ECON 1113 Notes (Chapter 5), Econ test 1, 251ECO ch 14, ECON 202 Chapter 13 Heath, Chapter 13 Learn Smart Microeconomics torture, ECO 251 Chapter 12 Pure Monopoly, ECO231 Chap 11, ECO231 Chapter 10, Chapter 9, ECon
Why does the law of diminishing returns not account for the U-shape of the long-run average-total-cost curve?
In the long run all resources and inputs are variable.
Why will firms choose not to enter an industry when marginal revenue, marginal cost, price, and average total cost are equal?
Existing firms are earning only normal profits.
Taken together, the four general categories of economic resources (land, labor, capital, and entrepreneurial ability) are referred to as which of the following?
Factors of production
New firms entering an increasing-cost industry will usually (increase/decrease) resource prices.
Increase
What are the effects of taxation on resources?
- It makes resources available for producing public goods. - It reduces private demand for resources.
What does public choice theory demonstrate about majority voting?
It can produce inefficiencies and inconsistencies.
Which of the following are entry barriers created by monopolists?
-Increased advertising -Price reductions
Which of the following are conditions necessary for price discrimination?
-monopoly power -market segregation -no resale
What does a demand curve look like for an oligopolistic firm?
It could be downward sloping or kinked.
When comparing different public project plans, which guideline should be followed?
An activity should be increased as long as marginal benefit exceeds marginal cost.
Total fixed cost divided by output plus total variable cost divided by the output yields which of the following?
Average total cost
How is the long-run average-total-cost curve derived?
From all points of tangency of the short-run average-total-cost curves
Which of the following illustrate the concept of a short-run adjustment?
Boeing adds an entire shift of workers. Boeing hires 100 extra workers for one of its commercial airline plants.
How is total cost calculated?
By adding total fixed cost and total variable cost
How can a business manager control variable costs in the short run?
By altering levels of production
Which of the following are likely to cause cost curves to shift?
Changes in resource prices Changes in technology
Which of the following industries highlight the pattern of declining long-run average total costs?
Computer microchip Automobile Aluminum
The optimal size and scope of a project or a government regulation are determined by comparing marginal _____________ to marginal _______________
Cost, Benefit
Entry to and exit from monopolistically competitive industries is:
relatively easy
Compared with oligopoly and monopoly, entry of new firms into monopolistically competitive industries is
relatively easy because economies of scale are few.
In an increasing-cost industry, which of the following occur when an increase in product demand results in economic profits and attracts new firms to the industry?
Increased resource demand drives up resource prices. Each firm's ATC curve shifts upward.
Which of the following best describes the average variable cost curve?
It is U-shaped.
Microsoft is a firm that benefits from _______ consumption.
simultaneous
Which is another term for average product?
Labor productivity
In general, what production characteristic and plant size scale are required for efficient capital usage to be effective?
Large-scale producers High production volume
In the run, firms are able to adjust all resources.
Long
What type of cost can be saved by not producing the last unit?
Marginal
Which theory posits that, under majority rule and consistent voting preferences, the median voter will determine the outcome of elections?
Median-voter model
In the long run, a purely competitive firm will only earn a ______ profit.
Normal
Allocative efficiency is achieved in the short run when the equality of which of the following occurs?
P = MC
Which best describes economic costs?
Payments that must be made to obtain a resource
Which of the following has the greatest effect on the quantity supplied?
Price
Increased labor ______ becomes more achievable as a plant increases in size.
specialization
Labor _______ allows workers to become even more proficient in their tasks as they work at fewer tasks.
specialization
If a good is nonrival and nonexcludable then it is known as a(n) __________ good
Public
A purely competitive firm is a price (Enter one word).
taker
Changes in (Enter one word) and changes in prices of variable inputs alter costs and shift the marginal cost or short run supply curve.
technology
Which of the following occur when fixed costs increase?
The average total cost curve shifts upward. The average fixed cost curve shifts upward.
Over what period of time can an industry and firms in that industry adjust all resource inputs used?
The long run
The shape of a long-run average-total-cost curve will determine ______.
the number and size of firms in the industry
What happens to fixed costs when the level of production output reaches zero?
They remain unchanged.
How is average fixed cost determined?
Total fixed cost divided by output
Multiplying product price by output reveals which of the following?
Total revenue
What is the definition of economic profit?
Total revenue minus economic costs (explicit and implicit)
What is the definition of average variable cost?
Total variable cost divided by output (Q)
True or false: Hourly labor, raw materials, and fuel are examples of resources a firm can easily adjust.
True
The economizing problem
Your next-door neighbors want to go on a European vacation but cannot afford it, so they decide to visit a local amusement park instead.
A basic feature of the purely competitive market is the presence of ______.
a large number of sellers
Economic costs are defined as
a) the value or worth a resource would have in its best alternative use.
A trade-off occurs when some quantity of production of a good is given up in order to produce another good.
true
What term means "cooperation with rivals?
collusion
What term means "cooperation with rivals?"
collusion
Blu-ray players and Blu-ray discs are:
complementary goods
Average total costs are pulled upward when _________ rises above average total costs.
d) marginal cost
A change in the number of buyers is a determinant of market
demand
Firms that operate in a purely competitive industry:
do not differentiate their products
A firm's costs are the explicit and implicit costs of the resources it has used.
economic
Total _________ costs equal explicit costs plus implicit costs.
economic
The interaction between buyers and sellers determines the equilibrium price and the ________ quantity.
equilibrium
A major trade-off that occurs in monopolistically competitive industries as product differentiation increases is
excess capacity increases.
With a natural monopoly the demand curve intersects the long-run average total cost curve where the long run average total cost curve is still_____.
falling
For an industry to be considered an oligopoly the four-firm concentration ratio must be ______.
greater than or equal to 40%
special-interest effect
happens when a small number of people successfully lobby the government for policies that are advantageous to them but defy the will of the majority.
When the number of firms in an oligopolistic industry increases from 3 to 10, it is ______ to collude.
harder
In monopolistically competitive industries, small stores with high proxies can compete with larger stores by
having a very convenient locations for customers
________ costs are the firm's opportunity costs of using its self-owned, self-employed resources.
implicit
Greater resource prices _______ the costs of production, thereby, ______ the incentive for firms to produce the good at each price.
increases; reducing
The firm and ______ are synonymous in pure monopoly.
industry
Refer to the diagram. A shortage of 160 units would be encountered if price was:
$0.50
Refer to the diagram. A surplus of 160 units would be encountered if the price was
$1.60
A purely competitive firm can maximize its economic profit (or minimize its loss) by adjusting only its output because it ______.
is a price taker
The economic profict per unit is the amount that the product price ______the average total cost at the profit-maximizing output
is grater than
If total product is 50 and the units of labor used is 10, then the average product is .
5
All else equals, which is more likely to experience and economic profit in the long-run?
A pure monopolist
What is the difference between accounting profit and economic profit?
Accounting profit equals total revenue less explicit costs. Economic profit equals total revenue less economic costs (explicit and implicit).
What is the definition of accounting profit?
Accounting profit is what remains after a firm has paid its explicit costs.
What does every point on a budget line graph represent?
All combinations of goods that can be purchased with a given income
What is the Nash equilibrium?
An outcome in the payoff matrix from which neither firm wants to deviate since the current strategy is optimal given the rival's strategic choice.
Which of the following are obstacles to collusion in an oligopolistic industry?
Antitrust laws Recession Demand and cost differences Cheating
The economic profit per unit is the amount that the product price ________ the average total cost ath the profit-maximizing output.
is greater than
What is meant by the phrase "spreading the overhead"?
As production increases, average fixed cost declines.
Which curve first falls and then rises?
Average variable cost curve
Which of the following enables firms to make per-unit comparisons with product price?
Average-cost data
A(n) competitive firm's average-revenue schedule is also known as its demand schedule.
Blank 1: pure, perfectly, or purely
What is the focus of positive economics?
Cause-and-effect relationships and Facts
Which of the following best describes the situation of a price-taking firm? A price-taking firm is one of a ______ number of firms producing a product that is identical to that of every other firm in the industry and providing ______ of total market supply.
large; only a fraction
A purely competitive industry has a very ______ number of sellers, whereas the other three market structures reflect a progressively ______ or ______ number of sellers.
large; smaller; decreasing
Without collusion, if a firm incorrectly assumes that its rivals will charge the same price but its rivals actually charge a lower price, the firm's demand curve will shift to the
left
If costs of production rise, the producer has an incentive to produce ______ output.
less
Demand for monopolistically competitive firms is ______.
less elastic than demand for firms in pure competition due to fewer rivals and relative product differentiation
Demand for monopolistically competitive firms is ________.
less elastic than demand for firms in pure competition due to fewer rivals and relative product differentiation
Economic principles are generalized statements that ______ consumer behavior.
look at typical
Positive economics encourages value judgments.
False
The study of how people behave in strategic situations is called theory.
Game
______ resource prices raise production costs and, assuming a fixed product price, ______ profits.
Higher; reduce
How does labor specialization allow a worker to become more proficient?
It allows a worker to focus on fewer tasks and become more skilled in performing those tasks.
Which of the following explains how the government provides the optimal quantity of a public good?
It compares the marginal benefit of an added unit of the good against the government's marginal cost of providing it.
What is the overall effect of a large firm using brand loyalty and increasing advertising to gain profit and market share?
It helps the firm acquire monopoly power.
More efficient technology has what effect on the productivity of all inputs?
It increases the productivity of all inputs.
Because an economy's resources are ______________ , decisions to use more resources in the public sector will mean fewer resources for the ____________ sector
Limited, Private
product is the change in total product divided by the change in labor input.
Marginal
A firm's total revenue is calculated as (Enter one word) times quantity produced.
Price
What are three models used to study pricing and output by oligopolies?
Price leadership model Kinked-demand curve model Collusive pricing model
(Allocative/Productive) efficiency means that goods are produced in the least costly way.
Productive
A game that is played more than once between rivals is a (Enter one word) game.
Repeated
What leads to most patentable inventions and products?
Research and development
What is the term for self-interested actions that take the reactions of others into account?
Strategic behavior
In a sequential game, how does the firm that moves first impact the outcome of the game?
The first firm can establish a Nash equilibrium that is favorable to the first firm.
Which best describes the graphical portrayal of marginal cost?
The marginal cost curve declines sharply at first, reaches a minimum, and then rises abruptly.
What is the difference between options in the marketplace and in the public sector?
The marketplace can satisfy preferences exactly, while the public sector requires choosing a candidate who is not always an exact fit.
The change in total revenue is called ___ revenue
marginal
The change in total revenue that results from selling one more unit of output is called revenue.
marginal
What is the definition of total product (TP)?
The total quantity, or total output, of a particular good or service produced
The socially optimal price is where a monopoly's price is equal to :
marginal cost
The supply curve for a public good is society's
marginal cost curve
Which statement best describes combinations of goods that are beyond the production possibilities curve?
They are unattainable
A firm would not produce a unit of output where ______.
marginal cost exceeds marginal revenue
Which statement is true about oligopolies?
They do not achieve allocative efficiency because their price exceeds marginal cost.
Which of the following goods would be considered a rivalrous private good?
Tickets to a movie
What is the goal of mechanism design as it relates to democratic voting?
To design voting rules that minimize the chance of inefficient outcomes
Which are reasons that that firms merge?
To increase control over the product's price To increase economies of scale To increase market share To obtain lower input prices
Based on the figure, why would a firm deviate from a collusive outcome as presented in the payoff matrix?
To increase its profit
Average product declines when ______.
marginal product is less than average product
A purely competitive firm's demand schedule is equal to which of the following?
marginal revenue average revenue
True or false: A decrease in income will shift the budget line to the left.
True
True or false: Firms within pure competition will produce standardized products.
True
The downward-sloping willingness-to-pay curves for public goods are also known as ______.
marginal-benefit curves
Oligopolies are comprised of ______.
a few large producers
The price leadership model in an oligopoly can break down and when it does it can lead to ______.
a price war
A firm's decision about what output level to produce at is based on ________ decisions.
a) marginal
Managers can identify excess capacity by measuring the gap between:
minimum ATC output and profit-maximizing output
In heavy industries, small firms are unlikely to realize ______ and will be unable to compete with large-scale producers.
minimum efficient scale
A production possibilities curve (PPC) illustrates the attainable combination ______,
of two goods that can be produced given a specific set of resources
When economists consider the output of all U.S. businesses as a single entity, they are treating them as a(n) ______.
aggregate
_ (one word) efficiency means that resources are distributed among firms and industries to yield a mix of goods and services that is most wanted by society.
allocative
Points ______ the production possibilities curve represent a maximum output of two products as long as the economy is fully employed.
along
Excess capacity refers to the:
amount by which actual production falls short of the minimum ATC output
A monopolist does not achieve productive efficiency because it produces a level of output that does not correspond to the minimum point of the ______ ______ cost curve
average total
Average total cost goes up when marginal cost is greater than ______.
average total cost
Monopolistically competitive firms are not productively efficient because output is less than society's optimal level because a producer's ______.
average total cost per unit is not at its lowest possible cost
The marginal-cost curve intersects with the average-variable-cost curve at the ______.
average-variable-cost curve's minimum
Positive economics ______ value judgments, tries to establish ______ statements about economic behavior, and deals with ______ economic events.
avoids; scientific; actual
Economically speaking, what period of time is sufficient for new firms to enter or for existing firms to exit an industry?
b) The long run
Which of the following are examples of an opportunity cost?
b) The opportunity cost of the paper used in printing textbooks is the value it would have in printing encyclopedias or romance novels. c) The opportunity cost of steel used in constructing office buildings is the value it would have in manufacturing automobiles or refrigerators.
