ECON FINAL

Refer to the above diagram. The firm will realize an economic profit if price is:

P4

Should the firm produce?

Yes, if price is equal to or greater than minimum average variable cost. This means that the firm is profitable or that its losses are less than its fixed

Refer to the above diagram. In short-run equilibrium, the monopolistically competitive firm shown will set its price:

above ATC

Refer to the above diagram. Other things equal, an increase of product price would be shown as:

an increase in the steepness of curve (3), and upward shift in curve (2), and upward shift in curve (1).

Assume a pure monopolist is charging price P and selling output Q as shown on the above diagram. On the basis of this information we can say that:

if marginal costs were somehow zero, the firm would be maximizing its profits

In long-run equilibrium, purely competitive markets

maximize the sum of consumer surplus and producer surplus

Refer to the above diagram. If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown above.

new firm will enter the industry

Refer to the above diagram. At the profit-maximizing output, total variable cost is equal to:

0CFE

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be:

160

Refer to the above short-run data. The profit maximizing output for this firm is

320 units

Refer to the above data for a non-discriminating monopolist. This firm will maximize its profit by producing:

4 units at mr=mc

Break-even point

An output at which a firm makes a normal profit but no economic profit

Refer to the above short-run data. Which of the following is correct?

Any level of output between 100 and 440 units will yield an economic profit.

Economic profits

Equal to the difference between accounting profits and implicit costs

Oligopoly

Few sellers of a homogeneous or differentiated product. Each firm is affected by the decisions of its rivals and must take it into account when determining price and output.

Refer to the above two diagrams for individual firms. In Figure 2 the firm's demand and marginal revenue curves are represented by:

Lines B and C respectively

Refer to the above diagrams. If $4 is Firm B's profit-maximizing price, its:

MC must be zero

Monopoly

One firm is the sole seller of product or service. Entry is blocked. Product is unique so differentiation is not an issue.

Which of the following will not hold true for a competitive firm in long-run equilibrium?

P equals AFC

Refer to the above diagram. The firm will shut down at any price less than:

P1

Refer to the above diagram. If this industry is comprised of only one seller the profit-maximizing price and quantity will be:

P3 and Q3 at MR=MC

Refer to the above diagram for a pure monopolist. If the monopolist is unregulated, it will maximize profits by charging:

Price P3 and producing output Q3

Refer to the above diagrams which pertain to a purely competitive firm producing out put q and the industry in which it operates. Which of the following is correct?

The diagrams portray short-run equilibrium, but not long-run equilibrium.

Which of the following statements is correct?

The long-run supply curve for a purely competitive increasing-cost industry will be upsloping

Perfect competition

Very large number of firms producing a standardized product. Entry is very easy.

If firms are exiting a market then

economic profit must be less than zero

Refer to the above diagram for a purely competitive producer. If product price is P3

economic profit will enter this industry

Entry of new firms causes

economic profits to go to zero

Refer to the above diagram. At the profit-maximizing output, total profit is:

efbc

Refer to the above diagrams. The demand for Firm B's product is:

elastic for prices above $4 and inelastic for prices below $4.

Refer to the above diagram. Diagram (A) represents:

equilibrium price and quantity in a purely competitive industry.

Refer tot he above diagram for a monopolistically competitive producer. This firm is experiencing

excess capacity of DE

Cash expenditures a firm makes to pay for resources are called

explicit costs

Refer to the above diagram for a pure monopolist. Monopoly output will be:

f at mc=mr

Refer to the above diagrams which pertain to a purely competitive firm producing output q and the industry in which it operates. In the long run we should expect:

firms tot leave the industry, market supply to fall, and product price to rise.

Refer to the above diagram for non-discriminating monopolist. Demand is elastic:

for all levels of output less than q2

The MR=MC rule applies

in both the short run and the long run

Refer to the above diagram showing the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total cost:

is $400

Refer tot he above diagram showing the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total revenue:

is $400

Refer to the above diagram. The profit-maximizing output:

is n

Refer tot he above diagram. The profit-maximizing output:

is n.

Monopolistic competition

large number of sellers producing differentiated products. Non-price competition, meaning firms try to distinguish its product from competition based on attributes. Easy entry.

