unit 5

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the marginal product of labor can be defined as the change in

output divided by the change in labor

the demand curve for a good is a line that relates

price and quantity demanded

in a long run equilibrium the marginal firm has

price equal to average total cost, total revenue equal to total cost, and economic profit equal to zero

in the short run a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the

price is greater than average variable cost

when drawing a demand curve

price is measured along the vertical axis, and quantity demanded is measured along the horizontal axis

total revenue equals

price times quantity

the signals that guide the allocation of resources in a market economy are

prices

a production function is a relationship between inputs and

quantity of output

an increase in quantity demanded

results in a movement downward and to the right along a demand curve

an increase in demand is represented by a

rightward shift of a demand curve

a monoply is a market with one

seller and that seller sets the price

the quantity supplied of a good is the amount that

sellers are willing and able to sell

price discrimination is the business practice of

selling the same good at different prices to different customers

the first major peace of antitrust legislation was the

sherman act

the market demand curve for a monopolists is typically

downward sloping

when new firms have an incentive to enter a competitive market, their entry will

drive down profits of existing firms in the market

at the profit maximizing level of output

marginal revenue equals marginal cost

roger owns a small health store that sells vitamins in a perfectly competitive market. if vitamins sell for $12 per bottle and the average total cost per bottle is $12.50 at the profit maximizing output level, then in the long run

some firms will exit from the market

an example of a perfectly competitive market would be the

soybean market

in the market economy

supply and demand determine prices and prices, in turn, allocate the economy's scarce resources

for a construction company that builds houses, which of the following costs would be a fixed cost?

the 30000 per year salary paid to the company's bookkeeper

a monopoly firm is a price

maker and has no supply curve

what is not a characteristic of a monopoly

one buyer

in a competitive market the price $8, a typical firm in the market has ATC= $6 AVC=$5 and MC=$8.

$2 per unit

when a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. when the same firm produces and sells 200 units of output, what is average revenue

$80

when the price of a good is $5 the quantity demanded is 100 units per month, when the price is $7 the quantity demanded is 80 units per month using the midpoint method the price elasticity of demand is about

0.67

if the price elasticity of a demand for a good is 2.0 then a 10 percent increase in price results in a

20 percent decrease in the quantity demanded

the carolina christmas tree corporation grows and sells 500 christmas trees. the average cost of production per tree is 50. each tree sells for a price of 65. the carolina christmas tree corporations total revenues are

32500

anya has decided to start her own hair styling salon. to purchase the necessary equipment, anya withdrew 10000 from her savings account, which was earning 3% interest and borrowed an additional 5000 from the bank at an interest rate of 8%. what is anyas annual opportunity cost of the financial capital that has been invested in the business

700

which of the following is an example of public ownership of a monopoly

U.S postal service

which of the following changes would not shift the demand curve for a good or service

a change in the price of the good or service

a leftward shift of a demand curve is called

a decrease in demand

an industry is a natural monopoly when

a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

in a competitive market the quantity of a product produced and the price of the product are determined by

all buyers and all sellerss

which of the following statements best expresses a firm's profit maximizing decision rule

all of the above are correct

if the demand for a product increases then we would expect the equilibrium price

and equilibrium quantity both to increase

in competitive markets buyers

and sellers are price takers

for a monopoly

average revenue exceeds marginal revenue

the firms efficient scale is the quantity of output that minimizes

average total cost

profit maximizing firms in competitive industires with free entry and exit face a price equal to the lowedt possible

average total cost of production

if consumers view cappuccinos and lattes as substitutes, what would happen to the equilibrium price and quantity of lattes if the price of cappuccinos falls

both the equilibrium price and quantity would decrease

if macaroni and cheese is an inferior good, what would happen to the equilibrium price and quantity of macaroni and cheese if consumers incomes rise

both the equilibrium price and quantity would decrease

which of the following statements is correct

buyers determine demand and sellers determine supply

demand is said to be price elastic if

buyers respond substantially to changes in the price of the good

which of the following events must cause equilibrium quantity to rise

demand and supply both increase

a table that shows the relationship between the price of a good and the quantity demanded of that good is called a

demand schedule

a monopoly

can set the price it charges for its output but faces a downward sloping demand curve so it cannot earn unlimited profits

lead is an important input in the production of crystal, if the price of lead decreases then we would expect the supply of crystal to increase

crystal to increase

for a good that is a necessity

demand tends to be inelastic

a decrease in input costs to firms in a market will result in an

decrease in equilibrium price and an increase in equilibrium quantity

an increase in the prices of a good will

decrease quantity demanded

when a monopolists increases the amount of ouput that is produces and sells, the price of its output