Monopolistic competition and ______ combine, in differing degrees, characteristics of pure competition and pure monopoly
oligopoly
Productive efficiency in monopolistically competitive markets does not occur in the long run because firms set the price
on the demand curve where MR-MC to maximize economic profit, making output less than optimal from society's perspective.
Productive efficiency in monopolistically competitive markets does not occur in the long run because firms set the price
on the demand curve where MR=MC to maximize economic profit, making output less than optimal from society's perspective.
What will happen to a monopolistically competitive firm in the long run?
break even
A consumer's ____ line or constraint shows various combinations of two products that can be purchased with a specific amount of income.
budget
If at 10 units of output, total fixed cost is $10 and total variable cost is $16, what is total cost?
c) $26
Which of the following resources can a firm easily and quickly adjust?
c) Raw materials d) Fuel e) Hourly labor
A firm in an oligopolistic market ______.
can set its price and output to maximize profits
The rationing function of prices refers to the:
capacity of a competitive market to equate the quantity demanded and the quantity supplied.
Factories, storage, transportation, and machinery are all examples of ______ goods.
capital
For economists, ______ goods include all manufactured aids used in producing consumer goods and services.
capital
Which is NOT a common form of non-price competition in monopolistic competition?
cash rebates and discount coupons (both come from the manufacturer, not the retailer)
If economists examine the relationship between the price of a good and sales of that good while ignoring other related factors, or assuming those other factors are equal, they are using which of the following?
ceteris paribus
A ______ good is one that is used together with another good.
complementary
The straight-line budget constraint indicates ______ opportunity cost.
constant
A comparison of the marginal cost of a project or program with the marginal benefits is known as
cost-benefit analysis
The transformative effects of competition are often referred to as:
creative destruction
Monopolistically competitive firms are not productively efficient because
output is less than society's optimal level because a producer's average total cost per unit is not at its lowest possible cost
The marginal cost curve's shape is a consequence of the law of returns.
diminishing
In a purely competitive industry, buyers view the products of firms B, C, D and E as ______ for the product of firm A.
perfect substitutes
X-inefficiency occurs when a firm operates at a cost, which is_____ than the lowest cost for a particluar level of output.
higher
Collusion becomes more difficult as the number of firms
increases
The supply curve for any good, private or public is
its marginal-cost curve
According to the median-voter model, the person holding the ______ position on an issue is most likely to determine the outcome of a majority vote.
middle
The supply curve illustrates the relationship between ______.
price and quantity supplied
Economic profit for a firm will result if:
price exceeds average total cost
A ______ lists the different combinations of two products that can be produced with a specific set of resources, assuming full employment.
production possibilities table
The location of the product supply curve depends on the:
production technology.
The production of a good or service in the least costly way is known as ______ efficiency.
productive
Competition among corn producers forces them to use the best technology and right mix of productive resources; otherwise their costs will be too high relative to the market price and they will be unprofitable. This is best described as ______.
productive efficiency
When a firm's price is equal to its minimum average total cost of producing a product, ___ exists.
productive efficiency
When a firm's price is equal to its minimum average total cost of producing a product, ______ exists.
productive efficiency
Competitive market economies generate ______.
productive efficiency allocative efficiency
A change in demand is represented by a ______ the demand curve while a change in quantity demanded is represented by a _______ the demand curve.
shift of; movement along
An increase in income will ______.
shift the budget line to the right
A firm cannot avoid paying fixed costs in the _______ run.
short
A firm cannot avoid paying fixed costs in the run.
short
If a monopolistically competitive firm is producing where its marginal revenue is less than its marginal cost, then the firm
should produce less output to increase profits or reduce losses
A purely competitive market leads to the efficient use of:
society's scarce resources
A leftward shift of a product supply curve might be caused by:
some firms leaving an industry.
Industry concentration measures the extent to which ______. Multiple choice question.
the largest firms account for industry output
Allocative efficiency refers to:
the production of the product mix most wanted by society.
Over a long time period, cheating ______ collusive oligopolies
threatens
True or false: Concentration ratios that use national market share numbers are of limited help because they do not account for the fact that competition in many industries is concentrated in local markets.
true
If total variable cost is $100, total fixed cost is $100, and output is 10, what is average variable cost?
$10
Suppose the total fixed cost of a firm is $500, the total variable cost is $200, and the output produced is 5 units. The average fixed cost of the firm is ______.
$100
What is the total revenue if economic profit is $24,000 and economic costs are $96,000?
$120,000
What is the total revenue if the economic profit is $24,000 and the economic costs are $96,000?
$120,000 Reason: Rearrange the profit formula to solve for total revenue: economic profit equals total revenue minus total economic cost.
As the first mover in a sequential game, the firm is able to its rivals from entering the market.
preempt
Which of the following is a characteristic of a monopolistically competitive market?
A relatively large number of sellers producing differentiated products
Which of the following is a potential cause of the special-interest effect?
A small number of people advocating for and benefiting from a program at the expense of a much larger group of people
If a firm estimates that its level of output will be 40 units, it will most likely select the plant size depicted by which short-run cost curve in the accompanying figure?
ATC -3
Which businesses would allow for the greatest use of management specialization?
An international airline An automobile manufacturer
Economic, technological, legal, pricing and advertising strategies are all types of:
Barriers of entry
Suppose an industry has 10 firms and each has a 10% share of the market. This industry's Herfindahl index is
Blank 1: 1000
Variable costs change with the level of .
Blank 1: output or production
Which of the following are long-run adjustments?
Boeing installs more robotic welding equipment. Boeing adds a new production facility.
How close a monopolist charge the price of its products?
By changing the quantity of the product it produces
What are two ways that a purely competitive firm can determine the level of output at which it will realize maximum profit or minimum losses?
By comparing marginal revenue to marginal costs By comparing total revenue to total costs
Based on the payoff matrix if Big Box makes the first move, what will be the outcome of the sequential game?
Cell C
Which of the following combinations are unattainable given a consumer's budget line?
Combinations that fall beyond the budget line
Which best characterizes variable costs?
Costs that change with the level of output
As a firm grows, decision making may slow, impairing efficiency and _______ average total cost.
raising
The U-shape of the long-run average-total-cost curve results from which of the following?
Economies of scale Diseconomies of scale
What is it called when firms reach a verbal or tacit agreement with rivals about price in a social setting like the golf course?
Gentleman's agreements
Which of the following result from managerial specialization?
Greater efficiency Lower unit costs
A monopolist can increase its profit by
Charging different prices to different buyers
Specializing and participating in international trade allows an economy to do which of the following?
Circumvent the output limits imposed by its own production possibilities curve Increase the quantities of capital and consumer goods available to society
What are the negative effects if large oligopolists do not advertise?
Consumers would be unaware of important new products. Customers might purchase less efficient products that cost more.
When productive efficiency and allocative efficiency are not achieved in the market, it is called
Efficiency loss
Public choice theory provides an economic analysis of which of the following subjects?
Elections Government decision making Politics
Which of the following shows the effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand?
Equilibrium price falls and the change in equilibrium quantity is indeterminate.
Based on the information given in the table, which of the following statements are true?
Every unit of output up to and including the ninth unit represents greater marginal revenue than marginal cost. The ninth unit of output is the profit-maximizing level of output.
________________ means that sellers can restrict people who do not pay for a product from obtaining its benefits.
Excludability
Characteristics of a pure private good include:
Excludability, Rivalry
____________ costs are the monetary payments a firm makes to those who provide the factors or inputs to production.
Explicit
When a firm considers its economic costs, it considers which of the following?
Explicit and implicit costs All opportunity costs of resources used
What must be eliminated or avoided if the "invisible hand" is to produce socially optimal outcomes in purely competitive markets?
Externalities
Economists use the terms "capital" and "money" interchangeably.
False
Everyone except for the super wealthy has a finite, or limited, amount of income.
False
True or false: A pure monopoly involves a very large number of firms producing a single unique product.
False
True or false: Economic costs equal explicit costs minus implicit costs.
False
True or false: Everyone except for the super wealthy has a finite, or limited, amount of income.
False
True or false: Firms in an oligopoly always produce a homogeneous product.
False
True or false: Higher resource prices create lower ATC and cause an upward shift of the long-run ATC curve.
False
True or false: Important determinants of an industry's structure are economies of scale and revenue.
False
True or false: In the Unitde States, most regulatory agencies do not establish a fair return price.
False
True or false: Price discrimination is always legal in the US
False
True or false: Quantity supplied increases as price decreases, and economic profit is usually higher at lower product prices and output.
False
True or false: Under the price leadership model, the price leader frequently adjusts price in response to day to day changes in the market.
False
True or False: Product differentiation in a monopolistically competitive market always entails more costs than benefits.
False (definite word ALWAYS makes it False)
True or false: Price discrimination is not practiced very often in the US economy.
False (price discrimination is widely practiced in the US economy)
True or false: For a pure monopolist, total revenue increases at an increasing rate
False (total revenue increases at a diminishing rate)
True or false: Network effects exist if the value of a product to each user decreases as teh total number of users increases.
False (value of product increases as the number ot users increases)
Which of the following reflects the possible actions of firms in a repeated game?
Firm "A' will cooperate with Firm "B" in game one with the expectation that Firm "B" will then cooperate with Firm "A" in the next game.
Which scenario describes a simultaneous game?
Firms choose strategies at the same time.
Which of the following is not a characteristic of oligopoly?
Firms have no control over their price.
How does a repeated game impact firms' behaviors?
Firms may restrain from competing as hard as possible. Firms may reciprocate their rivals' actions. Firms may want to cooperate.
If there are losses in the long run, what adjustments will take place?
Firms will exit the industry until losses are eliminated.
A firm's insurance premiums are generally considered costs.
Fixed
costs are part of the simple existence of a firm's plant and must be paid even when output is zero.
Fixed
In the short run, a business manager is unable to alter which of the following?
Fixed Costs
The ____________ rider problem occurs when a person benefits from a good for which he or she has not paid.
Free
The situation occurring when people can receive the benefits from a good without having to pay for it is known as the ______ problem.
Free-rider
Excess capacity is the
Gap between Q3 and Q4
When a country engages in international specialization, it focuses on producing which of the following?
Goods with the lowest opportunity costs
_____________ failure refers to economically inefficient outcomes caused by shortcomings in the public sector.
Government
How can advertising increase monopoly power of a firm?
Greater market shares Increased profits Increased brand loyalty
Which of the following is a measure of industry concentration that equals the sum of the squared percentage market shares of all firms in the industry?
Herfindahl index
______ competitors can influence total supply through their won output decisions.
Imperfect
______ competitors include pure monopolists, oligopolists, and monopolistic competitors.
Imperfect
Which term best describes the allocation of resources that occurs under the private and public sectors?
Imperfect but necessary
What type of opportunity cost does a firm incur when it uses resources that it already possesses instead of selling them for cash?
Implicit
The fact that industry concentration may be overstated because the four-firm concentration ratio only accounts for production within the United States represents what kind of shortcoming with the four-firm concentration ratio?
Import competition
Whether a purely competitive industry is a constant-cost industry or an increasing-cost industry, the final long-run equilibrium position of all competitive firms share which of the following characteristics?
In the long run, an equality occurs where price equals marginal revenue, which equals minimum average total cost. Price or marginal revenue will settle where it is equal to minimum average total cost. In the long run, a multiple equality occurs where price equals marginal cost which equals the minimum average total cost.
Which of the following is a determinant of demand?
Income
_______ comes in form of wages, interest, rent, profit, and even from government programs.
Income
What are two goods called when a change in the price of one good has little or no effect on the demand for the other?
Independent goods
What is the firm's most likely response if price is exactly equal to minimum average variable cost?
Indifference to producing or shutting down
The four-firm concentration ratio understates the competition in the aluminum industry because aluminum competes with copper in many applications. What kind of problem does this represent with the four-firm concentration ratio?
Interindustry competition
Which of the following is true of positive economics?
It avoids value judgments, tries to establish scientific statements about economic behavior, focuses on facts and cause-and-effect relationships.
