Econ Unit 8 Practice Homework

In the short run, a perfectly competitive firm produces output and incurs an economic loss if:

AVC < P < ATC.

If all firms in an industry are price-takers, then:

An individual firm cannot alter the market price even if it doubles its output.

The wedding dress industry is monopolistically competitive. As a result, which condition applies to this industry?

Dresses tend to be differentiated among the many sellers serving this market.

In perfect competition, a change in fixed cost will:

Encourage entry or exit in the long run so that price will change enough to leave firms earning zero profits.

The sum of the squared market shares of each firm in an industry is the:

Herfindahl-Hirschman Index.

A perfectly competitive firm maximizes profit by producing the quantity at which:

MR = MC.

Because of the existence of a large number of similar but not identical substitutes in most communities, the market for chiropractors is best considered to be:

Monopolistic Competition

Microsoft and its operating system are often cited as an example of a company that grew into a monopoly through:

Network Externalities

In the short run, a perfectly competitive firm produces output and breaks even if the firm produces the quantity at which:

P = ATC.

Provided that there are no external benefits or costs, resources are efficiently allocated when:

P = MC.

An example of monopolistic competition is the _____ market.

Resturant

When perfect competition prevails, which characteristic of firms is likely to be observed?

They are all price-takers.

A firm's shut-down point is the minimum value of:

average variable cost.

If a perfectly competitive firm is producing a quantity where P < MC, then profit:

can be increased by decreasing production.

The difference between total revenue and total cost is:

economic profit or loss.

Suppose that Madelyne builds a new jumbo jet that can carry five times more passengers than any other competitor. She has high fixed costs due to the quantity of capital used to build the jets, and average cost is decreasing for all levels of demand. In this case, Madelyne's monopoly would result from:

economies of scale.

Which industry is most likely to be monopolistically competitive?

fresh bagel shops

If Trevor's local government gave him the exclusive right to sell breakfast bagels in his community, Trevor's monopoly would result from:

government-created barriers.

Marginal revenue is a firm's:

increase in total revenue when it sells an additional unit of output.

An assumption of the model of perfect competition is:

many buyers and sellers.

The short-run supply curve for a perfectly competitive firm is its:

marginal cost curve above its average variable cost curve.

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where:

marginal cost equals price.

Suppose a perfectly competitive firm can increase its profits by increasing its output. Then it must be true that the firm's:

marginal revenue exceeds its marginal cost.

The shut-down point in the short run is the:

minimum point of AVC.

The break-even price for a perfectly competitive firm is equal to the:

minimum value of average total cost.

The market for dentists in most communities can be considered a(n) _____ because there are a large number of similar but not identical dental services in the market.

monopolistic competition

For a firm producing at any level of output lower than the most profitable one, an increase in output adds:

more to total revenue than to total cost.

For the Colorado beef industry to be classified as perfectly competitive, ranchers in Colorado must have ________ on prices and beef must be a ________ product.

no noticeable effect; standardized

An industry characterized by a few interdependent firms and barriers to entry is called:

oligopoly.

An industry with a large number of small firms producing a standardized product in a market with easy entry and exit of firms is:

perfectly competitive.

If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

produce at an economic loss.

In the short run, if P > ATC, a perfectly competitive firm:

produces output and earns an economic profit.

If economic profits exist in perfect competition in the short run, then firms will enter in the long run because of easy entry, the short-run market _____ curve will shift to the right, and _____ in the market will _____.

supply; output; increase

Perfect competition is characterized by:

the inability of any one firm to influence price.

A firm's total output times the price at which it sells that output is:

total revenue.

Zoe's Bakery operates in a perfectly competitive industry. When the market price of iced cupcakes is $5, the profit-maximizing output level is 150 cupcakes. Her average total cost is $4, and her average variable cost is $3. Zoe's marginal cost is _____, and her short-run profits are _____.

$5; $150

Which statement best characterizes a monopoly?

A monopoly produces a product with no close substitutes.