Econ Exam 2
in the short run, a perfectly competitive firm will earn economic profit as long as
P > ATC
long run for a firm in monopolistic competition
P=ATC
why do economists say that monopoly is inefficient?
P>MC
best describes typical average total cost?
decreases initially when output increases, but then increases
When new firms enter a monopolistically competitive industry, each existing firm's
demand curve shifts leftward
Price discrimination is the practice of charging different prices to
different customers even though the cost of selling to each is the same
collusions or cartel agreements are bound to fail because
each firm will earn higher profit by breaking from the cartel agreement
in the long run, the equilibrium in the perfectly competitive market
the economic profit for each firm equals zero
what happens in the long run if competitive forms earn excess profits?
the entrance of new firms and the loss of short run profits
What happens in the long-run if competitive firms suffer economic losses?
the exit of some firms and the elimination of he short run losses
what is marginal cost?
the extra cost of producing one more unit of output?
if a monopoly is operating along the portion of its demand curve where marginal positive is
total revenue increases when price decreases
economic profit is equal to
total revenue minus opportunity cost
an economic profit for a self employed entrepreneur is
total revenue that exceeds the opportunity cost
in the long run, perfectly competitive firms earn zero economic profit. this result is due mainly to which of the following assumptions?
unrestricted entry and exit
in the long run, a competitive firm decides
what plant size, inputs and technology to choose; whether to enter or exit an industry
when should a profit-maximizing firm increase production?
when marginal revenue exceeds marginal cost
in the short run, a competitive firm decides
whether to produce or shut down
in a perfect competition, the demand curve facing a single firm is
horizontal
when will a perfectly competitive firm shut down?
in the short run, when price falls below average variable cost
the marginal product of labor is equal to the
increase in the total product that results from hiring one more worker
a monopolist
is a price setter
Brand name drugs are chemically identical to their generic counterparts. Yet, consumers often prefer the brand name product to the generic product. Making consumers think that a brand name drug differs from its generic counterpart is an example of
product differentiation
a firm in monopolistic competition can determine what price to charge for its product because of
product differentiation
one benefit of monopolistic competition over perfect competition is
product variety
a firm's basic goal is to maximize
profit
economies of scale refer to the range of output over which
the average cost falls as output increases
a firm in monopolist competition produces where
MR=MC
a firm incurs implicit costs when
a company uses capital equipment in which it owns
how to monopoly outcomes differ from competitive outcomes?
a monopoly limits its output and charges a higher price for its product
a barrier to entry is
a natural or legal impediment that makes it difficult for new firms to enter a market
the long run is a period of time in which
all factors of production are variable
a natural monopoly is defined as
an industry in which one firm can supply the entire market at a lower price than two or more firms
the distinguishing features of oligopoly are __________ and a __________ in the industry
barriers to entry; few firms
perfect price discrimination
converts all consumer surplus into economic profit
what are variable costs?
costs that change as output changes
explicit costs differ from implicit costs in that
explicit costs are paid in money, but implicit costs are often non-paid opportunity costs
opportunity cost equals
explicit costs plus implicit costs
in the long run equilibrium in the perfectly competitive market
firms produce at the lowest average cost per unit
in a perfectly competitive industry
firms take the price as given
for a single priced monopolist, price is ________________ marginal revenue
greater than
A single-price monopolist is inefficient because
it creates a deadweight loss since P>MC
a perfectly competitive firm maximizes profit when
its marginal revenue equals its marginal cost
A single-price monopolist produces a ________ quantity than a perfectly competitive industry and charges a ________ price than the perfectly competitive industry.
lesser, higher
a single price monopolist maximizes profits by producing output at which
marginal revenue equals marginal cost
Small pizza parlors exist in just about every town. Anyone can open a pizza parlor, and the pizzas from one parlor typically have different tastes and sizes than pizzas from another parlor. Thus, the pizza industry is an example of
monopolistic competition
which is a fixed cost on a bike company?
mortgage payment on the property
small number of firms, competition between the firms
oligopoly
if a monopolist can perfectly price discriminate, then
price equas marginal cost for the last unit it sells
the period of time in which the quantity of at least one factor of production is used by a firm is fixed is called
short run
In the long run, monopolistically competitive firms are ________ to perfectly competitive firms because ________
similar; both firms earn zero economic profit
what is total cost?
sum of total variable cost and total fixed cost
cost, as measured by an accountant, generally does not include
the opportunity cost of the firm
an industry is perfectly competitive if
there are many firms in it, each selling an identical product
in a perfectly competitive industry
there are no barriers to entry; there are many firms in it, each selling an identical product
which of the following is true about a perfect price discriminating monopolist?
there is no consumer surplus
