Economics Final Part 2 of #****me

If the distribution of water is a natural monopoly, then (i) Multiple firms would likely each have to pay large fixed costs to develop their own network of pipes. (ii) allowing for competition among different firms in the water-distribution industry is efficient. (iii) a single firm can serve the market at the lowest possible average total cost.

(i) and (iii) only

Jane was a partner at a law firm earning $223,000 per year. She left the firm to open her own law practice. In the first year of business she generated revenues of $347,000 and incurred explicit costs of $163,000. Jane's economic profit from her first year in her own practice is

-$39,000

The cost of producing an additional unit of output is the firm's

Average total cost

When a monopolist maximizes profit, its marginal cost will

Be less than the price price per unit of its product

In the long run a company that produces and sells popcorn incurs total costs of $1,050 when output is 90 canisters and $1,200 when output is 120 canisters. The popcorn company

Economies of scale because average total cost is falling as output rises.

When a monopolist is able to sell product at different prices it is engaging in

Price discrimination

Many movie theaters allow discount tickets to be sold to senior citizens because

Senior citizens have a more elastic demand for movies than ordinary citizens.

When a firm is able to put idle equipment to use by hiring another worker,

Variable cost increases when production or output increases and fixed cost vary with change in output

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

average total cost

Marginal cost is equal to average total cost when

average total cost is at its minimum

In the long run the company that produces and sells dog beds incurs total costs of $1,200 when output is 30 beds and $1,600 when output is 40 beds. Firm A exhibits

constant returns to scale because average total cost is constant as output rises (HOW TO DO IT: 1200/30= 40 and 1600/40= 40. So constant)

In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market the

decision about how much to supply is impossible to separate from the demand curve it faces.

If the total cost curve gets steeper as output increases, the firm is experiencing

diminishing marginal product

A firm's opportunity costs of production are equal to its

explicit costs + implicit costs.

In a competitive market with identical firms,

free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run.

The short-run supply curve for a firm in a perfectly competitive market is

he supply curve for a firm in a perfectly competitive market in the short run is that firm's marginal cost curve for prices at or above average variable cost

If a profit maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should

increase its output

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has

less market power than it would otherwise have.

Private ownership of a monopoly may benefit society because the monopoly will have incentive to

lower its cost to earn a higher price

Economists normally assume that the goal of a firm is to (i) sell as much of its product as possible (ii) Set the price fo the product as high as possible. (iii) maximize profit.

only (iii) is true

A monopolist maximizes profits by

producing an output level where marginal revenue equals marginal cost

The long-run market supply curve in a competitive market will

show how price and quantity in the market change as firms enter and exit the market. Each quantity on the supply curve is equal to the quantity supplied by a single firm, multiplied by the number of firms in the market.

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

sunk costs

Generic drugs enter the pharmaceutical drug market once

the patent on the name brand drug expires.

For a monopoly,

the price of the product always equals the marginal revenue