why tho

MC curve.

The short-run supply curve of a perfectly competitive firm is based primarily on its

Marginal revenue minus marginal cost equals zero.

Which is necessarily true for a perfectly competitive firm in short-run equilibrium?

Successful price discrimination will generally result in a lower level of output than would be the case under a single-price monopoly

Which is not true of price discrimination?

Teen Angle Hardware looks for a niche to sell its hardware products to teens but finds it difficult to earn anything more than normal profits due to other hardware stores also looking for niches

Which of the following best represents the pricing behavior of firms in a monopolistically competitive industry?

product differentiation

Which idea is inconsistent with perfect competition?

constant returns to scale

A firm finds that whether it produces 30,000 vases or 40,000 vases, its average total cost is $180. This observed pattern might be explained by:

the long-run supply curve is perfectly elastic.

A constant-cost industry is one in which

average revenue exceeds average total costs.

A firm will earn economic profits whenever

$10

A young Thomas Edison makes 20 light bulbs a week in his dorm room. The parts for each light bulb cost $2.00. He sells each light bulb for $5.00. General Electric offers Thomas an executive job that pays $50.00 a week. Thomas's weekly economic profit from making light bulbs is equal to:

greater than economic profits because the former do not take implicit costs into account.

Accounting profits are typically

Change in TVC/ Change in Quantity

Answer the next question on the basis of the following information. TFC = Total Fixed Cost MC = Marginal Cost TVC = Total Variable Cost Q = Quantity of Output P = Product Price Select the marginal cost.

perfectly competitive firm.

If the demand curve faced by an individual firm is perfectly elastic, the firm must be a(n)

can result from government regulation.

Barriers to entry

$0.60

Bobby decides to sell lemonade on a hot summer day. If Bobby sell 20 glasses of lemonade for $0.20 per cup, and his average total cost is $0.17, what are his economic profits for the day?

becomes more difficult if the firms all have different cost and demand curves.

Collusion among oligopolistic firms

agree with each other to set prices and output.

Collusion refers to a situation where rival firms decide to

is less efficient and offers more choices to customers.

Compared to a perfectly competitive market, a monopolistically competitive market:

hail insurance

If you owned a small farm, which of the following would most likely be a fixed cost?

marginal cost = marginal revenue.

Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by

equals both average variable cost and average total cost at their respective minimums.

Marginal cost

total cost resulting from one more unit of production.

Marginal cost can be defined as the change in

there is some control over price in monopolistic competition.

One difference between monopolistic competition and pure competition is that

reflect opportunity costs.

Production costs to an economist

165

Suppose that you could either prepare your own tax return in 15 hours or hire a tax specialist to prepare it for you in 2 hours. You value your time at $11 an hour; the tax specialist will charge you $55 an hour. The opportunity cost of preparing your own tax return is

shut down in the short run.

T-Shirt Enterprises is operating in a perfectly competitive market. It is producing 3,000 t-shirts and selling them for $10 each. At this level of output, the average total cost is $10.50 and the average variable cost is $10.20. Based on these data, the firm should

a few large producers.

The characteristic most closely associated with oligopoly is

is the same as its marginal revenue curve.

The demand curve faced by a perfectly competitive firm

economies of scale.

The downward-sloping portion of the long-run average cost curve is a result of:

be able to separate buyers into different markets with different price elasticities.

To practice long-run price discrimination, a monopolist must

explicit and implicit costs.

To the economist, total cost includes:

Looking Over Your Shoulder Handbag Co. chooses the price it charges by estimating what its rivals are most likely to do and then taking their responses into consideration.

Which of the following best represents the pricing behavior of firms in an oligopolistic market?

$-250 correct.

A business owner makes 50 items by hand in 40 hours. She could have earned $20 an hour working for someone else. Her total explicit costs are $200. If each item she makes sells for $15, her economic profit equals:

falling long-run average cost curve.

A firm encountering economies of scale over some range of output will have a

maximize joint profits.

A major reason that firms form a cartel is to

$-13.

A monopolist can sell 20 toys per day for $8 each. To sell 21 toys per day, the price must be cut to $7. The marginal revenue of the 21st toy is

highly elastic demand curve.

A monopolistically competitive firm has a

neither industry has significant barriers to entry.

A monopolistically competitive industry is like a purely competitive industry in that

produces differentiated products that are similar but produces a smaller quantity overall compared to a perfectly competitive market.

A monopolistically competitive market can do this because:

its average revenue equals its marginal revenue.

A perfectly competitive firm can be identified by the fact that

it can sell all it wants to at the market price.

