has one theater for live performances and several restaurants, including one Indian restaurant. We assume that it will be easier for BLANK to price-discrimination because it has BLANK

the theater, more monopoly power

Private firms seek to maximize The amount by which Total Cost rises when one more unit is produced is called the For firms in perfectly competitive markets, the amount by which the Total Revenue rises when one more unit is sold is called the BLANK and this is equal to the BLANK

total profits marginal cost marginal revenue product price

Self-employed business owners frequently overestimate their profit levels because they

underestimate their implicit costs.

The figure below presents the demand curve, marginal revenue, marginal costs, and average total costs facing a monopolist producer. Under monopoly pricing, are profits positive, negative, or zero? If government mandates pricing such that P = ATC, profits will be Compared to a mandate where P = ATC, deadweight loss under efficient pricing will be Is this a natural monopoly

zero, smaller, negative, smaller, smaller, yes