Greater labor specialization has which of the following effects?
It eliminates the loss of time that occurs whenever a worker shifts from one task to another.
What are the positive effects of large oligopolists advertising?
It enhances competition and reduces monopoly power. It lowers search costs of information for consumers.
What happens to average product as additional units of labor are added to a fixed plant?
It increases, reaches a maximum, and then decreases.
Which of the following is true regarding a firm's plant capacity?
It is fixed in the short run.
Which of the following statements are true about allocative efficiency?
It is impossible to produce net gains for society by altering the mix of goods and services produced. The goods and services produced are those that society most wants to consume. The marginal cost and marginal benefit of producing each unit of output is equal.
Which of the following describes consumer surplus?
It is the difference between the maximum price that consumers are willing to pay for a product and the market price for that product.
Suppose that there are two firms Chipco and Dramco. Chipco faces lower costs than Dramco, and both firms follow international strategies. Now, Chipco makes a credible threat that Dramco must follow its national strategy. Else, Chipco will dramatically lower its price to its average total costs, making it difficult for Dramco to compete. Based on the payoff matrix, how will the outcome in the game change?
It will move away from the Nash equilibrium, cell A, to cell D.
When Chipco makes an empty threat that they will lower their price significantly if Dramco does not also follow its national pricing strategies like Chipco, how does it impact the outcome of the game based on the payoff matrix?
It will move towards Nash equilibrium, cell A.
Which of the following is true about the oligopolist if rivals match a price cut but ignore a price increase?
Its marginal revenue curve would consist of two segments Reason: All oligopolists' or imperfect competitors' demand curves are down-sloping because they are price makers
Which of the following exemplify a rivalrous good?
John eats an apple for lunch; Mary drinks a can of Pepsi.
In the short run, if a firm wants to vary its output, what resources can it adjust?
Labor Materials
A firm grows from one to three plants. As a result, the firm's sales increase, leading to greater marketing expertise. This is an example of which of the following?
Learning by doing
A time period during which a firm can adjust the quantities of all the resources that it employs, including plant capacity, is known as which of the following?
Long run
Economically speaking, what period of time is sufficient for new firms to enter or for existing firms to exit an industry?
Long run
A planning curve is another term for which of the following?
Long run average-total-cost curve
Which is true of pure competition but not of monopolistic competition?
Long-run equilibrium occurs at the minimum point on the ATC curve.
Which of the following does a decreasing-cost industry experience?
Lower costs as industry output expands.
By expanding the size of its operations, a growing firm is able to experience economies of scale to do which of the following?
Lower its average total costs
In the short-run, monopolistically competitive firms maximize profits or minimize losses by producing the output level where:
MR=MC
Between P2 and P4, the firm will minimize its losses by producing and supplying the quantity at which:
MR=P=MC
Which discipline studies the economy as a whole or its basic subdivisions or aggregates?
Macroeconomics
_____is the discipline that examines the performance and behavior of an economy as a whole.
Macroeconomics
In the United States, decisions regarding taxation, regulation of business, and government intervention in private markets are made via a process that relies heavily on which of the following?
Majority voting
_________ product is the change in total product divided by the change in labor input.
Marginal
The government can provide the efficient amount of a public good by adhering to which of the following rules?
Marginal benefit equals marginal cost
The government can provide the efficient amount of a public good by adhering to which of the following rules?
Marginal benefit equals marginal good
What is the term for the extra cost of producing one more unit of output?
Marginal cost
Which of the following costs can a firm control directly and immediately?
Marginal cost
A firm's decision whether to produce a few more or a few less units of output is a decision based on which of the following?
Marginal data
What happens to marginal product when total product is increasing but at a decreasing rate?
Marginal product is positive but falling.
What happens to marginal product when total product is increasing at an increasing rate?
Marginal product is rising.
Which of the following are scenarios in which a firm should continue to produce?
Marginal revenue is $0.25 and marginal cost is $0.20. Marginal revenue is $5 and marginal cost is $4.75. Marginal revenue is $1.50 and marginal cost is $1.45.
The equilibrium price where the quantity demanded equals the quantity supplied is otherwise known as the ______-clearing price.
Market
Which of the following are examples of variable costs?
Materials costs Fuel costs Transportation services payments
What are the effects of the "invisible hand" in a purely competitive economy?
Maximum profits for individual producers Resource allocation that maximizes consumer satisfaction
Which of the following are issues most explored in microeconomics?
Measuring the price of specific goods, the expenditures of a government entity, measuring total revenues of a firm
Which field of economics and game theory studies how to establish procedures that will minimize the chance of inefficient votes?
Mechanism design
Which discipline studies the decision-making process of customers, workers, households, and business firms on an individual basis rather than as aggregates?
Microeconomics
According to the median-voter model, the person holding the ______ position on an issue is most likely to determine the outcome of a majority vote.
Middle
Economic profit will fall to zero and firms will choose not to enter an industry when price is equal to which of the following factors?
Minimum average total cost Marginal cost
Which of the following occurs at a low level of output for small businesses such as those in retail trades and light manufacturing industries?
Minimum efficient scale
A good way to describe ________ competition is that is mixes a small amount of monopoly power with a large amount of competition, while _______ competition blends a large amount of monopoly power, a small amount of competition through entry, and considerable rivalry among firms.
Monopolistic Oligopolistic
Which of the following turns out variations of a particular product?
Monopolistic Competition is distinguished by product differentiation
________ _________ is a market characterized by having many sellers, differentiated products, and with ease of entry and exit from an industry.
Monopolistic competition
Which of the following combine, in differing degrees, characteristics of pure competitions and pure monopoly?
Monopolistic competition and oligopoly
_______ (one word) is/are worth studying because it provides insights into the market structures of monopolistic competition and oligopoly
Monopoly
What has been the result of a recent increase in foreign competition in oligopolistic industries?
More competitive pricing
What may occur when only a single firm can achieve the economies of scale necessary to compete in an industry?
Natural monopoly
What is the term used to describe a single firm with the bulk of sales in a specific market<
Near-monopoly
How does a purely competitive market restore allocative efficiency when an increase in demand disrupts efficiency?
New firms enter and increase industry output until price and marginal cost are equal.
Which characteristics of pure monopoly requires a consumer to buy the monopolized product or do without it enterely?
No close substitutes
Based on the figure, if Big Box decides to build what will Huge Box decide to do and what will be the profits of Big Box and Huge Box respectively?
Not build; $12; $0
When the marginal cost of an additional unit of output exceeds the marginal revenue, what should the firm do?
Not produce that additional unit of output
Which of the following best describes a pure monopoly?
One firm selling a single unique product, where entry of additional firms is blocked and there is considerable control over price
If the objective of government is to achieve allocative efficiency, what kind of price should government establish for the monopolist?
One that is equal to its marginal cost
What kind of game is it when firms choose their optimal pricing strategy today without worrying about possible interactions in the future?
One-time game
Andrea and Robert are considering operating a retail jewelry store. Robert has been designing jewelry for a wholesaler since graduating from college. Andrea was a business major and is evaluating if they can increase their income by being in business for themselves. Which of the following characteristics show that the industry they wish to enter is a monopolistically competitive industry?
Opening a retail jewelry store is relatively easy. There are many places to buy jewelry.
Which are barriers to entry in both monopolies and oligopolies?
Patents Ownership and control of raw materials Large capital investment Preemptive pricing
Which group of costs is the most accurate example of variable cost?
Payments for materials, fuel, power, and transportation services
Which resource requires the most time for a firm to adjust, given a change in demand?
Plant capacity
The long-run average-total-cost curve is derived from the many short-run average-total-cost curves, each of which represents a different ______.
Plant size
At which point will a firm be indifferent whether to shut down or continue to produce?
Point b
______________ corruption occurs when government officials abuse their entrusted powers for personal gain.
Political
Unlawful misdirection of governmental resources or actions that occur when government officials abuse their entrusted powers for political gain is better known as ______.
Political corruption
Why do principal-agent problems arise in representative democracies?
Politicians' goals, such as reelection, may conflict with the best interest of constituents.
Public choice theory provides an economic analysis of which of the following subjects?
Politics Elections Government decision making
__________________-_____________________ politics is a means of securing a government project that yields benefits mainly to a single political district. (Enter only one word in each blank.) Listen to the complete question
Pork-barrel
In pure competition, to calculate economic profit, we first calculate the difference between and average total cost and then multiply it by output. (Type only one word in blank.)
Price
Achieving economic efficiency that uses the right amount of scarce resources to produce the right amount of output requires a triple equality. Which three components must be equal?
Price Marginal cost Minimum average total cost
Which of the following improves as production increases?
Price-marginal cost relationship
______________-agent (one word) problems are conflicts that arise when tasks are delegated by one group of people to another group of people.
Principal
A firm's manager is given the following information: To sell 4 units of output, a price of $ 132 must be charged; this level of output reflects marginal revenue of $102 and marginal cost of $60. If the firm wants to sell 5 units of output, a prie of $122 must be charged; this reflects marginal revenue of $82 and marginal costs of $70. To sell 6 units of output, a price of $122 must be charged; at this level of output, marginal revenue will be $62 and marginal costs $80. What should the manager do?
Produce 5 units of output and charge $122
Which of the following explains why a firm would not produce a unit of output where MC exceeds MR?
Producing it would add more to costs than to revenue, and profit would decline or loss would increase
_____ lists the different combinations of two products that can be produced with a specific set of resources, assuming full employment
Production Possibilities Table
Which of the following illustrates the attainable combination of two goods that can be produced given a specific set of resources?
Production possibilities curve
In the long run, a monopolistic competitor fails to achieve which of the following?
Productive efficiency Allocative efficiency
Within reason, everyone can benefit from ______ goods and there is no effective way of excluding individuals from the benefits derived from them once they exist.
Public
Which type of analysis seeks to understand government decision making, politics, and elections?
Public choice theory
Which of the following examples exemplifies a rivalrous private good?
Purchasing the last in-stock cell phone at the wireless cell phone store.
Which type of market produces the most efficient use of society's resources?
Pure competition
Match the market models based on the number of firms present in each model.
Pure competition = Very large number Monopolistic competition = relatively large number oligopoly = few Monopoly = One
______ is relatively rare in the real world, although this market model is highly ______ to several industries.
Pure competition; relevant
competition is considered to be rare in the real world.
Pure or perfect
Your company's total sales revenue for the month is $150,000; the costs to produce your products are $12,000 for rent, $6,000 for utilities, and $42,000 for employee wages. What is your accounting profit?
Reason: $150,000 - $60,000 (explicit costs) = $90,000.
What is the definition of economies of scale?
Reductions in the average total cost of producing a product as the firm expands the size of its plant (its output) in the long run.
Which of the following are examples of fixed costs?
Rental payments Interest on a firm's debts
What is the cause of a society's increasing opportunity costs with respect to the production of goods?
Resources that are not fully interchangeable
_________________ means that the purchase and consumption of a good makes the purchase and consumption of that good unavailable to another person.
Rivalry
Private goods exhibit two consumption characteristics, _____________ and _____________
Rivalry, Excludability
Based on the graph, which of the following is the reason for the demand curve segment e to D1?
Rivals match a price decrease
Which of the following features occur in a purely competitive market?
Sales in both national and international markets. Many independently acting sellers
In a(n) game one firm moves first, committing to a strategy and then the rival firm responds.
Sequential
In what kind of game does one firm move first and commit to a specific strategy and then the rival responds?
Sequential game
B-Balls, a manufacturer of athletic balls, is facing increased competition due to the entry of several new firms into the industry. These new competitors have resulted in reduced demand for B-Balls' basketballs, and the company is losing money. Which of the following steps should B-Balls take regarding price in order to minimize losses until some firms exit the industry?
Set its price at its new reduced level of demand where the MC curve intersects the MR curv
B-Balls is a manufacturer of athletic balls sold to sporting goods retailers. Recently, it has noticed the entry of several new firms into the industry due to an increase in demand for athletic balls resulting from increased school enrollments throughout the country. The accounting department notified management that they were actually losing money making the basketballs due to reduced demand for their basketballs caused by all of the new competitors. Which of the following steps should B-Balls, a basketball manufacturer, take in order to minimize losses until some firms exit the industry?
Set its price at its new reduced level of demand where the MC curve intersects the MR curve.
What kind of game is it if the firms must choose their pricing strategies at the same time?
Simultaneous game
Identify the correct statement about the government's allocation of resources in an economy.
Since the economy's resources are limited, decisions to use more resources in the public sector will mean fewer resources for the private sector.
Which of the following are typical characteristics of monopolistic competition?
Small Market Shares No Collusion Independent Action
Which of the following best describes the relationship between a firm's size and its ability to use managerial specialization to its best advantage?
Small firms cannot use management specialists to their best advantage.
Which of the following scenarios does not illustrate the concept of product differentiation based on service?