A perfectly competitive firm does not try to raise its price above the market price because

it would not be able to sell its output.

A perfectly competitive firm does not try to raise its price above the market price because

the loss is smaller than its total fixed costs.

A perfectly competitive firm will be willing to produce even at a loss in the short run, as long as

charging a higher price to those with less elastic demand and a lower price to those with more elastic demand than it would if it could not price discriminate.

A price-discriminating monopolist can increase profits by:

buyers with inelastic demand are charged higher prices than buyers with elastic demand.

A price-discriminating monopolist will follow a system where

make the marginal cost equal to society's valuation of the marginal benefit.

An argument for making regulated monopolies adopt marginal cost pricing is that this would

patent.

An exclusive legal right as sole producer for 20 years granted to an inventor of a product is called a

economic performance and industry sales

An increase in which of the following factors does not increase the incentive to cheat within a cartel?

some firms to exit, causing the market price of corn to increase.

Assume that the market for corn is perfectly competitive. Currently, firms growing corn are generating losses. In the long run, we can expect

new firms to enter, causing the market price of soybeans to decrease.

Assume that the market for soybeans is perfectly competitive. Currently, firms growing soybeans are experiencing economic profits. In the long run, we can expect

a. What are Barney's average monthly accounting profits? $11,875 correct b. What are Barney's average monthly economic profits? $1,575 correct

Barney decides to quit his job as a corporate accountant (which pays $10,000 a month) and go into business for himself as a certified public accountant. He decides not to rent office space downtown, but instead sets up shop in his converted garage apartment, which he could rent out for $300 a month if he wasn't using it as his own office. He must purchase office supplies worth $75 a month, and his monthly electricity bill has increased by $50 now that he is working out of his home office. After six months of working from home, Barney has earned an average of $12,000 per month.

a. What are Barney's monthly explicit costs? $125 correct b. What are Barney's monthly implicit costs? $10,300 correct c. What are Barney's monthly economic costs? $10,425 correct

Barney decides to quit his job as a corporate accountant (which pays $10,000 a month) and go into business for himself as a certified public accountant. He decides not to rent office space downtown, but instead sets up shop in his converted garage apartment, which he could rent out for $300 a month if he wasn't using it as his own office. He must purchase office supplies worth $75 a month, and his monthly electricity bill has increased by $50 now that he is working out of his home office. After six months of working from home, Barney has earned an average of $12,000 per month.

productive inefficiency.

Excess capacity implies

negative and demand is inelastic.

Given a downward-sloping linear demand curve, if total revenue decreases as quantity rises, marginal revenue must be

$5,000.

Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10% interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.

perfectly elastic.

If a firm is a price taker, then the demand curve for the firm's product is

economic profit is zero.

If a firm's revenues just cover all its opportunity costs, then

$-55.

If a monopolist is able to increase the amount of product she sells from 400 to 420 units by lowering the price of that product from $50 to $45, her marginal revenue is:

diseconomies of sale

If all resources used in the production of a product are increased by 10% and output increases by less than 5%, then the firm is experiencing

constant returns to scale.

If all resources used in the production of a product are increased by 20% and output increases by 20%, then there must be

decrease.

If monopolistically competitive firms in an industry are making an economic profit, then new firms will enter the industry and the product demand facing existing firms will

the industry would more closely approximate pure competition.

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes

200

If you know that total fixed cost is $200, total variable cost is $600, and total product is 4 units, then average total cost must be

$930.

If you know that when a firm produces 10 units of output, total costs are $1,030 and average fixed costs are $10, then total variable costs are

"payments" for self-employed resources.

Implicit costs are

economic profits may exist in the short run but not in the long run.

In a perfectly competitive industry

neither allocative nor productive efficiency.

In an oligopolistic market there is likely to be

produce more than its output quota.

In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to

equal to MR, MC, and the minimum ATC.

In long-run equilibrium, a perfectly competitive firm will operate where price is

price is greater than MC.

In monopolistic competition there is an under-allocation of resources at the profit-maximizing level of output, which means that

the same as the profits for a purely competitive firm.

In the long run, the economic profits for a monopolistically competitive firm will be

excess capacity.

In the long run, the representative firm in monopolistic competition tends to have

oligopoly and pure monopoly

In which set of market models are there the most significant barriers to entry?

In some markets the producers of a certain commodity might face competition from products of other industries

Interindustry competition refers to the fact that

producing differentiated products.

Monopolistic competition is characterized by firms

extensive economies of scale in production.

Natural monopolies result from

ownership of essential resources.

