Ch.22-24 ECON
Economies of scale in production
reveal that as a firm expands, its long-run per-unit costs fall.
Slide 26 in your Presentation Materials for Chapter 22 may shed light on this problem: A trampoline manufacturer finds that at 1,000 units of output, its marginal costs are above average total costs. If it produces an additional trampoline, its average total costs will
rise
At the point at which diminishing marginal product begins, marginal costs begin to _____ as the marginal product of the variable input begins to _____.
rise; decline
During the previous month, Stoked! produced 300 snowboards at an average variable cost of $64 and at an average fixed cost of $22. During the month, the firm's total costs were
$25,800.
By the end of the year, a firm produced 10,000 laptops. Its total costs were $6 million, and its fixed costs were $4 million. What are the average variable costs of this firm?
200
In a perfectly competitive industry, if more firms enter the industry over the short run, which of the following will occur?
Marginal costs will not change, but the industry supply curve will increase.
In a competitive market, positive economic profits act to
attract new entrants into the industry.
A monopolist is
a single supplier of a good or service for which there is no close substitute.
In the long run,
all factors of production can be varied.
In the long run there
are only variable inputs.
A firm typically achieves its position as a monopolist as a result of
barriers to entry.
A monopolist engages in price discrimination
by charging a higher price to consumers whose demand is more inelastic.
Economies of scale involve _____ in long-run average costs resulting from _____ in output.
decreases; increases
If total product is increasing at a decreasing rate, then marginal product is
decreasing
If price is $5, marginal cost is $5, average total cost is $3, and the quantity produced is 150 units, then the perfectly competitive firm is
earning $300 in economic profits and is maximizing economic profits.
For a perfectly competitive firm, price
equals both average revenue and marginal revenue.
One reason for economies of scale is
gains from specialization.
Many electrical utilities are monopolies primarily because of
government restrictions that prevent new firms from entering the market.
Which of the following is not one of the assumptions of a perfectly competitive market?
greater information for producers than for consumers
The Alpha Beta Company is a firm in a perfectly competitive industry. The average rate of return on capital in this industry is 8%. If the Alpha Beta Company earns an 8% rate of return,
it earns zero economic profit.
Under perfect competition, a firm that sets its price slightly above the market price would
lose all of its customers.
If a burrito shop hires an additional worker, then discovers that its total output of burritos has fallen, it must be true that
marginal product is negative.
If a company hires an additional worker and finds that its total output then falls, it must be true that
marginal product is negative.
When marginal cost is falling
marginal product must be rising.
When total revenue (TR) is increasing as a monopolist's output increases
marginal revenue (MR) is positive.
Drug companies are able to secure monopoly power in the various drug markets they create by utilizing
patent protection.
In a perfectly competitive market, which of the following is the primary factor that impacts consumers' decisions on which firm to purchase a good from?
price
Firms in perfect competition are
price takers because they cannot influence price.
The law of diminishing marginal product states that
successive equal-sized increases in a variable factor of production added to fixed factors of production will result in smaller and smaller increases in output.
The law of diminishing marginal returns is caused by
the existence of a fixed input that must be combined with increasing amounts of the variable input.
The planning horizon is defined as
the period of time for which all inputs are variable.
The short run is defined as
the period of time in which at least one factor of production is fixed.