Some stores may charge different prices.
The _______________-____________________ effect happens when a small number of people successfully lobby the government for policies that are advantageous to them but defy the will of the majority.
Special-Interest
Which of the following scenarios does NOT illustrate the concept of product differentiation based on service?
Stores charging different prices Different Prices is NOT a form of "Service"
Which of the following goods could be classified as nonexcludable?
Street lighting Environmental protection
Which of the following goods could be classified as nonexcludable?
Street lighting, Environmental protection
Which of the following diverts purchasing power from private spenders to government, thereby removing resources from private use?
Taxation
Which of the following factors will alter costs and shift the marginal cost or short-run supply curve to a new location?
Technology Prices of variable inputs
Choose all of the following that will cause a change in supply, not quantity supplied.
Technology Producer expectations Number of sellers
What is the effect of an increase in the price of labor on the ATC, AVC, and MC curves?
The average-variable-cost, average-total-cost, and marginal-cost curves shift upward. The average-fixed-cost curve remains the same.
Based on the payoff matrix, if the two firms agreed to both follow national strategies there is an incentive for them to cheat. If one of the firms cheats on this agreement, what will happen?
The game would temporarily move to either cell B or cell C. The game would eventually end in the Nash equilibrium (cell A).
What are reasons that it difficult for small firms to make use of efficient capital?
The high price of production equipment is often prohibitive. The efficient use of large-scale production equipment requires a high production volume.
Why is collusion unlikely in a monopolistically competitive industry?
The industry has a relatively large number of firms.
What determines market price and equilibrium output in a market?
The interaction of buyers and sellers
Which of the following is a model used to examine oligopolistic pricing?
The kinked-demand curve model
A production possibilities curve with an increasing slope is the result of which of the following?
The law of increasing opportunity costs
Which statement is true about an industry and the Herfindahl index?
The lower the index, the more likely the industry is monopolistically competitive.
What does the long-run average-total-cost curve show?
The lowest average total cost at which any chosen output level can be produced after the firm has had time to make adjustments in plant size
In this graph, which curve represents the firm's short-run supply curve?
The marginal-cost curve
What is a term for a situation in which paired-choice voting by majority rule fails to produce a consistent ranking of society's preferences for public goods or public services?
The paradox of voting
Which of the following best describes the economic break-even point?
The point where total revenue covers all costs, but there is no economic profit.
Why is collusion desirable to oligopolistic firms?
The possibility of price wars diminishes and profits are maximized.
What is the example of game theory based on a scenario where two people are encouraged to confess to a crime?
The prisoner's dilemma
Which of the following are examples of a long-run adjustment period?Which of the following are examples of a long-run adjustment period?
The two days it takes a t-shirt maker to add sewing machines and silk-screen printers The three years it takes an oil refining company to build a new plant
The smoothness of a long-run average-total-cost curve results from which of the following?
The virtually unlimited number of available plant sizes
What happens to variable costs during the onset of production when marginal product is increasing?
They decrease with successive units of output.
Which statement is true about oligopolies?
They may produce homogeneous or differentiated products.
What happens to oligopolistic firms when a recession occurs?
They move leftward and upward to a higher point on the average-total-cost curve.
B-Balls, a manufacturer of athletic balls, is facing increased competition due to the entry of several new firms into the industry. These new competitors have resulted in reduced demand for B-Balls' basketballs, and the company is losing money. What should B-Balls do in regard to output for their basketballs to help minimize losses until some firms exit the industry?
They should reduce output to wherever their new MR curve equals the MC curve caused by a leftward shift in demand.
B-Balls is a manufacturer of athletic balls sold to sporting goods retailers. Recently, it has noticed the entry of several new firms into the industry due to an increase in demand for athletic balls resulting from increased school enrollments throughout the country. The accounting department notified management that they were actually losing money making the basketballs due to reduced demand for their basketballs caused by all of the new competitors. What should B-Balls do in regard to output for their basketballs to help minimize losses until some firms exit the industry?
They should reduce output to wherever their new MR curve equals the MC curve caused by a shift in demand leftward.
Which of the following sets of values are necessary to compute average total cost (ATC)?
Total cost and output Average fixed cost and average variable cost Total variable cost, total fixed cost, and output
What methods can be used to calculate average total cost?
Total cost divided by output (Q) Average fixed cost plus average variable cost
What is the term for the total quantity of a specific good produced?
Total product
The shape of the marginal cost curve reflects which of the following?
Total variable cost first increases by decreasing amounts then by increasing amounts.
A trade-off occurs when some quantity of production of a good is given up in order to produce another good.
True
Resources should be shifted from the private to the public sector if the benefit from the extra public goods exceeds the cost that results from having fewer private goods.
True
True or false: A cartel abides by a formally written agreement that specifies the output and price of each member firm and is a form of overt collusion.
True
True or false: A one-time game occurs when firms will choose their pricing strategy for today without concern about future interactions with their rivals.
True
True or false: Based on the payoff matrix, 2Cool could improve its outcome if ThirstQ holds its advertising budget to the normal level.
True
True or false: Efficiency within pure competition can be temporarily disrupted by a change in consumer tastes.
True
True or false: Heavy industries, such as aluminum and steel, exhibit the pattern of declining long-run average total costs.
True
True or false: Implicit costs are the firm's opportunity costs of using its self-owned, self-employed resources.
True
True or false: In a representative democracy, principal-agent problems often occur because politicians have goals that aren't consistent with those of their electorate.
True
True or false: In an industry with an extended range of constant returns to scale, firms of varying sizes can coexist and be equally profitable.
True
True or false: Resource costs or changes in these costs to production are responsible for shifts in the supply curve.
True
True or false: Resources should be shifted from the private to the public sector if the benefit from the extra public goods exceeds the cost that results from having fewer private goods.
True
True or false: Special interest groups will often support even failing bureaucratic agencies to further their own agenda.
True
True or false: Strategic behavior takes into account the reactions of others.
True
True or false: The short run and the long run are conceptual periods rather than calendar time periods.
True
True or false: When there is no effective way of keeping individuals from the benefit of a good once it comes into existence, the good is said to be characterized by nonexcludability.
True
When there is no effective way of keeping individuals from the benefit of a good once it comes into existence, the good is said to be characterized by nonexcludability.
True
In microeconomics, the long run is also known as which of the following?
Variable-plant period
Match each market structure with the description that best describes the conditions for exit and entry into that industry.
Very easy, no obstacles = purely competitive Relatively easy = monopolistically competitive Significant obstacles = oligopoly Blocked = monopoly
Why is the provision of public goods and services inherently inefficient?
Voters must select among a bundle of goods and services that does not exactly match their preferences.
Which of the following resources would be considered to be land by an economist?
Water Oil and mineral deposits Forests Arable land
After a company has determined that it should produce a product and the amount of the product to produce, what basic question should it ask?
What economic profit (or loss) will we realize?
Confronted with the market price of its product, a purely competitive producer will ask which three questions?
What economic profit or loss will we realize if we produce this product? Should we produce this product? If we produce this product, in what amount?
When do demand-side market failures occur?
When demand curves underreport how much consumers are willing and able to pay for a product
When is marginal cost at its minimum?
When marginal product product is at its maximum
When will a firm earn an economic profit?
When price is greater than average total cost.
Economic Efficiency occurs when firms produce ________.
Where P=MC=minimum ATC The equality of price and minimum ATC yields productive efficiency; whereas the equality of P=MC yield allocative efficiency. Together they yield economic efficiency.
Which of the following worker productivity factors often lead to diseconomies of scale?
Worker alienation from the employer Increased opportunities to shirk and avoid work
A decrease in demand while holding supply constant results in ______ in both equilibrium price and quantity.
a decline
The effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand are shown by ______.
a decrease in equilibrium price and an indeterminate change in equilibrium quantity
The inverse relationship between price and quantity demanded can be graphically illustrated by ______.
a downward sloping curve
Which of the following best exemplifies a firm with excess capacity?
a fast-fod restaurant where customers never have to wait to place an order
Which of the following does the monopolist ot have?
a supply curve
Which of the following are types of resources that require more time for a firm to adjust, given a change in demand?
a) Amount of machinery c) Size of the factory
Which of the following are ways that industries and firms can change the amounts of inputs used in the long-run?
a) An industry can change its overall capacity. c) A firm can build a larger plant. d) An industry can make major complex technological production advances.
_________ costs are payments made by firms to attract the resources they need away from alternate production opportunities.
a) Economic e) Opportunity
What type of costs do firms incur when producing products?
a) Implicit d) Explicit
What methods can be used to calculate average total cost?
a) Total fixed cost divided by output (Q) plus total variable cost divided by output (Q) b) Total cost divided by output (Q) c) Average fixed cost plus average variable cost
When a firm considers its economic costs, it considers
a) all opportunity costs of resources used d) explicit and implicit costs
If you quit your job to start your own business, your forgone wages are:
a) an opportunity cost c) an implicit cost
When marginal product at its maximum, marginal costs:
a) begin rising with additional output produced. c) are at a minimum at the same output level
Marginal cost designates the cost that:
a) can be incurred by producing an additional unit c) can be saved by not producing the last unit
If total variable cost is $100, total fixed cost is $100, and output is 10, what is average variable cost?
b) $10
Which is the definition of explicit costs?
b) A firm's monetary payments made for the use of resources owned by others. d) A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services.
Which of the following is an example of labor specialization?
b) Each worker may now have just one task instead of five or six. d) Workers can work full-time on the tasks for which they have unique skills. e) Hiring more workers means jobs can be divided and subdivided.
Which of the following are examples of implicit costs?
b) Foregone wages c) Foregone rent
Which group of costs is the most accurate example of variable cost?
b) Payments for materials, fuel, power, and transportation services
Which of the following is not covered when an entrepreneur's economic profit is zero?
b) Pure profit
When cost curves shift, it is die to changes in which of the following?
b) Technology c) Resource prices
When a firm chooses to produce the appropriate level of output, it has made:
b) a decision in the margin
A natural monopoly is a relatively rare market situation where average total cost is
b) minimized when only one firm produces the particular good.
Greater ________ specialization eliminates the loss of time that occurs whenever a worker shifts from one task to another.
b) resource
The formula for marginal costs is
b) the change or difference in total variable cost divided by the change or difference in output c) the change or difference in total cost divided by the change or difference in output
What type of costs in total do not vary with changes in output?
b)Fixed
What is the definition of efficient capital?
c) The purchase and effective use of efficient capital equipment to achieve large scale production economies of scale
A firm can most easily increase its output in the short run by
c) adding units of labor to its fixed plant.
The shape of a long-run average total cost curve will determine:
c) the number and size of firms in the industry
High-volume production and being a large-scale producer are economic justifications for:
c) the purchase of efficient capital
A firm operating in a purely competitive market is a price taker because it ______.
cannot change the market price, it can only adjust to it
Entry of new firms into monopolistically competitive industries is relatively easy because ______.
capital requirements are low
In monopolistically competitive industries
collusion is unlikely because there is a large number of firms.
When members of an oligopoly meet to set prices to maximize profits it demonstrates the ______ and/or the ______ model.
collusion; cartel
The optimal size and scope of a project is determined by
comparing marginal costs to marginal benefits
The optimal size and scope of a project is determined by ______.
comparing marginal costs to marginal benefits
Pure ___ involves a very large number of firms.
competition
The figure illustrates that in an industry with an extended range of returns to scale, firms of varying sizes can coexist and be equally profitable.
constant
An industry where expansion or contraction will not affect resource prices and production costs is known as a(n) ______.
constant-cost industry
The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be ______.
consumed at various possible prices
One of the determinants of demand is ______ expectations.
consumer
In purely competitive markets, efficiency can be temporarily disrupted and then restored by changes in:
consumer tastes. technological changes. resource supplies.
involves an assessment of marginal costs and marginal benefits associated with a project or program
cost-benefit analysis
What is the best definition of constant returns to scale?
d) The unchanging average total cost of producing a product as the firm expands the size of its plant (its output) in the long run.
