ECO 100 Week 4

Why are some producers forced to sell their products at the prevailing market price?

They have a high degree of similarity to competitorsí products.

A firm that holds a monopoly position in the marketplace is:

a price maker.

Which of the following is the most accurate description of a monopolist?

a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry

When a natural monopoly exists in a given industry, the per-unit costs of production will be

lowest when a single firm generates the entire output of the industry

Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products.

perfect competition

The use of sharp, temporary price cuts as a form of _________________ would enable traditional U.S. automakers to discourage new competition from smaller electric car manufacturers.

predatory pricing

In the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _____________________.

short run; losses are smallest

In the _________, the perfectly competitive firm will seek out ________________________.

short run; the quantity of output where profits are highest

A monopolistically competitive firm may earn abnormally high profits in the

short term, but the process of entry will drive those profits to zero in the long run.

When the demand for a good or service limits the quantity that can be sold to an output at which the firm experiences economies of scale,

the firm is a natural monopoly

The fundamental belief behind the market-oriented US economy is that firms are in the best position to know if their actions will

the right answer is both b and c.

_____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.

An oligopoly

Idaho farmers can sell as large a quantity of their potato crop as they wish, if which of the following is true?

Each farmer willingly accepts the prevailing market price.

Government policy-makers often must decide how to balance the potential benefits of ___________ against the potential benefits of _____________ .

corporate size; competition

If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.

decreasing returns to scale

Which term describes a situation where the quantity of output rises, but the average cost of production falls?

economies of scale

"Constant returns to scale" describes a situation where:

expanding all inputs does not change the average cost of production

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________, regardless of the level of production.

fixed costs; do not change

The application of current U.S. antitrust law

includes a wide arrange of anticompetitive practices

In the ________, the perfectly competitive firm will react to profits by _______________________.

long run; increasing its production