Ch 3, 6, 8
Consider a graph of a production possibilities curve. If a producer is operating at an inefficient point, then that producer:
can produce more of one good without producing less of the other good.
Like a perfectly competitive firm, a monopolist maximizes profit by
choosing the output level at which marginal revenue equals marginal cost.
A price-taker faces a demand curve that is:
horizontal at the market price.
One problem with antitrust laws is that they:
may prevent firms from achieving economies of scale.
Which of the following is NOT a determinant of demand for gasoline?
The quantity of gasoline supplied.
price taker
a buyer or seller that is unable to affect the market price
imperfectly competitive firm
a firm that has at least some control over the market price of its product
price setter
a firm with at least some latitude to set its own price
normal good
a good for which the demand increases as the income of people rises and decreases as the income of people falls; FANCY RESTAURANT
inferior good
a good that consumers demand less of when their incomes increase; RAMEN
monopolistic competition
a market structure in which many companies sell products that are similar but not identical
Oligopoly
a market structure in which only a few sellers offer similar or identical products
cost-plus regulation
a method of regulation under which the regulated firm is permitted to charge prices that cover explicit costs of production plus a markup to cover the opportunity cost of resources provided by the firm's owners
natural monopoly
a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms
fixed factor of production
an input whose quantity can NOT be altered in the short run
variable factor of production
an input whose quantity can be altered in the short run
An imperfectly competitive firm faces a demand curve that is ________, while a perfectly competitive firm faces a demand curve that is ________.
downward sloping; perfectly elastic
A perfectly competitive firm's supply curve
is the segment of the marginal cost curve that lies above the average variable cost curve.
According to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively:
larger and larger quantities of the variable factors of production.
A monopoly that results from economies of scale is called a(n):
natural monopoly.
A seller's reservation price is generally equal to:
opportunity cost
The reason economists consider monopoly to be socially undesirable is that monopolists
produce less than the socially optimal level of output.
The role that prices play in distributing scarce goods and services to those consumers who value them the most highly is known as the ________ function of price.
rationing
Jessica's marginal cost for producing a pitcher of lemonade is $0.25. Therefore, $0.25 can also be called her:
reservation price
market power
the ability to alter the market price of a good or service without losing all of its sales
Law of Supply
the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
pure monopoly
the only supplier of a unique product with no close substitutes; imperfect competition
Whenever the quantity demanded is not equal to the quantity supplied, the quantity that is actually sold in the market is:
the smaller of the quantity demanded and the quantity supplied.
The socially optimal level of output is ________.
when price equals marginal cost