decreases

two goods are substitutes when a decrease in the price of one good

decreases the demand for the other good

when a monopolists increases the amount of output that it produces and sells, average revenue

decreases, and marginal revenue decreases

if government regulation sets the maximum price for a natural monopoly equal to its marginal cost, then the natural monopolists will

earn economic losses

drug companies are allowed to be monopolists in the drugs they discover in order to

encourage research, increase the overall welfare of society through better health because drug companies continually produce better medications, and increase the availability of expensive but useful medications

what is not a characteristic of a competitive market

entry is limited

a monopolists average revenue is always

equal to the price of its product

the unique pint at which the supply and demand curves intersect is called

equilibrium

suppose that demand for a good increases and at the same time supply of the good decreases. what would happen in the market for the good

equilibrium price would increase but the impact on equilibrium quantity would be ambiguous

a firms opportunity costs of production are equal to its

explicit costs+implicit costs

if textbooks and study guides are complements then an increase in the price of textbooks will result in

fewer study guides being sold

soup is an inferior good if the demand

for soup falls when income rises

the midpoint method is used to compute elasticity because it

gives the same answer regardless of the direction of change

most markets in the economy are

highly competitive

in general elasticity is measure of

how much buyers and sellers respond to chanes in market conditions

a rightward shift of a supply curve is called an

increase in supply

exceptionally favorable growing conditions in the vineyards of napa valley would cause an

increase in the supply of wine, decreasing price

which field of economics studies how the number of firms affects the prices in a market and the efficiency of market outcomes

industrial organizations

a person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

inelastic

other things equal when the price of a good rises the quantity supplied of the good also rises and when the price falls the quantity supplied falls as well. this relationship between price and quantity supplied

is referred to as the law of supply

a monopoly is an inefficient way to produce a product because

it produces a smaller level of output than would be produced in a competitive market

a firm that shuts down temporarily has to pay

its fixed costs but not its variable costs

if a competitive firm is selling 500 units of its product at a price of $8 per unit and earning a positive profit, then

its total cost is less than $4000

suppse that a doggie day care firm uses only two inputs: hourly workers and a building. in the short run the firm most likely considers

labor to be variable and capital to be fixed

which of the following is likely to have the most price elastic demand

lattes

suppose jan started up a small lemonade stand business last month. variable costs for jans lemonade stand now include the cost of

lemons and sugar

a group of buyers and sellers of a particular good or service is called a

market

total cost is the

market value of the inputs a firm uses in production

economists normally assume that the goal of a firm is to

maximize its profit

a perfectly price discriminating monopolists is able to

maximize profit and produce a socially optimal level of output

goods with many close substitutes tend to have

more elastic demands

if a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will

more than triple, less than triple, and exactly triple

an increase in the price of blueberries would lead to a

movement up and to the right along the supply curve for blueberries

in a competitive market the current price is $6. the typical firm in the market has ATC= $5 and AVC= $4.5

new firms will likely enter this market to capture some of the economic profits

you lose your job and as a result you buy fewer itunes music downloads. this shows that you consider itunes music downloads to be a

normal good

in markets, prices move toward equilibrium because of

the actions of buyers and sellers

in a competitive market the current price is $5. the typical firm in the market has ATC= $5 and AVC= $4.50

the firm will earn zero profits in both the short run and long run

which of the following statements is not correct

the government may break up a natural monopoly to lower the price charged to customers

other things equal, when the price of a good rises, the quantity demanded of the goods falls and when the price falls the quantity demanded rises. this relationship between price and quantity demanded is referred to as

the law of demand

which of these curves is the competitive firms short run supply curve

the marginal cost curve above average variable cost

one assumption that distinguishes the short run cost analysis from long run cost analysis for a profit maximizing firm is that in the short run

the size of the factory is fixed

a decrease in the number of sellers in the market causes

the supply curve to shift to the left

when the price of a good or service changes

there is a movement along a given supply curve

in the long run a firm will exit a competitive industry if

total revenue exceeds total cost and the price exceeds average total cost

for a firm operating in competitive industry, which of the following statements is not correct

total revenue is constant

profit is defined as

total revenue minus total cost

what is the closest to being a perfectly competitive firm

wheat farmer in kansas

the demand curve for coffee shifts

when a determinant of the demand for coffee other than the price of coffee changes

the quantity demanded of a good is the amount that buyers are

willing and able to purchase


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