Econ 2103 Final
A perfectly competitive firm produces where
marginal cost equals price, while a monopolist produces where price exceeds marginal cost
The short-run market supply curve in a perfectly competitive industry
shows the total quantity supplied by all firms at each possible price
Monopolistically competitive markets differ from perfectly competitive markets due to
The product differentitiation among the sellers
Firms thats spend the greatest percentage of their revenue on advertising tend to be firms that sell
highly-differentiated consumer goods
Explicit costs
require an outlay of money by the firm
Marcus sells 300 candy bars at $0.50 each. His total costs are $125. His profits are
$25
The three amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $50. Each bed was sold for $65. The Three amigo's total costs are
$25,000
Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8. What would be the firm's total revenue if it instead produced and sold 4 units?
$32
Johnny is a sophomore in college and has a 1.5 cumulative grade point average (GPA). Johnny's cumulative GGPA will be next semester if he (i) performs better than he did last semester (ii) performs better than his cumulative GPA (iii) gives an average performance
(ii)
Total profit for a firm is calculated as
(price minus average cost) times quantity of output.
A monopoly firm can sell 150 units of output for $10 per unit. Alternatively, it can sell 151 units of output for $9.90 per unit. The marginal revenue of the 151st unit of output is
-$5.10
Which of the following is not an example of a barrier to entry?
A soybean farmer is the first in her country to use a new brand of fertilizer
In the long run, a firm will exit a competitive industry if
ATC exceeds price
For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follows that the a. production of the 100th unit of output increases the firm's profit by $3. b. production of the 100th unit of output increases the firm's average total cost by $7. c. firm's profit-maximizing level of output is less than 100 units. d. production of the101st unit of output must increase the firm's profit by more than $3.
C
Which of the following goods is most likely to be associated with monopolistic competition?
Cookies
Which of the following is a characteristic of monopolistic competition?
Free Entry
Which of the following is true about a monopolistically competitive firm?
It can earn an economic profit in the short run, but not the Long run
Which of the following market structures is considered a differentiated products market?
Monopolistic competition
A profit-maximizing monopolist charges a price of $14. The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7. What is the monopolist's profit?
Not enough information is given to determine the answer
Total revenue equals
Price x Quantity
If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then
a one-unit increase in output will increase the firms profit
Excess capacity is
an example of the inefficiencies of monopolistically competitive markets
A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following
average revenue exceeds marginal revenue
If marginal cost is equal to average total cost, then
average total cost is minimized.
The fundamental source of monopoly power is
barriers to entry
If a firm experiences constant returns to scale at all output levels, then its long-run average total cost curve would
be horizontal
A monopolistically competitive market has characteristics that are similar to
both a monopoly and a competitive firm
Defenders of advertising
contend that firms use advertising to provide useful information to consumers
Average total cost tells us the
cost of a typical unit of output, if total cost is divided evenly over all the units produced
When marginal cost is rising, average variable cost
could be rising or falling
Critics of advertising argue that advertising
creates demand for products that people otherwise do not want or need.
Suppose that some firms in a. competitive market industry are earning zero economic profits, while others are experiencing losses. All else equal, in the long-run, we would expect the number of firms in the industry to
decrease
Some firms have an incentive to advertise because they sell a
differentiated product and charge a price equal to marginal cost
Implicit costs
do not require a cash outlay (opportunity cost of the owner's time)
A monopolists faces a
downward-sloping demand curve
Free entry and exit means that the number of firms in a market adjusts until
economic profits are driven to zero
In a monopolistic competitive market,
firms can enter or exit the market without restrictions
Total cost can be divided into two types of costs:
fixed costs and variable costs
A monopoly market
generally fails to maximize total economic well being
The marginal product of labor is equal to the
increase in output obtained from a one unit increase in labor
A firm has market power if it can
influence the market price of the good it sells
A competitive firm
is a price taker, whereas a monopolist is a price maker
A firm that shuts down temporarily has to pay
its fixed costs but not its variable cost
Suppose that Christine owns her own CPA firm. She uses two inputs in her business: her hours worked (labor) and a computer (capital). In the short run, Christine most likely considers
labor to be variable and capital to be fixed
In the short run, a firm operating in a competitive industry will shut down if price is
less than average variable cost
Diseconomies of scale occur when
long-run average total costs rise as output increases
When a market is monopolistically competitive, the typical firm in a market can earn
losses in the short run and zero profit in the long run
When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to
marginal cost
A profit-maximizing monopolist will produce the level of output at which
marginal revenue is equal to marginal cost
In which of the following product markets are we likely to observe the largest amount of advertising?
markets with highly differentiated products
If marginal cost exceeds marginal revenue, the firm
may still be earning a positive accounting profit.
In the short run, a firm in a monopolistically competitive market operates much like a
monopolist
When a natural monopoly exists, it is
never cost effective for two or more private firms to produce the product
For a firm in a competitive market, an increase in the quantity produced by the firm will result in
no change in the product's market price
Which of the following is not a characteristic of a monopoly?
one buyer
Economic profit is equal to total revenue minus the
opportunity cost of producing good and services
In the short-run, a firm operating in a monopolistically competitive market can earn
positive economic profits, economic losses, and zero economic profits
For a monopolistically competitive firm, at the profit-maximizing quantity of output,
price exceeds marginal cost
A key characteristic of a competitive market is that
producers sell nearly identical product
Diminishing marginal product suggests that the marginal
product of an extra worker is less than the previous worker's marginal product
If there is an increase in market demand in a perfectly competitive market, then in the short run
profits will rise
A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price falls to $18, and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price. Once the firm has adjusted, its
quantity of output is lower than it was previously.
A total-cost curve shows the relationship between the
quantity of output produced and the total cost of production
The long-run supply curve for a curve for a competitive industry may be upward sloping if
some resources are available only in limited quantities
The accountants hired by the Brookside Racquet Club have determined total fixed costs to be $75,000, TVC to be $130,000 and TR to be $145,000. Because of this information, in the short run, the Brookside should
stay open because shutting down would be too expensive.
Which of these types of costs can be ignored when an individual or a firm is making decisions?
sunk costs
When managers of firms in a competitive market observe falling profits, they may infer that the market is experiencing
the entry of new firms
In a perfectly competitive market, the market supply curve is
the horizontal sum of the individual firms' supply curves
Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In long-run equilibrium, market price is determined by
the minimum point on the firm's average variable cost curve
Marginal cost equals
the slope of the total cost curve
In perfect competition as well as in monopolistic competition,
there are many firms in a single market
If a firm produces nothing, which of the following costs will be zero?
variable costs
Economies of scale arise when
workers are able to specialize in a particular task