The long run average total cost curve is made up of:
d) all points of tangency of the short run average total cost curves
Average total cost ________ when economies of scale exist and a firm is expanding production.
declines
Marginal revenues (MR) for the monopolist compared to that of a pure competitor .......
declines and is lower than product price
A natural monopoly occurs when he market demand curve crosses the long-run average total cost curve where average total costs (ATC) are still.....
declining
Economies of scale refer to ____ average total costs whit added firm size.
declining
Heavy industries, such as aluminum and steel, exhibit the pattern of _______ long-run average total costs.
declining
When the demand for a good is price elastic, an increase in its price, will _______ total revenue
decrease
An unfavorable change in consumer tastes and preferences for a product will ______ demand, which is illustrated as a shift of the demand curve to the ______.
decrease; left
A change in the number of buyers is a determinant of market ________.
demand
A pure monopolist must face a downward-sloping product _______ curve
demand
If products A and B are complements and the price of B decreases, the:
demand for A will increase and the quantity of B demanded will increase
Firms with downward-sloping product____ curves are called price_____.
demand; makers
When minimum efficient scale occurs at a low level of output, consumer ______ may support a large number of relatively ______ producers.
demand; small
In a manufacturing plant with no labor, adding labor increases output and marginal product. However, at some point increasing labor will no longer increase output at the same rate. Adding even more labor eventually causes marginal product to decline, because there will simply not be enough space for so many workers to work. This is an example of the law of returns.
diminishing
The law of ______ returns states that as successive units of a variable resource are added to a fixed resource, beyond some point, the marginal product will decline.
diminishing
A farmer cultivates a cornfield by fertilizing and increases the farm's yield to 50 bushels per acre. Additional cultivation increases the yield but at a decreasing rate. At some point, additional cultivation will not lead to any additional output per acre. This is an example of the law of ______.
diminishing returns
Assuming technology and production techniques are fixed and cannot change, if beyond some point of production a firm experiences declining units of additional output with each additional unit of labor input, then the firm is experiencing the effects of the law of ______.
diminishing returns
According to the law of supply, price and quantity supplied have a(n) ______ relationship.
direct/positive
Average total cost equals total cost _______ by output.
divided
A firm position itself in the best profit-maximizing(or loss-minimizing) level of production if that amount of output fleflects the point at which the last unit's marginal revenue is equal to its marginal cost because:
each unit of output after the MR=MC amount will earn less revenue than its costs
Entry into monopolistically competitive industries is
easy compared to oligopoly.
A firm's _________ costs are the explicit and implicit costs of the resources it has used.
economic
All natural resources, human resources, and manufactured goods that go into the production of goods and services are considered as society's scarce _______ resources
economic
All natural resources, human resources, and manufactured goods that go into the production of goods and services are considered as society's scarce __________ resources.
economic
The ______ cost of any resource used to produce a good is the value or worth the resource would have in its best alternative use.
economic
Total ____ profit is found by multiplying per-unit profit by the profit-maximizing output.
economic
The _________ of any resource used to produce a good is the value or worth the resource would have in its best alternative use.
economic cost
A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions is known as a
economic principle
A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions is known as a(n) ______.
economic principle
In the given figure, the monopolistically competitive firm's economic profit per unit when producing at Q1 units of output:
economic profit=Price-ATC EP=(P1-A1)*Q1
Economists maintain that new firms are attracted into an industry due to:
economic profits
Government failure refers to
economically inefficient outcomes caused by shortcomings in the public sector
Government failure refers to ______.
economically inefficient outcomes caused by shortcomings in the public sector
A firms's long-run average total cost may decline over a wide range of output due to ______ of scale
economies
Start-up firms achieve of scale from learning by doing and through increased specialization of labor, management, and equipment.
economies
Learning by doing contributes to a firm's ______.
economies of scale
The ____ problem refers to the need to make choices because economic wants exceed economic means.
economizing
In the graph, the price elasticity of demand is highly ______ above the price of P0.
elastic Reason: At prices above Po, the price elasticity of demand would be elastic
Barriers to ___reduce the likelihood or prohibits firms from entering an industry
entry
When efficiency is disrupted in pure competition, producers will reallocate resources until product supply is such that price will again _____ marginal cost.
equal
Mary tried to get an appointment with a local dentist. She was told the earliest she could be seen was 3 weeks from now. This may have been due to the lack of ________.
excess capacity
When Mary tried to get an appointment with a local dentist she was told that the earliest the doctor could see her was in three weeks. This may have been due to a lack of ______. Multiple choice question.
excess capacity
A constant-cost industry is one where ______ will not affect resource prices and production costs.
expansion or contraction
costs are the monetary payments a firm makes to purchase resources from others..
explicit
A firm's monetary payments to those who supply transportation services is an example of ______.
explicit costs
An oligopoly has ___ sellers and must consider the decisions of its rivals in determining its own ___ and output.
few; price
Oligopolies have ______.
fewer firms than monopolistic competition
There is no incentive for firms to enter or exit the industry in the long run when ______.
firms earn a normal profit price equals minimum average total cost MR = MC
In monopolistically competitive industries:
firms feel independent of one another, allowing them to determine their own price without considering the possible reactions by rival firms.
Average ________ cost always declines as output increases.
fixed
__________ costs are part of the simple existence of a firm's plant and must be paid even when output is zero.
fixed
A price _____ is a minimum price fixed by the government, generally imposed above the equilibrium price.
floor
When measuring industry concentration, the ____ is the ratio of sales of the four largest firms in an industry relative to total industry sales.
four-firm concentration ratio
When measuring industry concentration, the ________ is the percentage ratio of sales of the four largest firms in an industry relative to total industry sales.
four-firm concentration ratio
The situation occurring when people can receive the benefits from a good without having to pay for it is known as the
free-rider problem
The study of how one firm reacts to the actions taken by another firm or individual when implementing a strategy is called _____.
game theory
The difference in elasticity of demand above and below the going price creates a ______ in the marginal-revenue curve.
gap or vertical segment
What do combinations of output that fall inside the production possibilities curve represent?
goods that are attainable and less total outcome than points on the curve
A purely competitive firm's total revenue curve will
have a constant slope because each extra unit of sales increases total revenue by a constant amount
In monopolistically competitive industries, small stores with high prices can compete with larger stores by
having very convenient locations for customers.
Government may place legal limits on prices when it is determined that prices are unfairly ______ for buyers or unfairly ______ for sellers.
high, low
The price discriminator's total profit is _____ than it would be with no discrimination .
higher
Higher resource prices will result in ______ total costs.
higher average
In time, the growth of a firm's plant size and output may lead to ________ and ________.
higher average total costs; diseconomies of scale
The demand curve faced by a monopolistically competitive firm is _____.
highly but not perfectly elastic. Reason: It is elastic because the monopolistically competitive seller has many competitors producing closely substitutable goods, the latter being a determinant of the elasticity of demand.
Price leadership in an oligopoly entails a type of ______.
implicit collusion
Forgone entrepreneurial income is an example of a(n) ______.
implicit cost
The entry of new firms entering an increasing-cost industry increase resource prices particularly:
in industries using specialized resources whose long-run supplies do not readily increase in response to increases in resource demand
In general, a firm will _______ the output of a good or service if the price of the good is rising.
increase
Later in a production cycle, as diminishing returns are encountered, variable costs ______ for each additional unit of output.
increase by increasing amounts
A monopolistically competitive firm is producing at a short-run output level where average total cost is $10.00, marginal cost is $5.00, marginal revenue is $6.00, and price is $12.00. In the short run, the firm should
increase the level of output
A favorable change in consumer tastes and preferences for a product will _______ demand, shifting the demand curve to the
increase, right
A decrease in supply while holding demand constant results in a(n) ______ in equilibrium price, and a(n) ______ in equilibrium quantity.
increase; decrease
In an increasing-cost industry, increases in resource prices and the minimum average total cost (ATC) are a result of ______.
increases in product demand resulting in economic profits and industry expansion
An industry whose average total cost curve shifts upward as the industry expands and shifts downward as the industry contracts is known as a(n) ______ industry.
increasing-cost
If the market price exceeds the firm's minimum average total cost (ATC), then it will ______.
incur an economic profit
The vast majority of goods that are not related to one another are called ______ goods.
independent
The four-firm concentration ratio and the Herfendahl index measure
industry concentration
The four-firm concentration ratio and the Herfindahl index measure ______.
industry concentration
The profit-maximizing monopolist will always want to avoid the _____ segment of tis demand curve
inelastic
When comparing the demand curve for a perfectly competitive firm to demand curve of a monopolist, the monopolist's demand curve would be more______
inelastic
An industry and the firms in that industry can adjust all resource ________ in the long run.
inputs
What is the simplified term economists use to refer to "factors of production"?
inputs
Points lying ______ the production possibilities curve are attainable but reflect less total output than can be produced.
inside
In economics, the term ______ describes spending that pays for the production and accumulation of capital goods.
investment
When total product declines, marginal product ______.
is negative
The monopolistically competitive firm's economic profit per unit when producing at Q1 units of output ______.
is the difference between P1 and A1 Reason: Recall that profit can be calculated as price minus average total cost (ATC) multiplied by output. Here, P1 represents price and A1 represents ATC at Q1 units of output.
What happend to total revenue when marginal revenue is positive?
it its increasing
A price ceiling is the maximum legal price a seller may charge for a product or service where a price at or below the ceiling is ______ and a price above the price ceiling is ______.
legal; illegal
If costs of production rise, the producer has an incentive to produce (one word) output.
less, lower, fewer, decreased, reduced, lesser, or low
The price-discrimination monopolist charges a higher price to costumers who have ________ elastic demand and a lower price to costumers who have ______ elastic demand.
less; more
In this graph, a firm incurs a loss but continues to operate because price is ______ than the lowest average total cost but above the lowest average ______ cost.
less; variable
Because an economy's resources are ______ decisions to use more resources in the public sector will mean fewer resources for the _______
limited , private
From the industry's viewpoint, the run includes enough time for existing firms to dissolve and leave the industry or for new firms to be created and enter the industry.
long
From an existing firm's perspective, the ________ ________ is a time period during which it can adjust the quantities of all the inputs that it employs, including plant capacity.
long run
Economies of scale explain the downward-sloping part of the ______ curve.
long-run average-total-cost
Whit a fixed downward-sloping demand curve, the pure monopolist can only increase sales by charging a ___ price
lower
A monopolist is a price____ because it controls the total quantity produced and thus has control over the price
maker
A price _____ will use its power over product quantity and price whenever it is adventageous to do so.
maker
A marketing supervisor works in a small plant where she performs a range of duties. As the company grows and hires additional supervisors, she is able to spend the bulk of her time in her area of expertise. In this example, the company has increased its ______.
managerial specialization
If all workers are hired at the same price, the marginal cost of producing each extra unit of output falls provided the ______ of each additional worker is rising.
marginal product
In a pure monopoly,____ is less than the price for every unit of output except the first.
marginal revenue
In the short run, monopolistically competitive firms maximize profits or minimize losses by producing the output level where
marginal revenue equals marginal cost.
A firm should produce any unit of output whose ______.
marginal revenue is greater than marginal cost
The downward-sloping willingness-to-pay curves for public goods are also known as
marginal-benefit curves
Compared to pure monopolies, oligopolies ______.
may be less desirable because they are not regulated by government to protect consumers
Pork-barrel
means of securing a government project that yields benefits mainly to a single political district.
The long run, every purely competitive firm tends to operate at its ______.
minimum ATC
Achieving economic efficiency that reduces the number of resources used by increases the number of socially optimal outputs requires a triple equality. Which of the following are the three components that must be equal?
minimum of ATC Marginal Cost Price
Economists do not include money as an economic resource because ______.
money produces nothing
In general, industries that typically have lower Herfindahl index values are ______.
monopolistically competitive rather than oligopolistic
A(n)________ is able to mantain an economic profit in the long run because there are no new entrants to increase supply, dirve down price, and eliminate economic profit
monopoly
The highest barriers to entry can be found with pure_______. The lowest barriers to entry can be found with pure ________.
monopoly; competition
A monopolistic competitor's demand curve is ______.
more elastic than that of a pure monopoly but less elastic than that of a firm in pure competition
A monopolistic competitor's demand curve is:
more elastic than that of a pure monopoly but less elastic than that of a firm in pure competition
Improvements in the methods of production allows for the creation of ______.
more goods with available resources
Regulatory capture often occurs because ______.
nearly everyone who knows the details of the regulated industry works in the industry
If the benefit from producing extra public goods exceeds the cost that results from having fewer private goods, then
needed or required resources should be shifted from the private to the public sector
If the benefit from producing extra public goods exceeds the cost that results from having fewer private goods, then ______.
needed or required resources should be shifted from the private to the public sector
The relationship between the price of a good or service and the quantity demanded of that good or service described by the law of demand is
negative
From an economic standpoint, the break-even point is the level of output at which a firm makes a(n) ______ profit.
normal
In long-run equilibrium, monopolistically competitive firms will show a(n) _____.
normal
The disagreement among economists typically revolves around
normative economics
In the long-run, if a monopolistically competitive firm is earning normal profits (breaking even), then it should:
not exit the industry because both explicit and implicit costs are covered.
