ECO 120 Test 2

Variable cost

A cost that varies with the rate of output

Is a competitive firm with no market power

A firm that must take whatever price the market offers for its goods

Investment decision

A long run situation in which the decision to build, buy or lease plant and equipment is possible

Charges a higher price than a competitive firm, ceteris paribus

A monopolist

MR = MC

A monopolist maximises profit when

Demand, marginal revenue and marginal cost

A monopolist sets price at a point on the " " curve, corresponding to the rate of output determined by the intersection of " "

It has n no control over the selling price of its product

A perfectly competitive firm is a price taker because

Natural monopoly

A single firm that can produce the entire market more efficiently than any large number of firms

Market supply of labor

All the hours people are willing to work at various wages

A natural monopoly

An industry in which one firm can achieve economies of scale over the entire range of output is referred to as

Quantity of labor supplied and the wage rate are directly related

An upward sloping supply curve of labor illustrates that the

Total profit

Average profit × quantity sold

Total cost / total output

Average total cost (ATC) equation

The labor supply curve shifts to the right

Ceteris paribus, if the cost of daycare increases causing some workers to leave the labor market and stay home with their children

Marginal physical product of a variable input declines as more of it is used

Ceteris paribus, the law of diminishing returns states that the

Marginal physical product

Change in total revenue associated with one additional unit of output

Production decision

Choice of how intensively to use available plant and equipment

Less pressure to reduce costs and less incentive to improve quality

Compared to a competitive market with the same long run costs and market demand, a monopolist has

Their individual production is insignificant relative to the production of the industry

Competitive firms cannot individually affect market prices because

Variable costs

Costs of production that change with the rate of output are

Fixed cost

Costs that do not vary with rate of output

Derived demand

Demand for labor and other factors of production results from the demand for final goods and services produced by these factors

Economic profit

Difference between total revenue and total economic costs

Price setter

Sales will not fall to zero if prices are set a little higher than other sellers prices

Price taker

Taking the market price of a good as a fact of life and doing the best within that constraint

U shaped

The ATC curve is

Supply

The ability and willingness to sell specific quantities of a good at alternative prices in a given period of time, ceteris paribus, defines

Market power

The ability to alter market price of a good or service

A monopoly may have no clear incentive to pursue new research and development

The argument that concentration of market power enhances research and development efforts may be weak because

Marginal physical product (MPP)

The change in total output that occurs when the worker is employed

Marginal physical product

The change in total output that results from one additional unit of input is the

Horizontal

The demand curve facing a perfectly competitive firm is

Diminishing marginal returns to labor

The demand for labor is downward sloping because of

Profit

The difference between total revenue and total cost

Economic cost

The dollar value of all resources used in the production process

Demand for labor increases and the supply of labor is constant

The equilibrium wage will definitely rise if

Land labor capital entrepreneurship

The factors of production include

Maximise total profit

The goal of most business firms is to

Downward, falls

The labor demand curve is " " sloping to the right which means that the quantity of labor will increase as the wage rate " "

Number of available workers

The market supply of labor depends on the

Total costs

The market value of all resources used in producing a good or service is expressed by

The production function

The maximum output that can be produced from a set of inputs is measured by

Maximizes total profit

The most desirable rate of output is one that

Market structure

The number and relative size of firms in an industry

Short run

The planning period over which at least one resource input is in fixed quantity is

Total revenue

The price of a good multiplied by the quantity sold equals

Demand for labor

The quantities of labor employers are willing and able to hire at alternative wages is the

Total cost

The sum of fixed cost and variable cost at any rate of output is equal to

Supply of labor

The willingness and ability to work specific amounts of time at alternative wage rates in a given time period, ceteris paribus

Total profit

Total revenue - total cost

They are protected from competition so they can have greater ability to pursue research and development

What is an argument in support of monopolies?

The change in total revenue divided by the change in quantity of labor

What is the correct formula for calculating the marginal revenue product of labor

Decreases, increases

When new forms enter the industry, price " " and industry output " "

Surplus of labor

When people are standing in line for jobs and there are more applicants than jobs, then the job market is characterized by a

Profits are maximized

When price equals MC

Output should not be increased

When price is less than MC

Labor constraint

Worker reduce total output by increasing congestion on the factory floor, access to the sewing machine, and just plain getting in the way

Total cost

Dollar figure for all the resources used in production

Explicit cost + implicit costs

Economic costs equation

Total revenue - total economic cost

Economic profit equitation

Profit

Economists assume that the principal motivation of production is

Price at which the quantity demanded of a good equals the quantity supplied

Equilibrium price refers to

Monopoly

Firm that produces the entire supply of a particular good or service

Competitive firms

Firms that have no power over the price of goods they produce

Inhibit economic growth

Firms that have significant market power tend to

The short run supply curve for an individual firm

For a competitive firm, the marginal cost curve

Economies of sale

Reductions in minimum average costs that come about through increases in the size of plant and equipment

Marginal costs

Refer to the additional costs incurred to harvest one more basket of fish

Marginal cost

Refers to the change in total costs when one or more unit of output is produced

Patent

Gives a firm the exclusive right to produce or licence a product

Production decision

How much output to sell at the going price

Economies of scale

If an increase in the size of a factory results in reductions in minimum average costs, this is known as

Can increase without a decrease in the number of jobs

If labor productivity rises, then wages

Reduce the price of all units sold

In order to sell one additional unit of output, a profit maximising monopolist must

Downward sloping

In the perfectly competitive catfish market, the market demand curve is

Horizontal

Individual perfectly competitive firm demand curve is

Change in total output / change in input quantity

MPP equation

Change in total revenue / change in quantity of labor

MPP equation

Law of diminishing returns

MPP is diminishing

Maximum efficiency

Making the best possible use of scarce resources

Change in total cost / change in total output

Marginal cost

May initially decline and then increases as more output is produced

Marginal costs

Are the additional costs incurred in producing one more unit of output

Marginal costs:

Downward sloping

Market demand curve for a product is always

Is the ability to alter the market price of a good or service

Market power

Perfect competition, monopolistic competition, oligopoly, duopoly, monopoly

Market structure order

Makers, but perfectly competitive firms are price takers

Monopolists are price

Competitive market

No single producer or consumer has any control over the price or quantity of the market

Barriers to entry

Obstacles that make it difficult or impossible for would be producers to enter a market are known as

Barriers to entry

Obstacles that make it difficult or impossible for would be producers to enter a particular market

Long run

Period in which the quantity of all inputs van change

Short run

Period in which the quantity of some inputs cannot be changed

Price - ATC

Profit per unit equitation

Demand for labor

Quantities of labor employers are willing and able to hire at alternative wage rates in a given time period, ceteris paribus