Econ Midterm 2 Preview
total cost per unit is equal to
average total cost ATC = TC/Q
total variable cost divided by the amount of output produced is equal to
average variable cost AVC = TVC/Q
a monopoly is not really a monopoly when there are no _ to entry
barriers
impediments that prevent firms from entering a market or industry are known as
barriers to entry
fixed costs of production in the short run
cannot be reduced by producing less output
because monopolies have market power and can influence the price of the goods they sell, they tend to produce lower output and charge a higher price than would prevail in a _ equilibrium
competitive
a perfectly competitive market involves firms that produce identical products. this guarantees
consumers recieve the lowest prices
price _ is the practice of selling the same good or service to different consumers at different prices
discrimination
Perfect Competition Characteristics
* identical/homogeneous product * price takers * firms can enter or exit the market without cost
a firm sustains a loss if
TR < TC
a situation in which a particular strategy yields the highest payoff, regardless of the other players strategy, is
a dominant strategy
by charging consumers the highest price they are willing and able to pay, _ extracts all surplus from consumers, yielding higher profits than any other pricing method available to the firm
a pure monopoly
zero _ profit is when the firms revenue equals its economic costs without a loss
economic
the costs associated with the use of resources are called
economic costs
the lowest level of output at which the long run average total cost is minimized is called minimum _ scale
efficiency
because the cost of a container is proportional to its surface area, by doubling the diameter of a container, a producer can
experience economies of scale
by charging consumers the highest price they are willing and able to pay, the pure monopoly
extracts all surplus from consumers
in a perfectly competitive market, we assume the product is in the minds of consumers
homogeneous
as the market price _, all else held constant, a profit maximizing firm can afford to expand its production
increases
fixed costs are those costs that are
independent of the amount of output a firm produces in the short run
decreasing marginal returns are a characteristic of production whereby the marginal product of the next unit of a variable resoruce utilized is _ than that of the previous variable resource
less
decreasing _ returns are a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is less than that of the previous variable resource
marginal
the extra or additional cost associated with the production of an additional unit of output is the _ cost
marginal
a profit maximizing firm should produce a level of output where
marginal revenue equals marginal cost
in the short run, the supply curve for a firm is the _ cost curve above or equal to the average _ cost curve
marginal, variable
the HHI is expressed as a number between 0 and 10,000, where 10,000 represents a pure _
monopoly
_ interdependence is a situation in which the strategy followed by one producer will likely affect the profits and behavior of another producer
mutual
zero accounting profit means that the value of economic profit is _
negative
_ profit is also known as zero economic profit
normal
the market condition in which firms do not face incentives to enter or exit the market and firms earn a _ profit is known as long run equilibrium
normal
costs that do not change with the amount of _ produced are fixed costs
output
the practice of selling the same good or service to different consumers at different prices is called _ discrimination
price
the practice of selling the same good or service to different consumers at different consumers at different prices is called
price discrimination
total revenue equals
price times quantity
which of the following is not a characteristic of an oligopoly
producers who are price takers
allocative efficiency is
producing the goods and services that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost
producing output at the lowest possible total cost per unit of production is
productive efficiency
(P-ATC) x Q equals
profit
all firms maximize _ by producing the quantity of output at which the marginal revenue is equal to the marginal cost
profit
for the profit maximizing level of output, the price charged by a monopoly is not just different but greater than marginal _
revenue
total _ equals price times quantity
revenue
normal profit is also known as zero _ profit
economic
for a monopoly, the marginal revenue is below the demand curve because
the monopoly has to lower the price on all units to sell more
total variable costs =
total costs - fixed costs
average fixed cost =
total fixed costs / number of units
average variable cost =
total variable costs / number of units
there are important exceptions in which monopolies are actually encouraged to incentivize positive outcomes (true or false)
true
the marginal cost curve must intersect both the average _ cost and average _ cost curves at their respective minimum points
variable, total