Demand and cost differences, the number of firms in the industry, and the potential for cheating all represent (one word) to collusion.
obstacles
The exclusive right of an inventor to use, or to allow another to use her or his invention is called:
patent
The assumption behind purposeful behavior is that ______.
people act in such a way as to rationally pursue their own interests
The size of the factory, the amount of machinery and equipment, and other capital resources make up __________ __________.
plant capacity
Unemployment in the economy is graphically represented by ______ the production possibilities curve.
points inside
occurs when government officials abuse their entrusted powers for personal gain.
political corruption
Which situation results when the profit outcomes based on the firms' pricing choices is positive?
positive-sum game
In a purely competitive market, marginal revenue is a constant that is equal to which of the following?
price
In pure competition, marginal revenue and are equal. (Remember to type only one word per blank.)
price
The determinants of the supply of a good are any factors other than the product's ______ that cause the supply curve of the good to shift.
price
When drawing a supply curve, _____ is labeled on the vertical axis.
price
In order for a monopolistically competitive firm to maximize profits, it must juggle which of the following factors?
price variety of product level of advertising
The supply curve shows the relationship between:
price and quantity supplied.
What is the term used to refer to charging different prices to different buyers of a specific product?
price discrimination
Monopolistically competitive firms do not achieve allocative efficiency because the _____.
price for a monopolistically competitive firm exceeds the marginal cost
In 2009, Walmart cut its price on several new books and Amazon matched it. Walmart then cut its price even more and it was also matched by Amazon, so Walmart cut its price again which was then undercut by Target's even lower price. What is it called when firms behave in this way?
price war
A monopolist uses the profit-maximizing rule of marginal revenue equals marginal cost to determine______ and ____
price; quantity
For the pure monopolist, there is no relationship between____ and quantity supply and therefore no supply curve
priceWhich
By controlling ______ through collusion, oligopolists may be able to reduce ______, ______ profits and block the entry of new rivals.
prices; uncertainty; increase Reason: Colluding firms, such as in an oligopoly, control prices through supply. They may individually control their own costs, but not collectively.
conflicts that arise when tasks are delegated by one group of people to another group of people.
principal-agent problems
Oligopolists often compete through product development and advertising instead of price because ______.
product development and advertising are relatively difficult to copy
When a business secures a convenient store location even if it means higher prices and less selection, it is known as
product differentiation
This ______ table lists the different combinations of pizza and robots that can be produced with a specific set of resources.
production possibilities
The equality of price and minimum average total cost yields _______ efficiency; the equality of price and marginal cost yields ________ efficiency.
productive efficiency allocative efficiency
In monopolistic competition, when plant and equipment are underutilized because firms are producing less than minimum-ATC output, this is known as ________ ________.
productive inefficiency excess capacity
Average product of labor is also referred to as labor _________.
productivity
Within reason, everyone can benefit from ______ goods and there is no effective way of excluding individuals from the benefits derived from them once they exist.
public good
Monopolies that produce standardized products engage mainly in _______
public relations advertising
Barriers to entry into an oligopoly most resemble those of a ______.
pure monopoly
Which of the following wxists when a single firm is the sole producer of a product for which there are no close substitutes?
pure monopoly
All firms in a(n) ______ industry share the same basic efficiency characteristics.
purely competitive
A good that could be produced by the market system (since exclusion is possible) but government provides to avoid an underallocation of resources is called a:
quasi-public good
government failure
refers to economically inefficient outcomes caused by shortcomings in the public sector.
Higher-than-competitive wages, nicer-than-typical office buildings, and more managers and staff than necessary are all examples of x-inefficiency found in ______ monopoly firms.
regulated
A government agency that is supposed to supervise a particular industry is said to have suffered ________ if its regulations and enforcement activities come to be heavily influenced by the industry it is supposed to be regulating.
regulatory capture
The price of ______ goods is a determinant of demand.
related
Entry to and exit from monopolistically competitive industries is ______.
relatively easy
What is it called when a firm spends significant money to mantain a monopoly through government legistlation?
rent-seeking expenditures
When a game between rivals occurs more than once, it is called a ______ game.
repeated
Allocative efficiency occurs in the short run from the appointment of ________ among firm or industry to produce the products most wanted by society.
resources
When an economy produces a good such that the marginal benefit equals the marginal cost, this indicates that ______.
resources are being allocated efficiently
In which industry is monopolistic competition most likely to be found?
retail trade
In a purely competitive industry, at the profit-maximizing or loss-minimizing level of output, marginal ______ is equal to ______.
revenue; marginal cost revenue; price cost; price
Total variable costs _______ with increases in output
rise
The four-firm concentration ratio, expressed as a percentage, is the ratio of the total industry _ of the four largest firms in an industry relative to total industry sales.
sales, output, or production
The oligopolistic firm's marginal revenue curve exhibits a gap or vertical segment because of the ______.
sharp difference in elasticity of demand above and below the going price
A ______ the demand curve represents a change in demand while a ______ the demand curve represents a change in the quantity demanded.
shift of; movement along
If a monopolistically competitive firm is producing where its marginal revenue is less than its marginal cost, then the firm
should produce less output to increase profits or reduce losses.
Firms in monopolistic competition produce goods with:
slightly varying physical characteristics varying degrees of customer service
The ratio of the price of two goods on a graphed budget line is measured by its _______.
slope
Monopolistically competitive firms typically have a relatively ________ share of the market and consequently ________ control over market price.
small; limited
One explanation for the U-shaped average variable cost curve is that greater ______ yields more efficiency and variable cost per unit of output declines
specialization
The Herfindahl index corrects for dominant firms in the industry by the market shares of the firms and therefore giving greater weight to those more powerful firms in the industry.
squaring
Monopolists that have________ products engage mainly in public relations advetising, while those with ______ products advertise their products' attributes
standardized; differentiated
Suppose the rivals of an oligopolistic firm ignore both a price increase and decrease. If so, then the firm's demand curve will be ______.
straight
Suppose the rivals of an oligopolistic firm match either a price increase or decrease. If this occurs, then the firm's demand curve will look ______.
straight and steep
In a purely competitive industry, an increase in the price of the product produced by firm A will cause buyers to ______.
substitute with products of firms B, C, or D
The supply curve measures quantity ______ on the horizontal axis and ______ on the vertical axis.
supplied; price
Market ______ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.
supply
Market _______ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.
supply
Firms within pure competition are considered to be price .
takers or taker
Which of the following diverts purchasing power from private spenders to government, thereby removing resources from private use?
taxation
Advertising acts as a barrier to the entry of new firms into oligopolistic industries because ______.
the costs of advertising are large in this situation
Your next-door neighbors want to go on a European vacation but cannot afford it, so they decide to visit a local amusement park instead. This is an example of ______.
the economizing problem
The optimal allocation of resources occurs when ______.
the marginal benefit of the good equals the marginal cost
The elasticities of the demand curves for firms in monopolistically competitive (MC) industries will become more like that of firms in pure competition as ______.
the number of rivals increases and product differentiation grows weaker
The elasticities of the demand curves for firms in monopolistically competitive (MC) industries will become more like that of firms in pure competition as
the number of rivals increases and the product differentiation grows weak
Establishing a price ceiling for a mnopoly causes the monopoly's demand curve to become perfectly elastic out to:
the quantity of demand that corresponds with the regulated price
The ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent is called ______.
the rationing function of prices
The Herfindahl index equals
the sum of the squared percentage market shares of all firms in an industry
The Herfindahl index equals ______.
the sum of the squared percentage market shares of all firms in an industry
The Herfindahl index equals the ______.
the sum of the squared percentage market shares of all firms in an industry
What best describes the combination of goods that lie on the production possibilities curve?
they are attainable; they utilize the economy's available resources
Suppose that total sales in an industry in a particular year are $800 million and sales by the top four sellers are $50 million, $40 million, $30 million, and $30 million, respectively. We can conclude that
this industry is monopolistically competitive
Oligopolistic behavior implies that oligopolists prefer competition ______.
through advertising through product development
To reduce uncertainty or increase profits, oligopolists may change their prices ______.
through collusion
A monopolistically competitive firm may be able to continue earning greater than a normal profit in the long run ______.
through further product differentiation Reason: The stronger the product differentiation (variety), the more likely the firm will retain some of its monopoly power even in the long run.
A monopolistically competitive firm may be able to continue earning economic profit in the long run ________.
through product differentiation through increased excess capacity (variety=excess capacity)
Which of the following goods would be considered a rivalrous private good?
tickets to a movie
________ cost is the sum of fixed cost and variable cost at each level of output.
total
After all long-run adjustments are completed in a perfectly competitive market, output will occur at each firm's minimum average ______.
total cost where product price is equal to marginal revenue
The two ways to determine the level of output at which a firm will realize maximum profit or minimum loss are to compare total revenue to ______ and to compare marginal revenue to ______.
total cost; marginal cost
At the point on a graph where total product (Q) is zero, total cost is equal to ______.
total fixed cost
The price, multiplied by the firm's output or goods produced, equals ______.
total revenue
A firm will break even where ______ will just cover ______ because the revenue per unit and the average total cost per unit are equal.
total revenue; total cost
The equation for determining economic profit or loss is ______ minus ______.
total revenue; total cost
A monopolist will never choose a price-quantity combination where price reductions cause:
total revenues to decrease (marginal revenue to be negative)
In a representative democracy, principal-agent problems often occur because politicians have goals that aren't consistent with those of their electorate.
true
People desire goods and services that provide maximum utility. In fact, our desires or wants are ______.
unlimited
If price is below a firm's minimum average cost, the firm will not operate. (Insert only one word in the blank.)
variable
The long run exists when all inputs costs are _________.
variable
Total costs, including _______ (one word) and marginal costs change with the level of output.
variable
Under the definition of long run, all resources and inputs are ______.
variable
When viewed on a graph, total variable cost is measured ______ at each level of output from the X axis.
vertically
Which of the following are conditions necessary to have pure competition?
very large number of firms or sellers free entry and exit standardized product
Economic efficiency occurs when firms produce ______.
where P = MC = minimum ATC Reason: The equality of price and minimum ATC yields productive efficiency; whereas the equality of price and MC yield allocative efficiency. Together, they yield economic efficiency.
When total revenue earned by an entrepreneur is equal to the sum of explicit and implicit costs, then the entrepreneur earns a(n) ______.
zero economic profit Reason: An economic profit is earned if revenues exceed the sum of all explicit and implicit costs.
When one firm's gain must equal the other firm's loss it is called a ______ game whereas in a ______ game the net gain is negative.
zero-sum; negative-sum
How much will a profit-seeking monopolist produce if producing is preferable to shutting down?
It will produce to the output at which marginal revenue equals marginal cost (MR=MC)
Which of the following can be stated as potentially true about any economy?
Its current choice of position on its production possibilities curve helps determine the curve's future location.
What will happen to a firm that finds a way to lower production costs through better technology or improved organization?
Its profits will increase.
The lowest level of output at which a firm can minimize long-run average costs is called ______.
Mimimum effect scale
Which of the following produce variations of a particular product?
Monopolistically competitive firms
Which of the following is a method of calculating economic profit in pure competition?
Price minus average total cost multiplied by quantity
Why are private businesses often more efficient than public agencies?
Private businesses are motivated by profit, which encourages lower costs.
If a good is nonrival and nonexcludable, then it is known as a:
Public good
Which market structure has the fewest obstacles to entry or exit?
Pure competition
Which of the following are considered to be the four basic market structures?
Pure competition Pure monopoly Oligopoly Monopolistic competition
The portion of a firm's marginal cost curve that lies above its average variable cost is the firm's short-run curve.
Supply
Which of the following specifically refers to demand?
The buyer side of any market
What is the primary cause of diseconomies of scale?
The difficulty of efficiently controlling and coordinating a firm's operations as it becomes a large-scale producer
Which of the following best explains why the long-run supply curve of a constant-cost industry is perfectly elastic?
The entry and exit of firms changes industry output bringing the price back to its original level, where it is equal to the constant minimum ATC
Which of the following best illustrates diseconomies of scale?
The increase in average total costs as a firm expands the size of its plant in the long run
Which of the following describes the individual competitive firm's supply curve?
The individual firm's supply curve represents a negligible fraction of total supply and therefore cannot affect price.
What is the primary difference between the individual firm's supply curve and the industry supply curve?
The individual supply curve has no effect on price, whereas the industry supply curve has an important bearing on price.
What is the four-firm concentration ratio?
The percentage of total industry sales accounted for by the four largest firms
Which of the following best describes marginal revenue?
The revenue that an additional unit of output contributes to total revenue.
Your next-door neighbors want to go on a European vacation but cannot afford it, so they decide to visit a local amusement park instead.
This is an example of the economizing problem.
cost is the sum of fixed cost and variable cost at each level of output.
Total
Special interest groups will often support even failing bureaucratic agencies to further their own agenda.
True
In which of the following circumstances would a principal-agent problem occur?
When the person who completes a task has incentives to act against the interests of shareholders
Which of the following is a good example of network effects?
_The Internet allows people to send and recieve emails -People with similar software can share pictures
Economists use the term "demand" to refer to:
a schedule of various combinations of market prices and amounts/quantities demanded.
