econ 202 exam 3 ( module 9)

If the market price is $25 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

$25

When the marginal product of labor is rising the marginal output is _____

the marginal cost of output is falling

In perfect competition,

the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic.

Suppose that a firm in a competitive market succeeds in producing a superior product and selling it at a price that generates a large demand. As a result, the firm's market share is almost 100 percent. Meanwhile, other firms are trying to regain their market shares through research and development. Is this firm a monopolist?

No, because it faces potential competition from other companies.

Fixed costs=

constant

Marginal Revenue in a Perfectly competitive market is

constant and elastic

If MR>MC, then producing another pack of berries will give more $ to firm than it costs so a firm should,

do it

Firms in a Perfectly competitive market

dont have any bargaining power because 1.they are small 2.customers will go other places = lots of competitors

Both buyers and sellers are price takers in a perfectly competitive market because

each buyer and seller is too small relative to others to independently affect the market price

Economic costs of production differ from accounting costs in that

economic costs add the opportunity costs of a firm using its own resources while accounting costs do not.

Which of the following statements is false? Economists consider all costs to be implicit costs. Economic costs include both accounting costs and implicit costs. An explicit cost is a cost that involves spending money. An implicit cost is a nonmonetary opportunity cost.

economists consider all costs implicit costs

A perfectly competitive firm's marginal revenue

equal to its price

If fixed costs do not change, then marginal cost

equals the change in variable cost divided by the change in output.

economic costs=

explicit+implicit

The rules of accounting generally require that ________ costs be used for purposes of keeping a company's financial records and for paying taxes. These costs are sometimes called ________ costs.

explicit, accounting

economic profits lead to

firm entry

explicit costs are what

firms spend

in the short run, at least one input is ____

fixed

When MC= ATC it is at

its lowest point

in a Perfectly competitive market, there are 3 things

1.has many SMALL buyers and sellers 2. sell identical products 3. no barriers to entry

The difference between ATC and AVC is

AFC

As long as MC is ____ ATC, ATC ____

As long as MC is BELOW ATC, ATC falls

AVC is always _________ ATC

BELOW

In long-run perfectly competitive equilibrium,

Economies of scale are exhausted. Economic surplus is maximized. here is efficient, low-cost production at the minimum efficient scale

Which of the following is the best example of a short-run adjustment? Smith University completed negotiations to acquire a large piece of land to build its new library. Your local Walmart hires two more associates. Toyota builds a new assembly plant in Texas. A local bakery purchases another commercial oven as part of its capacity expansion.

Local walmart hires two more associates

Optimal point is where

MR=MC

In Perfectly competitive market P=

P=MR and P=MC so MR=MC <--- is the optimal point

firms in a Perfectly competitive market are called ________ which are

Price takers- unable to affect market price

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

Restaurants do not sell identical products.

T/F As output increases, average fixed cost becomes smaller and smaller.

TRUE

A characteristic of the long run is

all inputs can be varied.

as _____ increases, AFC gets __

as output increases, AFC gets smaller

as output ________, the difference between ATC and AVC ____

as output increases, the difference between ATC and AVC decreases

If the marginal cost curve is below the average variable cost curve, then

average variable cost is decreasing

Why is it U shapped?

because if the next unit (MC) cost more than average of previous, then avg. has to go up

Why is AVC below ATC?

because it takes into consideration fixed costs

Why the MC U-shapped?

because marginal product of labor rises and then falls

In the long run, the entry of new firms in an industry

benefits consumers by forcing prices down to the level of average cost.

Which of the following is an example of a long-run adjustment? Walmart builds another Supercenter. A soybean farmer turns on the irrigation system after a month long dry spell. Ford Motor Company lays off 2,000 assembly line workers. Your university offers Saturday morning classes next fall.

builds another supercenter

When firms exit a perfectly competitive industry, the market supply curve shifts to the _____

left

In the long run, a perfectly competitive maket will supply whatever demanded at that price determined by the ______ point on the firms ___ curve

minimum point on the firms ATC curve

If, in a perfectly competitive industry, the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost, then

new firms are attracted to the industry.

implicit costs are

non-monetary opportunity costs

allocative efficency

production represents consumer preferences

Which of the following is an implicit cost of production? the utility bill paid to water, electricity, and natural gas companies wages paid to labor plus the cost of carrying benefits for workers interest paid on a loan to a bank rent that could have been earned on a building owned and used by the firm

rent that could have been earned

When MC is ABOVE, ATC, then ATC ___

rises

Production tech that firms use can be

skills of mgmt training of workers speed and efficency

If a typical firm in a perfectly competitive industry is incurring losses, then

some firms will exit in the long run, causing market supply to decrease and market price to rise, increasing profits for the remaining firms.

Perfectly competitive market the price is determined by

supply and demand

Profit=

total revenue - total cost

in the Long run everything is

variable

Economies of scale

when LR avg. costs fall as Quantity increases.

Productive efficency

when goods are produced at lowest possible cost