Micro Exam 3

The dominant strategy for Hector is to

refrain from cleaning, and the dominant strategy for Bart is to refrain from cleaning.

Ryan sells 200 plastic ball point pens at $0.50 each. His total costs are $25. His profits are

$75.

The prisoners' dilemma game

provides insight into why cooperation is difficult.

When firms are said to be price takers, it implies that if a firm raises its price,

buyers will go elsewhere.

A group of firms that act in unison to maximize collective profits is called a

cartel.

For a firm, the relationship between the quantity of inputs and quantity of output is called the

production function.

As a monopolist increases the quantity of output it sells, the price consumers are willing to pay for the good

decreases.

The simplest type of oligopoly is

duopoly.

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic

in the short run but not in the long run.

Suppose that firms in a competitive industry are earning positive economic profits. All else equal, in the long run, we would expect the number of firms in the industry to

increase.

The total cost to the firm of producing zero units of output is

its fixed cost in the short run and zero in the long run.

The amount by which total cost rises when the firm produces one additional unit of output is called

marginal cost.

A profit-maximizing monopolist will produce the level of output at which

marginal revenue is equal to marginal cost.

If a monopoly lowers its price, its

marginal revenue must decrease.

If this game is played only once, then the most likely outcome is that

neither Hector nor Bart cleans.

What do economists call the business practice of selling the same good at difference prices to different customers?

price discrimination

In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if

price is less than average total cost.

Total revenue equals

price x quantity

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75, 000, total variable cost to be $130, 000, and total revenue to be $145, 000. Because of this information, in the short run, the Brookside Racquet Club should

stay open because shutting down would be more expensive.

For a large firm that produces and sells automobiles, which of the following costs would be a variable cost?

the cost of the steel that is used in producing automobiles