Which of the following are types of costs that do not vary with changes in output (i.e., fixed costs)?
a) Interest on a firm's debts b) Rental payments c) Insurance premiums
What is the effect of an increase in the price of labor on the ATC, AVC, AFC, and MC curves?
a) The average variable cost, average total cost, and marginal cost curves shift upward. c) The average fixed cost curve remains the same.
A firm's costs of producing a specific output depend on which of the following?
a) The prices of the needed resources required to produce a given output. d) The quantities of resources required to produce a given output.
Assuming technology and production techniques are fixed and cannot change, if beyond some point of production, a firm experiences declining units of additional output with each additional unit of labor input, then the firm is experiencing the law of
a) diminishing marginal returns
If a firm's total revenue is equal to its implicit and explicit costs, then the firm is said to earn a(n)
a) normal profit b) accounting profit d) zero economic profit
When a firm's total revenue exceeds all its economic costs
a) the residual goes to the entrepreneur d) the residual is called economic or pure profit
In a purely competitive market, price per unit to a buyer equals:
average revenue to a seller
Price leaders make price adjustments ______.
by communicating impending price adjustments to the industry infrequently, due to the uncertainty in rivals' response to these price changes by establishing a price that discourages new entrants into the industry
What is the definition of economic profit?
c) Total revenue less economic costs (explicit and implicit)
In monopolistically competitive industries:
collusion is unlikely because there is a large number of firms
The shape of the demand curve for an oligopolistic firm ______.
depends on the actions of rivals to price changes
Creative captures the idea that the creation of new products and new production methods erodes the market positions of firms committed to existing products and old ways of doing business
destruction
Total variable cost reflects the law of _________ _________ as more and more variable resources are added.
diminishing returns
Modern technology can be a cause of extensive____.
economies of scale
The profit-maximizing rule of MR=MC states that in the short run, the firm will maximize profit or minimize loss by producing the output for which marginal revenue ______ marginal cost.
equals
When plant and equipment are underutilized because firms are producing less than the minimum-ATC output, this is known as having ______.
excess capacity productive inefficiency
sellers can restrict people who do not pay for a product from obtaining its benefits.
excludability
Compared to monopolies, oligopolies ______.
give the appearance of increased competition
The entry and the exit of firms in an industry are considered to be -run adjustments.
long
A firm's decision about what output level to produce is typically a ______ decision.
marginal
________ costs equals the change or difference in total cost divided by the change or difference in output.
marginal
________ product is zero when total product is at a maximum.
marginal
Slashing prices is an example of an entry barrier created by a (n)
monopoly
When marginal revenues is _____ (positive/negative) total revenues is diminishing.
negative
A market is considered to be a(n) when the largest four firms in an industry control more than 40% or more of the market.
oligopoly
Unlawful misdirection of governmental resources or actions that occur when government officials abuse their entrusted powers for political gain is better known as
political corruption
Total revenue equals ______ times ______.
price; quantity
In developing economic theories, principles, or models, economists ______.
remove clutter and simplify
the appeal to government for special benefits at taxpayers' or someone else's expense.
rent-seeking behavior
consumer's budget line or constraint
shows various combinations of two products that can be purchased with a specific amount of income
In a world of scarcity, ______.
the decision to obtain the marginal benefit (MB) of a specific option always includes the marginal cost (MC) of forgoing something else
Excess capacity is
the gap between Q3 and Q4
Which of the following is a reason for a monopolist to use pirce discrimination?
to increase its profits
For better or worse, people have ______.
virtually unlimited wants
In this graph, the equilibrium price is $50 and is equal to a firm's average total cost. Therefore, the firm is earning ______ economic profits, or a(n) ______ profit.
zero; normal
If economic cost is $96,000 and total revenue is $120,000, what is the economic profit?
$24,000 Reason: Economic profit equals total revenue minus economic cost.
What is average fixed cost if average total cost is $100 and average variable cost is $75?
$25
Price Quantity Total Output Demanded Cost $20 1 $10 1 18 2 20 2 16 3 29 3 14 4 36 4 12 5 40 5 10 6 42 6 What will be the economic profit or loss for this monopolistically competitive firm at the profit-maximizing level of output?
+$20 @ Output Level 4 & 5
What allows a natural monopoly to produce efficiently?
- A declining long-run average total cost curve -Extensive economies of scale
Which of the following are ways of expressing the meaning of ceteris paribus?
- Assuming factors other than those being considered in a particular analysis do not change - Assuming other things remain constant
Economic growth is the result of which of the following?
- Increases in the supply of resources - Improvements in resource quality - Technological advances
Which of the following characteristics leads to a upward-sloping supply curve? Select all that apply .- Increasing opportunity costs - Increasing marginal costs - Diminishing marginal utility - A decrease in resource prices - An increase in resource prices - Increasing labor productivity
- Increasing opportunity costs - Increasing marginal costs
Which of the following exemplify a rivalrous good?
- Mary drinks a can of Pepsi. - John eats an apple for lunch
A monopoly is likely to suffer loses when:
- Price is set to marginal cost -Price is set to achieve the most efficient allocation of resources
Which of the following are illustrated by the following figure?
- That as one moves to the right and produces more pizzas, the number of robots that must be given up rises. - That the resources used to produce industrial robots and pizzas are not perfectly flexible and interchangeable.
The guidelines to follow when comparing different public project plans include _____
- do not undertake a project for which the marginal cost exceeds the marginal benefit - stop the activity at, or as close as possible to, the point at which the marginal benefit equals the marginal cost - consider increasing an activity, project, or output as long as the marginal benefit exceeds the marginal cost
Which of the following are the main characteristics of a pure monopoly?
-Absolute control over the price -Presence of a single seller -Unavailability of close substitutes for its products -Blocked entry for other firms
According to the law of demand, which of the following statements are true, all other things being equal?
-As price decreases, quantity demanded increases. -As price increases, quantity demanded decreases.
Which of the following are forms of price discrimination?
-Charging differnt costumers differnt prices -Charging each costumer the maximum price he/she is willing to pay. -Charging each costumer one price for the first unit and a lower price for subsequent units
Which of the following types of firms have achieved economies of scale through information technologies?
-Computer software -Internet service - Wireless communication
Which of the following are determinants of demand?
-Consumer income -Consumer expectations -Consumer tastes -Number of buyers -Prices of related goods
Which of the following steps are necessary to determine the profit-maximizing or loss-minimizing level of output, profit-maximizing or loss-minimizing price, and economic profit or loss in pure monopoly?
-Employ the profit-maximizing or loss-minimizing ruel of MR=MC Identify the profit-maximizing or loss-minimizing price and output by finding the price/output combination at MR=MC
Which of the following are characteristics of public utilities?
-Government owned or regulated -Monopolies or near monopolies
Which of the followings steps are necessary to determine the profit-maximizing or loss-minimizing level of output, profit-maximizing or loss-minimizing price, and economic profit or loss in pure monopoly?
-Identify the profit-maximizing or loss-minimizing price and output by finding the price/output combination at MR=MC -Employ the profit-maximizing or loss-minimizing rule of MR=MC
Which factors contribute to the likelihood of a monopolistically competitive firm sustaining a greater than normal profit in the long run?
-Increased financial barriers to entry due to product differentiation -Sufficient product differentiation that other firms cannot duplicate
Which of the following are reasons monopoly is not widespread in the United States
-Patents eventually expire -Barriers to entry are seldom completely successful
In which of the following situations do governments intervene to prevent prices from rising above or falling below their equilibrium levels?
-Prices are too high for consumers. -Prices are too low for firms.
Which of the following contribute to the complexities incolve in fair-return pricing?`
-Rate decisions that required extensive public input through letters and hearnings. -Large, extensive rate -Setting bureaucracies -Maze-like sets of procedures -Rate decisions that are subject to lengthly legal challenges
Which of the following are the characteristics of a competitive market?
-Standardized products -A large number of buyers and sellers
Choose all of the following that will cause a change in supply, not quantity supplied.
-Technology -Producer expectations -Number of sellers
Which of the following is a reason for a monopolist to block entry in a market?
-To restrict potential competitors from entering the market
Which of the following are reasons for a monopoly's loss of economic profit?
-change in tastes reducing demand -upward-shifting curves caused by escaliting resource price
All competitive markets involve which of the following?
-demand -quantity -supply -price
Which of the following can cause X-inefficiency?
-hiring incompetent relatives -poorly motivated work force -desire for easier work life
If a firm is found guilty of achieving a monopoly through anticompetitive actions, then the firm
-may be bronkent into 2 or more cometing firms -may be expressly prohibited from engaging in business activities.
Which of the following are assumptions made in the model of pure monopoly?
-no unit of government regulates the firm -patentes, economies of scale, and resource ownership secure the firm's monopoly -the firm is a single-price monopolist; it charges the same price for all units of output.
Which of the following are potential solutions to the economic losses incurred by a regulated monopoly cuased by socially optimal pricing?
-providing a public subsidy to cover the loss -to condone price discrimination
Monopolists may create an entry barrier when confronted with a new entrant into the industry by _____
-reducing product price - taking other strategic and making entry difficult to rival - incurring advertising cost
Declines in long-run average total costs occur due to which of the following
-spreding of product development costs -simultaneous consumption -network effects -learning by doing -greater use of specialized inputs
Comparing total revenue and total cost at each possible level of production and choosing the output with the greatest possible difference is another way to determine
-the loss-minimizing output -the profit-maximizing output
Which of the following are reasons that a monopolist is consider a price maker?
-the monopolist exerts control over the price -the monopolist controls the total quantity supplied
In this table, at a price of $71, the profit-maximizing or loss-minimizing level of output is ______.
0 units
Refer to the above graph of a representative firm in monopolistic competition. If curve (2) represents ATC and line (3) represents demand, then curve (1) and line (4) would be
1 Marginal Cost 4 Marginal Revenue
The guidelines to follow when comparing different public project plans include _____.
1. consider increasing an activity, project, or output as long as the marginal benefit exceeds the marginal cost 2. stop the activity at, or as close to, the point at which the marginal benefit equals the marginal cost 3. do not undertake a project for which the marginal cost exceeds the marginal benefit
If the change in total product is 10 units and the change in labor input is 1, what is marginal product?
10
What is average variable cost if total variable cost is $500, total fixed cost is $100, and output is 50?
10
What is the marginal cost when output changes from 300 to 301 units and total cost rises from $400 to $500?
100
Suppose an industry has 10 firms and each has a 10% share of the market. This industry's Hefindahl index is ________.
1000 because 10*(10^2)
In the table, total economic profits at the profit-maximizing level of output are calculated as a total revenue of $______ minus approximate total costs of $______.
1179; 880
When output is 10, what is the total cost if total fixed cost is $50 and total variable cost is $75?
125
Based on the figure, if one firm cheats on the collusive agreement it can increase its payoff by
15 - 12 = 3
A company has three workers. It adds an additional laborer and its total product increases by 21. What is the company's marginal product?
21
What is the average fixed cost if the average total cost is $100 and the average variable cost is $75?
25
If at 10 units of output, total fixed cost is $10 and total variable cost is $16, what is total cost?
26
If total cost rises from $300 to $700 when one additional unit of output is produced, what is the marginal cost?
400
What is the average fixed cost if total fixed cost is $100, total variable cost is $50, and output is 20?
5
Suppose an industry has two firms each with 50% market share. The Herfindahl index for this industry is ______.
5,000
Suppose at an output level of 150 units a firm's average fixed cost is $25 and average variable cost is $50. Then the average total cost of the firm is ______.
75
Suppose an industry has ten firms. Three of the firms produce 200 units of output each, one produces 150 units, two of the firms produce 75 units each, and four of the firms produce 25 units each. The four-firm concentration ratio for this industry equals ______.
75%
Which of the following does an increasing-cost industry experience?
A downward shifting average total cost (ATC) curve as the industry contracts. An upward shifting average total cost (ATC) curve as the industry expands.
A point that lies inside the production possibilities curve reflects which of the following?
A failure to achieve full employment
Which of the following can increase profits by charging different prices to different buyers?
A monopoly
Which type of game correlates most closely with a win-win scenario?
A positive-sum game
Which of the following in the rental market for housing benefits renters, but makes it unprofitable for suppliers or landowners?
A price ceiling
In the marketplace, what is a good that can be used in place of another good called?
A substitute good
If new firms to an industry must incur large advertising costs in order to establish their goods in a market, what might be the result?
Additional barriers to entry
Which of the following techniques are commonly used by interest groups to influence voters?
Advertisements Mailings Direct persuasion
Oligopolistic firms do which of the following when they change their pricing strategies?
Affect profits and influence the profits of rival firms
Which industry requires the most time for its firms to alter plant capacity?
Aircraft manufacturing
Marginal cost includes which of the following?
All the cost associated with producing the last unit of output The cost savings resulting from not producing the last unit of output
What are the components of plant capacity?
