Econ 1101 Test 2

17. At what point will a company decide to shut-down its operations in the short-run?

A firm would shut down if the market price of its product is lower than its average variable cost at its profit maximizing output level. Short run is a time period which at least one of a firm's inputs is fixed, it means at least some of the firm's costs will be fixed which will be incurred even if it shuts down.

13. What is a patent and the rationale for granting a patent? Does a patent have a limited, or perpetual monopoly power?

A patent is an exclusive right granted from the government, for invention which is a product or a process the provides a new way of doing things. In order to get a patent technical information must be disclosed. A patent grants inventors the right to exclude others from making, using, offering for sale, selling, or importing their invention. A patent is limited monopoly power so that firms can recoup their investment but then allow other firms to produce the product more cheaply.

12. _________________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry. A. Collusion B. An oligopoly C. A monopoly D. A cartel

B. An oligopoly

7. ____________ refers to the additional revenue gained from selling one more unit. A. Total revenue B. Marginal revenue C. Economic profit D. Accounting profit

B. Marginal revenue

5. _____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price. A. Total profits B. Total revenue C. Average profit margin D. Total cost

B. Total revenue

1. Why are some producers forced to sell their products at the prevailing market price? A. price takers find market analysis is too costly B. high degree of similarity to competitor's products C. they are very small players in the overall market D. they can increase output without affecting quality

B. high degree of similarity to competitor's products

3. The term _____________ is used to describe the additional cost of producing one more unit. A. average cost B. marginal cost C. fixed cost D. variable cost

B. marginal cost

8. Government _____________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for _______________. A. trademark; an unlimited time B. patent; a limited time C. copyright; a limited time D. trade secret; an unlimited time

B. patent; a limited time

11. Which of the following is most unlikely to present a barrier to entry into a market? A. market force B. patent laws C. deregulation D. technological advantages

C. deregulation

9. Roughly speaking, patent law covers ____________ and ___________ law protects an author's original books. A. trade secrets; trademark B. all inventions; trademark C. original inventive creations; copyright D. original audiovisual creations; copyright

C. original inventive creations; copyright

2. In order to determine the average variable cost, the firm's variable costs are divided by _______________________. A. its' fixed costs B. its' average costs C. the quantity of output D. diminishing marginal costs

C. the quantity of output

4. The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls. A. diminishing marginal returns B. marginal cost output C. diseconomies of scale D. economies of scale

D. economies of scale

6. In microeconomics, the term _____________________ is synonymous with economies of scale. A. diminishing marginal returns B. decreasing returns to scale C. constant returns to scale D. increasing returns to scale

D. increasing returns to scale

10. In the business world, a __________ is recognized as a legally acceptable way for any business to keep knowledge of its particular methods of production from being known by competing firms. A. patent B. monopoly C. trademark D. trade secret

D. trade secret

15. What are diminishing marginal returns as they relate to costs in a manufacturing or a production environment?

Diminishing marginal returns as they relate to costs is the efficiency of the last input used in a production process first rises and then falls, or diminishes, as you add more and more input to a production process without changing the scale of the process.

14. What is the difference between a natural monopoly and legal monopoly? Give an example of each.

Legal monopoly are utilities, products necessary for everyday life that are socially beneficial, they are often subject to economics scale, so it make sense to allow only one provider (laws prohibit or severely limit competition). A real-life example would the AT&T Corporation. A natural monopoly isa type of monopoly that exists due to high fixed or start-up costs of conducting a business in a specific industry, where the barriers of entry are something other than legal prohibition. An example of natural monopoly would be a utility company.

16. List and describe 3 market structures, and the characteristics of each market. Provide a real-world example of each market.

Perfect competition describes a market structure where a large number of small firms are competing against each other, a single firm does not have any significant market power. Which means as a whole the industry produces the socially optimal level of output because none of them can influence market price. Ex. A good example of a perfect competition would be the stock market. Monopolistic Competition is a market structure where a large number of small firms compete against each other but unlike perfect competition the firms sell similar but slightly different products, this difference gives them and certain degree of power, which allows them to charger higher prices. Ex. A good example would be soda brands or cereal brands they are all different flavors, but they are all still the same thing. Oligopoly is a markets structure that Is dominated by only a small number of firms, the firms can either compete with each other or collaborate, they use their collective market power to drive up prices and earn more profit. Ex. Would be the different brands of gaming consoles such as Nintendo, Microsoft, and Sony.