Refer to the above diagram for a natural monopolist. If a regulatory commission were to set a maximum price of P3, the monopolist would:

maximize profit

The practice of price discrimination is associated with pure monopoly because:

monopolists have considerable ability to control output and price.

Refer to the above diagram. At output level Q1

neither productive nor allocative efficiency are achieved

When a purely competitive firm is in long-run equilibrium

price equals marginal cost

Resources are efficiently allocated when production occurs where

price is equal to marginal cost

Other things equal, a price discrimination monopolist will

produce a larger output than a non-discriminating monopolist

Refer to the above diagram for a natural monopolist. If a regulatory commission set a maximum price at P2, the monopolist would

produce output at Q3 an realize a normal profit

A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit. This means the firm is

producing less output than allocative efficiency requires

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic:

profit of $480

Refer to the above diagrams. Firm A is a:

pure competitor and Firm B is a pure monopoly

Refer to the above diagram. Line (2) reflects a situation where resource prices

remain constant as industry output expands

Refer to the above diagram. At output level Q1

resources are underallocated to this product and productive efficiency is not realized

Long-run competitive equilibrium:

results in zero economic profits

If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources

rise as the industry expands

Refer to the above diagram. The short-run supply curve for this firm is the:

segment of the MC curve lying to the right of output level h.

If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown above:

some firms will exit the industry

price takers

the competitive firm cannot change market price, it can only adjust to it

Refer to the above diagram for a monopolistically competitive firm. If more firms were to enter the industry and product differentiation were to weaken, then:

the demand curve would become more elastic

If a purely competitive firm is producing where price exceeds marginal cost, then

the firm will fail to maximize profit and resources will be underallocated to the product

The term productive efficiency refers to:

the production of a good at the lowest average total cost

The term allocative efficiency refers to

the production of the product-mix most desired by consumers

Price discrimination refers to

the selling of a given product at differenet prices that do not reflect cost differences

The segment of the firm's marginal-cost curve that lies above the average-variable cost curve is

the short-run supply curve

The firm represented by the above diagram would maximize its profits where:

the vertical distance between curves (3) and (4) is the greatest

Curve 4 in the above diagram is a purely competitive firm's

total cost curve

Refer to the above diagram, which pertains to a purely competitive firm. Curve A represents

total revenue only

Refer to the above diagram for a non-discriminating monopolist. The profit-maximizing output for this firm is M

true because at M, MR=MC

Refer to the above diagram. The firm's supply curve is the segment of the:

MC curve above its intersection with the AVC curve.

Refer to the above diagram. If this competitive firm produces output Q, it will:

earn a normal profit

Refer to the above diagram for a monopolistically competitive firm. Long-run equilibrium price will be

A

Refer to the above diagram. To maximize profit or minimize losses this firm will produce:

E units at price B

Refer to the above diagram. At P2, this firm will:

Produce 44 units and earn only a normal profit

Refer to the above diagram. At the profit-maximizing output, total fixed costs is equal to:

BCFG

Which of the above diagrams correctly portray the demand (D) and marginal revenue (MR) curves of a purely competitive seller?

C

Refer to the above diagram for a pure monopolist. Monopoly price will be:

C vertical line above mc=mr

What quantity should the firm produce?

Produce where MR(=P)=MC; there, profit is maximized (TR exceeds TC by a maximum amount) or loss is minimized

Refer to the above diagram. If this somehow was a costless product (that is, the total cost of any level of output was zero), the firm would maximize profits by:

Producing Q2 units and charging a price of P2

Will production result in economic profit?

Yes, if price exceeds average total cost (TR will exceed TC). No, if average total cost exceeds price (TC will exceed TR).

Refer to the above diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. The predicted long-run adjustments in this industry might be offset by:

a technological improvement in production methods.

Refer tot the above diagram. At the profit-maximizing output, the firm will realize

an economic profit of ABGH

Economic profits and the performance of stock

are positively related

In short-run equilibrium, the monopolistically competitive firm shown above will set its price

below ATC

A purely competitive firm

cannot earn economic profit in the long run

Which of the following would not be expected to occur in a purely competitive market in long-run equilibrium?

consumer and producer surplus will be minimized

Price Maker

controls total quantity supplied and has considerable control over price.

Refer to the above diagrams, which pertain to monopolistically competitive firms. Short-run equilibrium entailing economic loss is shown by:

diagram c only