One major barrier to entry under pure monopoly arises from

there can be exchange of the product from children, who buy it at a lower price, to adults

Price discrimination for concessions at ball parks is not applied to adults and children because

the price elasticity of demand is the same for all groups of buyers in these industries. low price buyers will find it virtually impossible to resell the products of such industries to high price buyers.

Price discrimination is more common in service industries because

marginal costs are above average variable costs.

Rising short-run average variable costs of production for a firm indicate that

less than $1/unit.

Round Things, Inc.'s production process exhibits economies of scale. Currently their long-run average cost is $1/unit. If Round Things doubles its use of all inputs, its new long-run average total cost will be

shift to the right.

Suppose some firms exit an industry characterized by monopolistic competition. We would expect the demand curve of a firm already in the industry to

$3.

Suppose that Oscar sells pork in a perfectly competitive market. The market price of pork is $3 per pound. The marginal revenue generated by Oscar from selling the 12th pound of pork would be

economies of scale.

The larger the diameter of a natural gas pipeline is, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles. This is an example of one reason for

results in normal profits.

The long-run perfectly competitive equilibrium

is horizontal at the market price.

The marginal revenue curve faced by a perfectly competitive firm

marginal revenue is less than average revenue.

The nondiscriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why

it is not allocatively efficient.

The problem with adopting a fair-return pricing policy for a natural monopoly is that

decide to increase advertising expenditures even if it means a reduction in profits.

Under oligopoly, if one firm in an industry significantly increases advertising expenditures in order to capture a greater market share, it is most likely that other firms in that industry will

The firms in the market are part of a constant-cost industry.

Under what conditions would an increase in market demand lead to the same long-run equilibrium price?

A monopolistically competitive firm does not have the exact same product as other firms.

What is one difference between a firm in a perfectly competitive industry and a firm in a monopolistically competitive industry?

A monopolistically competitive firm faces competition from firms producing close substitutes.

What is one difference between a firm in a perfectly competitive industry and a firm in a monopolistically competitive industry?

The socially optimal price achieves allocative efficiency but may produce economic losses; the fair return price yields a normal profit but may not be allocatively efficient.

What is the meaning of the phrase "dilemma of regulation"?

* Electricity is not a standardized product. There are not a lot of buyers in the market. There are not a lot of sellers in the market. ** It is not easy to enter or exit the industry as a supplier.

What is the most likely reason that the market for electricity is not perfectly competitive?

economies of scale.

When a firm doubles its inputs and finds that its output has more than doubled, this is known as

oligopolistic competition

When near-monopolies like Google in Internet search and Amazon in online shopping start infringing on each other's turf, what kind of competition results?

There is no collusion mutual interdependence among firms.

Which assumption is part of the model of monopolistic competition?

A firm in an oligopolistic market has to consider its own impact on price when making production decisions.

Which of the following characteristics differentiates a firm in an oligopolistic market from a firm in a perfectly competitive market?

use of savings to pay operating expenses instead of generating interest income

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

interindustry competition

Which of the following has not contributed to the development of oligopolies in the U.S. economy?

The market for cell phone services.

Which of the following is an example of an oligopolistic market with a differentiated product?

The market for aluminum.

Which of the following is an example of an oligopolistic market with a standardized product?

The money a farmer could earn by working for someone else

Which of the following is an implicit cost of owning and operating a farm?

A purely competitive firm is a "price taker," while a monopolist is a "price maker."

Which of the following is correct?

fuel and power payments

Which of the following is most likely to be a variable cost?

forgone rent from the building owned and used by Company X

Which of the following is most likely to be an implicit cost for Company X?

The market for mushrooms

Which of the following markets is most likely to be perfectly competitive?

The market for rock salt

Which of the following markets is most likely to be perfectly competitive?

Our Drugs Inc. produces where its marginal revenue is equal to its marginal cost and prices on its downward-sloping demand curve, such that the market for its product clears knowing it will not face competition due to patents it holds on its products.

Which of the following scenarios best represents the pricing behavior of a monopolist?

Successful price discrimination will provide the firm with more profit than if it did not discriminate.

Which of the following statements is true of price discrimination?

A water company

Which of the following suppliers is most likely to be a monopolist?

specialization of production within a firm

Which would contribute most to a firm experiencing "economies of scale"?

is allocatively inefficient; the socially optimal price is allocatively efficient.

With a natural monopoly, the fair return price

diminishing marginal returns.

he reason the marginal cost curve eventually increases as output increases for the typical firm is because of

ATC is not at its minimum level.

make the marginal cost equal to society's valuation of the marginal benefit.