ECON 2020

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In the pharmaceutical industry, patents and copyrights can

create strong incentives to develop new drugs.

To maximize profits, a monopolist chooses the quantity where

marginal revenue equals marginal cost.

In the short run, the cost of ________ is variable, whereas the cost of ________ is fixed.

labor; capital

In 1911, the U.S. government sued Standard Oil, a U.S. company, for violation of antitrust laws. The company broke up into 34 smaller companies. This is an example of

promoting competition

In a perfectly competitive market, the price of the product is

set by the forces of market supply and demand

The price of a competitive firm's product is $50 per unit. The firm currently has marginal cost equal to $40. To maximize profits this firm

should increase its output

Converse, an apparel company, has been fairly successful selling denim-colored college sportswear. Lydia sees an opportunity for profit and enters the market. After producing her profit maximizing level of output, she finds that her average total cost per unit is $40, her average variable cost per unit is $30, and the market price is $35. In the short run, Lydia should

stay in business even though she is suffering a loss

What would cause a firm's production function to change?

the adoption of new technology

Which of the following is true with regard to monopoly?

A monopolist charges a price where marginal cost is equal to marginal revenue.

A competitive firm maximizes profit at an output level of 500 units. The market price is $24, and the firm's ATC is $24.50. At what range of AVC values for an output level of 500 would the firm choose not to shut down?

AVC < $24

To maximize profits, firms expand output until

MR = MC

Profits when a competitive firm shuts down are -$7,250 and profits are -$250 when the firm continues to produce. This firm will minimize losses by

continuing to produce

Ash is the preferred wood to be used in the production of baseball bats. If a company were to buy the rights to harvesting the ash trees out of all the forests in North America, which of the following barriers of entry has this company created?

control of resources

A firm's accounting profit is always greater than its economic profit because

economic profit considers implicit costs, which accounting profit does not.

If a firm's long-run average total costs decrease as it increases its scale of production, the firm is experiencing

economies of scale.

For a perfectly competitive firm, marginal revenue is

equal to price

The demand curve for the product of a firm in a competitive market is _______________, and the demand curve for the product of a monopolist is ___________________.

horizontal; downward-sloping

If a firm hires another worker and her marginal product of labor is positive, we know that the firm's total output is

increasing


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