Econ Exam 2 Study Guide
total revenue minus opportunity cost
economic profit is equal to
the average cost falls as output increases
economies of scale refer to the range of output over which
barriers to entry; few firms
the distinguishing features of oligopoly are _____ and a _____ in the industry
the market
the equilibrium price charged by firms in a perfectly competitive industry is determined by
costs that change as output changes
what are variable costs?
the entrance of new firms and the loss of short-run profits
what happens in the long-run if competitive firms earn excess profits?
the exit of some firms and the elimination of the short-run losses
what happens in the long-run if competitive firms suffer economic losses?
the extra cost of producing 1 more unit of output
what is marginal cost?
the sum of total variable cost and total fixed cost
what is total cost?
demand curve shifts leftward
when new firms enter a monopolistically competitive industry, each existing firm's
when marginal revenue exceeds marginal cost
when should a profit-maximizing firm increase production?
in the short-run, when price falls below the average variable cost
when will a perfectly competitive firm shut down?
oligopoly
which market type has characteristics as follows: small number of firms, competition between the firms?
it decreases continually as output is increased
which of the following best describes average fixed cost?
it decreases initially when output increases, but then increases
which of the following best describes the typical average total cost?
the mortgage payment on the property
which of the following is an example of a fixed cost in a bicycle factory?
there is no consumer surplus
which of the following is true about a perfect price discriminating monopolist?
P = ATC
which of the following is true regarding the long-run for a firm in a monopolistic competition?
because P>MC
why do economists say that monopoly is "inefficient"?
a monopoly limits its output and charges a higher price for its product
how do monopoly outcomes differ from competitive outcomes?
price equals marginal cost for the last unit it sells
if a monopolist can perfectly price discriminate, then
total revenue increases when price decreases
if a monopoly is operating along the portion of its demand curve where marginal revenue is positive, its
there are no barriers to entry & there are many firms in it, each selling an identical product
in a perfectly competitive industry
firms take the price as given
in a perfectly competitive industry...
horizontal
in perfect competition, the demand curve facing a single firm is
firms produce at the lowest average cost per unit
in the long-run equilibrium in the perfectly competitive market
what plant size, inputs, and technology to choose & whether to enter or exit an industry
in the long-run, a competitive firm decides
similar; both firms earn zero economic profit
in the long-run, monopolistically competitive firms are _____ to perfectly competitive firms because ______
unrestricted entry and exit
in the long-run, perfectly competitive firms earn zero economic profit. this result is due mainly to which of the following assumptions?
whether to produce or shut down
in the short-run, a competitive firm decides
P>ATC
in the short-run, a perfectly competitive firm will earn an economic profit as long as
lesser; higher
a single-price monopolist produces a _____ quantity than a perfectly competitive industry and charges a _____ price than the perfectly competitive industry
the economic profit for each firm equals zero
(2) in the long-run equilibrium in the perfectly competitive market
a natural or legal impediment that makes it difficult for new firms to enter a market
a barrier to entry is
MR = MC
a firm in a monopolistic competition produces where
product differentiation
a firm in monopolistic competition can determine what price to charge for its product because of
the company uses capital equipment which it owns
a firm incurs implicit costs when
profit
a firm's basic goal is to maximize its
is a price setter
a monopolist
an industry in which one firm can supply the entire market at a lower price than two or more firms
a natural monopoly is defined as
MR = MC
a perfectly competitive firm maximizes profit when
short run
a period of time in which the quantity of at least one factor of production used by a firm is fixed is called the
it creates a deadweight loss since P> MC
a single-price monopolist is inefficient because
MR = MC
a single-price monopolist maximizes profits by producing the output at which
total revenue that exceeds the opportunity cost
an economic profit for a self-employed entrepreneur is
there are many firms in it, each selling an identical product
an industry is perfectly competitive if
product differentiation
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
each firm will earn higher profit by breaking from the cartel agreement
collusions or cartel agreements are bound to fail because
the opportunity cost of the firm
cost, as measured by an accountant, generally does not include
explicit costs are paid in money, but implicit costs are often non-paid opportunity costs
explicit costs differ from implicit costs in that
greater than
for a single-price monopolist, price is _______ marginal revenue
product variety
one benefit of monopolistic competition over perfect competition is
explicit costs plus implicit costs
opportunity cost equals
converts all consumer surplus into economic profit
perfect price discrimination
different customers even though the cost of selling to each is the same
price determination is the practice of charging different prices to
monopolistic competition
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
are only a few sellers
the key feature of an oligopoly is that there
all factors of production are variable
the long-run is a period of time in which
increase in the total product that results from hiring one more worker
the marginal product of labor is equal to the