Econ 224 Exam 2 Review Part 2

The main difference to an economist between "short-run" and "long-run" is that:

In the long-run all resources are variable where as in the short-run at least one resource is fixed.

During the short run:

Some inputs are fixed.

A perfectly competitive firm:

Can sell all of its output at the prevailing price.

If a firm can change market prices by altering its output then it:

Has market power.

People find it difficult to get along without necessities, therefore demand for necessities:

Is relatively inelastic.

What is an example of perfect competition?

Many small firms all produce the same good

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

Marginal physical product.

List the market structures in the correct order from the most to the least market power:

Monopoly, oligopoly, monopolistic competition, perfect competition.

In a perfectly competitive market:

No seller has market power.

The law of diminishing returns indicates that the marginal physical product of a factor declines as more:

Of the factor is used, holding other inputs constant.

What is true about the short run?

Some inputs are fixed.

Assume a toy company hires an additional worker to assemble toys, and the size of the factory and amount of equipment remain constant. As a result, the level of output increases but by a smaller amount than when the previous additional worker was hired. This is an example of:

The law of diminishing returns.

As more labor is hired in the short run, diminishing returns are observed because:

The new workers have less capital and land to work with.

Explicit cost is:

The value of all resources used to produce a good or service.

If Pepsi and Coke are the only two soft drink producers, they could be considered:

A duopoly.

If more of an input factor is used, while holding other inputs constant, a firm will eventually experience:

Diminishing returns.

In defining costs, economists recognize:

Explicit and implicit costs while accountants recognize only explicit costs.

An individual competitive firm:

Produces a small portion of output relative to the market.

The limits to the production of any good are reflected in the:

Production function.

Total revenue minus total cost equals:

Profit. P= TR - TC