ECON Exam 2

if the price of the good is $150 then consumer surplus amounts to

$250

Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus is

8,500

which area represents the increase in producer surplus when the price rises from p1 to p2

AHGB

Which area represents producer surplus when the price is P1?

BCG

the average total cost curve for a monopoly firm is depicted by curve

D

Which of the following represents the firm's long-run condition fir exiting a market?

Exit if P<ATC

Producer surplus is the area

above the supply curve and below the price line.

a monopolist

an individual, group, or company that dominates and controls the market for a specific good or service

If marginal cost is equal to average total cost, then

average total cost is at its minimum.

Welfare economics is the study of

how the allocation of resources affects economic well-being

what happens to the price and quantity sold of a drug when its patent runs out

the price will fall

if a firm produces nothing which of the following costs will be zero

variable cost

a sunk cost is one that

was paid in the past and will not change regardless of the present decision.

When marginal cost is below average total cost, average total cost

will be falling,

Which of the following are necessary characteristics of a monopoly? (i)the firm is the sole seller of its product (ii) the firms product does not have close substitutes (iii) the firm generates a large economic profit (iv) the firm is located in a small geographic area

(i) and (ii) only

Refer to Figure 7-18. Suppose the willingness to pay of the marginal buyer of the 3rd unit is $125. Then total surplus is maximized if

3 units of the good are produced and sold.

a seller's opportunity cost measures

value of everything she must give up to produce a good

In a market, the marginal buyer is the buyer

who would be the first to leave the market if the price were any higher

When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

ABGD

All else equal, what happens to consumer surplus if the price of a good decreases?

Consumer surplus increases.

An industry is a natural monopoly when

III only

One difference between a perfectly competitive firm and a monopoly is that a perfectly competitive firm produces where

Marginal cost equals price, while a monopolist produces where price exceeds marginal cost.

Profit on a typical unit sold for a profit-maximizing monopoly would equal

P3 - P0

For a firm, the production function represents the relationship between

Quantity of inputs and quality of output

One of the defining characteristics of a perfectly competitive market is

a similar product

A monopoly's marginal cost will likely:

be less than the market price of its goods

when total revenue is less than variable costs a firm in a competitive market will

continue to operate as long as average revenue exceeds marginal cost

In the long run Firm A incurs total costs of $1,200 when output is 30 units and $1,400 when output is 40 units. Firm A exhibits

economies of scale because average total cost is falling as output rises.

For a firm in a perfectly competitive market, the price of a good is always

equal to marginal revenue

Patent and copyright laws are major sources of

government-created monopolies

In a perfectly competitive market, the process of entry and exit will end when (i) accounting profits are zero, (ii) economic profits are zero, (iii) price equals minimum marginal cost, (iv) price equals minimum average cost.

iii only

the short run supply curve for a firm in a perfectly competitive market is

marginal cost

Refer to figure 14-1 If the market price is $5.00, the firm will earn

negative economic profits in the short run but remain in business.

Free entry means that

no legal barriers prevent a firm from entering an industry

a monopolist maximizes profits by

producing an output level where marginal revenue equals marginal cost

Which of these curves is the competitive firm's short-run supply curve?

the marginal cost curve above average variable cost

we can say that the allocation of resources is efficient if

total surplus is maximized