Microeconomics MBE 100 Part 2

Suppose a monopoly firm produces a medical device and can sell 15 items per month at a price of $2,000 each. In order to increase sales by one item per month, the monopolist must lower the price of the medical device by $100 to $1,900. The marginal revenue of the 16th item is:

$400

Market failure occurs when:

An imperfection in the market mechanism prevents an optimal outcome

In the long run, a perfectly competitive market with economic losses will experience:

An increase in equilibrium quantity as firms exit.

If there are only 4 companies that produce tennis balls, the market could be considered

An oligopoly

Which of the following is consistent with a monopoly industry?

Barriers to entry keep potential competitors out fo the market.

Obstacles that make it difficult or impossible for additional producers to being producing or selling in a new market are known as:

Barriers to entry.

A natural monopoly is a firm that:

Can produce the entire market supply more efficiently than any number of smaller firms.

Market power is a form of market failure because:

Competition is restricted, output is reduced, and the price is higher.

In the long run, a company will stay in business as long as price is:

Greater than or equal to average total costs.

The main difference to an economist between "short run" and "long run" is that:

In the long run all resources are variable where as in the short run at least one resource is fixed.

The labor supply curve depicts the quantity of _____ at alternative _______.

Labor supplies; wage rates.

If American Airlines engages in predatory pricing, it might:

Lower fares when a new carrier enters the market and then raises fares once the new carrier is driven out of business.

Ceteris paribus, the law of diminishing returns states the beyond some point the:

Marginal physical product of a variable input declines as more of it is used.

The NEWSWIRE article in the text titled "Flat Panels, Thin Margins", says that the prices for flat-panel TVs are falling. Which of the following is likely a reason why prices are decreasing?

Market supply has shifted to the right because more firms have entered the market.

Government intervention in the economy

May fix market failures or make the economy worse off.

If the economy relies entirely on markets to answer the WHAT question, it tends to:

Overproduce private goods and under produce public goods.

Which of the following groups correctly ranks market structure from most competitive to least competitive?

Perfect competition, monopolistic competition, oligopoly, monopoly.

If the government decides to raise the minimum wage, ceteris paribus:

Some workers are better off and some are worse off.

Marginal Physical Products:

The additional output from using one more unit of labor.

Total profit can be calculated as:

The difference between price and average total cost multiplied by the quantity sold.

If the MPP of the last worker hired is 3 units per hour, product price is constant at $5 per unit, and the wage rate is $18 per hour, then:

The last worker hired should not be employed because she costs more than she is worth.

Competitive firms cannot individually affect market price because:

Their individual production is insignificant relative to the production of the industry.

Which of the following is an argument is support of monopolies?

They are protected from competition so they have greater ability to pursue research and development.

Other things being equal if a perfectly competitive firm is forced to switch to a more expensive nonpolluting production process:

Total profits will decrease.

The opportunity cost of working is the:

Value of leisure time that is given up in the process

In a competitive market, in the long run, economic profits will cause:

new firms to enter into the market.

If price is greater than marginal cost, a perfectly competitive firm should increase output because additional units of output will:

Add to the firms profits (or reduce losses)

A firm's demand for labor is referred to as a derived demand because it is derived from the:

Demand for the product that labor produces.

A firm that incurs an emissions charge for polluting will install more pollution control equipment only if the:

Emissions charge exceeds the increased cost of installing the equipment.

In defining costs, economists recognize:

Explicit and implicit costs while accountants recognize only explicit costs.

In a competitive market with economic profits, equilibrium:

Price will fall as new firms enter the market.

Which of the following is most likely a fixed cost?

Property taxes