Amount of machinery and equipment Size of the factory building
Which of the following will cause the demand curve for product A to shift to the left?
An increase in money income if A is an inferior good.
A decrease in equilibrium price and indeterminate result on equilibrium quantity is a result of which of the following?
An increase in supply and a simultaneous decrease in demand
Which of the following is likely to cause an increase in the demand for a good or service?
An increase in the number of buyers
Which of the following best describes pure competition?
An industry involving a very large number of firms producing identical products and in which new firms can enter or exit the industry very easily.
Which of the following statements explain why the average variable cost curve is U-shaped?
As output rises from the initial very low levels, greater specialization occurs, and average variable cost declines. At low levels of output, production is relatively inefficient and costly.
According to the law of demand, which of the following statements are true, all other things being equal?
As price decreases, quantity demanded increases. As price increases, quantity demanded decreases.
Which of the following is an example of labor specialization?
Assigning each worker one task instead of five or six Hiring more workers in order to subdivide tasks
Which of the following are ways of expressing the meaning of ceteris paribus?
Assuming other things remain constant and Assuming factors other than those being considered in a particular analysis do not change
In the given figure, which of the following is a reason why allocative efficiency cannot be achieved?
At Q3, price exceeds MC to maximize profits and under-allocates resources.
In the given figure, which of the following is a reason why allocative efficiency cannot be achieved?
At Q3, price exceeds MC to maximize profits but resources will be under-allocated
Where does the marginal-cost curve intersect the average-total-cost curve?
At the minimum point of average total cost
Which of the following best explains why the price-marginal cost relationship improves as production increases?
At the very early stages of production, marginal product is low, making marginal cost unusually high.
Per-unit costs are also referred to as ______ costs.
Average
__________ product of labor is total product divided by units of labor.
Average
What does the vertical distance between the average total cost and average variable cost curves measure?
Average fixed cost at any level of output
Which of the following is true of average fixed cost when output increases?
Average fixed cost declines as output increases.
What happens to average product when marginal product exceeds it?
Average product continues to rise.
Which of the following is true where the marginal product curve intersects the average product curve?
Average product is at its maximum.
An increase in the price of labor has no effect on which cost curve?
Average-fixed-cost
Which of the following reasons explains why the purely competitive firm's demand curve is perfectly elastic?
Because the individual firm is a price taker, the marginal revenue curve coincides with the firm's equilibrium price.
Why does marginal product eventually diminish as units of labor are added?
Because the number of workers increases relative to the amount of capital equipment
Which of the following best summarizes why firms in purely competitive industries do not differentiate their products?
Because there are so many of them selling a standardized product
A cost- ______________ analysis involves an assessment of marginal costs and marginal benefits associated with a project or program.
Benefit
profit is the firm's total revenue less its explicit costs, whereas profit is the firm's total revenue less economic costs (explicit and implicit).
Blank 1: Accounting Blank 2: economic
revenue is the additional revenue that an additional unit of would add to total revenue.
Blank 1: Marginal Blank 2: output or production
Advertising can persuade consumers to pay higher prices for products that are well (one word) instead of purchasing unadvertised products with lower prices.
Blank 1: advertised, advertise, advertized, advertize, marketed, or acclaimed
The equality of price and minimum average total cost yields Blank 1Blank 1 production , Incorrect Unavailable efficiency; the equality of price and marginal cost yields Blank 2Blank 2 allocative , Incorrect Unavailable efficiency. (Enter one word in each blank.)
Blank 1: allocative Blank 2: productive
Each purely competitive firm's demand curve is perfectly at the equilibrium price.
Blank 1: elastic, flat, or horizontal
In a perfectly competitive market, the demand curve for an individual firm is perfectly at the market price.
Blank 1: elastic, horizontal, flat, constant, or fixed
A firm should not produce a unit of output when the marginal cost is (greater/lesser) than its marginal revenue.
Blank 1: greater, bigger, larger, more, or higher
A good way to describe Blank 1Blank 1 monopolistic , Correct Unavailable (monopolistic/oligopolistic) competition is that it mixes a small amount of monopoly power with a large amount of competition, while Blank 2Blank 2 oligopolistic , Correct Unavailable (monopoly/oligopoly) blends a large amount of monopoly power, a small amount of competition through entry, and considerable rivalry among firms.
Blank 1: monopolistic Blank 2: oligopoly or oligopolistic
In the short run, a purely competitive firm can maximize its economic profit (or minimize its loss) by adjusting its .
Blank 1: output, production, supply, or quantity
When members of an oligopoly react to price changes by a dominant firm, the model is most applicable. (Enter one word per blank.)
Blank 1: price Blank 2: leadership or leader
Gentleman's agreements are a type of covert collusion, occurring in social settings where a product's is agreed upon and market shares are determined by competition. (Enter one word for each blank.)
Blank 1: price or prices Blank 2: nonprice or non-price
A competitive market generates efficiency and efficiency. (Enter one word for each blank.)
Blank 1: productive Blank 2: allocative
Since entry of new firms increases the market supply and reduces prices and , successful collusion requires that colluding firms prohibit entry of new firms.
Blank 1: profits or profit
In a purely competitive market, price per unit to the purchaser is synonymous with per unit or revenue to a seller. (Enter one word per blank.)
Blank 1: revenue or cost Blank 2: average or marginal
Total product goes through three phases: It initially at an increasing rate; then it increases but at a diminishing rate; finally, after reaching a maximum, it .
Blank 1: rises, increases, grows, or expands Blank 2: declines, decreases, falls, diminishes, or drops
A competitive firm may realize an economic profit or loss in the run but will earn only a normal profit in the run.
Blank 1: short Blank 2: long or longer
A purely competitive firm's total revenue (TR) is a straight line that slopes (upward/downward) and to the (left/right).
Blank 1: upward, up, or upwards Blank 2: right
Which of the following statements about the public and private sectors is true?
Both sectors are imperfect allocators of resources.
Based on the figure, if Big Box decides not to build what will Huge Box decide to do and what are the profits for Big Box and Huge Box respectively?
Build; $0; $12
How is the average total cost curve determined from graphical information?
By adding vertically the average fixed cost and average variable cost curves.
How do companies save consumers the direct and indirect costs associated with learning about product features and availability?
By advertising
How can oligopolistic firms influence their profits and the profits of their rivals?
By changing pricing strategies
How do interest groups generally attempt to influence the outcome of majority voting?
By convincing voters of the merits of a public good
How is marginal cost (MC) calculated?
By dividing the change in total cost by the change in output
Dominant firms in an industry can cause the four-firm concentration ratio to be misrepresented, leading the four-firm concentration ratio to overstate the amount of concentration in the industry. How can this problem be resolved?
By using the Herfindahl index
In a negative-sum game the overall loss is greater than the overall gain, but a zero-sum game can be seen as a ______ situation.
"I win-you lose"
Which of the following would be considered private goods?
Automobiles Clothing
Which of the following would be considered private goods?
Automobiles, Clothing
Generally speaking, there are two types of calculable profits. Of these, profit is what remains after a firm has paid itsexplicit costs.
accounting
When people get satisfaction from charitable giving, they are
acting out of rational self-interest
When people get satisfaction from charitable giving, they are ______.
acting out of rational self-interest
Because there are so many of them selling a standardized product
A purely competitive firm offers only a negligible fraction of total market supply and therefore must accept the price determined by the market
Which of the following market structures produces only a standardized product?
A purely competitive market
The rationing function of prices refers to the ability of the competitive forces of supply and demand to establish a price at which ______.
buying and selling decisions are consistent
The difference between the maximum price a consumer is willing to pay for a product and the actual price that they do pay is known as _____.
consumer surplus
Consumer expectations are a determinant of _______.
demand
The prisoner's dilemma is an example of theory.
game
Companies often merge to ______ monopoly power.
increase
The quantity of a product supplied by a firm in pure competition should _____ as long as price rises.
increase
A demand curve shows the ______.
inverse relationship between price and quantity demanded for a product
A manufacturing firm builds a new warehouse to expand its inventory capacity. Economists refer to this activity as ______.
investment
As a result of our ______ incomes and ______ wants, it is in our self-interest to economize or pick and choose goods and services that maximize our satisfaction.
limited; insatiable
A(n) _ (Enter one word) is a market dominated by a few large producers of a homogeneous or differentiated product.
oligopoly
Imperfect competitors, by changing market supply, cna influence product____.
price
Land and mineral resources, transportation and communication facilities, factories and farm buildings, equipment, tools and machinery are all examples of
scarce economic resources
Land and mineral resources, transportation and communication facilities, factories and farm buildings, equipment, tools and machinery are all examples of _______.
scarce economic resources
Which of the following describes rent-seeking behavior?
Attempting to use government to get paid more for a good or service than the minimum amount they would normally have to be paid.
__________-seeking behavior is the appeal to government for special benefits at taxpayers' or someone else's expense.
Rent
Price controls or ______ mandated in the apartment rental market benefit the consumer by establishing a price ______ the free market equilibrium price.
ceilings; below
An unfavorable shift or ______ in demand will upset the original industry equilibrium and produce ______.
decrease; losses
If demand for the good decreases creating economic losses, firms will exit the industry in the long run. As firms exit in the long run, industry supply will ______ and market price will ______.
decrease; rise
The demand curve for a monopolistically competitive firm is:
downward-sloping
One qualification to why an oligopoly may not act like a monopoly is ______.
due to foreign competition that may increase efficiency through increased rivalry
The main characteristics of a pure_____ are a single seller, no close substitutes, a price maker, blocked entry, and non-price competition.
monopoly
Oligopolies are not a desirable market structure because they achieve ______.
neither productive efficiency nor allocative efficiency
This graph illustrates that a firm can minimize its losses by producing where ______.
price exceeds minimum average variable cost but is less than average total cost
All the following are the determinants of demand except ______.
price of substitutes in production
Monopolists use economies of scale to block the entry of new firms into an industry by reducing ______so that other firms cannot compete
prices
A firm should always stop producing if its average ______ cost is ______ price.
variable; greater than
The demand for a normal good would likely increase in which of the following cases?
-A decrease in the price of complementary goods -An increase in the number of buyers
Which of the following are examples of a geographic monopolies?
-A small town with one railroad -A small town served by one airline -A small town with one restaurant
"Single-seller" refers to:
-A sole producer of a specific good or service
In the figure given, what is the economic profit of a monopolistically competitive firm when it is producing optimally?
(P1- A1) x Q1
The size of the factory, the amount of machinery and equipment, and other capital resources define
Blank 1: plant, operational, or operation Blank 2: capacity or size
Which statements best describe the combinations of goods that lie on the production possibilities curve?
- They utilize all of an economy's available resources. - They are attainable.
Based on the information in this chart, at which price will a firm shut down?
P1
At any price above ______, the firm will obtain economic profit by producing to the point where MR=P=MC.
P4
Given an output of Q4, at which price will the firm break even or earn a normal profit?
P4
Which voting system is associated with the paradox of voting?
Paired-choice majority voting
_____ laws aim to protect an inventor from rivals who would use teh invention without having shared in the effort and expense of developing it.
Patent
A good that could be produced by the market system (since exclusion is possible), but government provides it in order to avoid an underallocation of resources is called a(n) _______________
Quasi
A good that could be produced by the market system (since exclusion is possible) but government provides to avoid an underallocation of resources is called a:
Quasi-public good
Which of the following resources can a firm easily and quickly adjust?
Raw materials Fuel Hourly labor
Which of the following would incur an explicit cost?
Raw materials Labor services Utility usage
What are oligopolists able to do by controlling price through collusion?
Reduce uncertainty Increase profits Prohibit the entry of new rivals
A private good that displays ____________ characteristics means that when someone buys and consumes that good, it is not available for someone else to buy and consume.
Rivalry
The characteristics of a private good include ______________ in excludability
Rivalry
When the purchase and consumption of a good makes the purchase and consumption of the good unavailable to another person, it is known as:
Rivalry
What does it mean to the entrepreneur when economic profit is zero?
The entrepreneur is covering all explicit and implicit costs, including a normal profit.
What is the price where the intentions of buyers and sellers match?
The equilibrium price
Which of the following occur only in the long-run?
The expansion or contraction of plant capacity The entry and exit of firms
How is marginal product (MP) defined?
The extra output or added product associated with adding a unit of a variable resource
Which factors illustrate that the demand curve for a purely competitive firm is perfectly elastic?
The firm does not need to lower its price to increase its sales volume. The firm cannot obtain a higher price by restricting its output.
Based on the chart, what happens at a price P3 and an output of Q3?
The firm incurs a loss but covers part of its fixed cost.
Which of the following statements is true of the firm represented by this graph?
The firm incurs a loss but should continue to operate because price exceeds the lowest average variable cost.
If a firm assumes that its rivals will match all price changes, but the firm's rivals actually charge a lower price what are the potential consequences?
The firm's demand curve will shift further to the left. The firm is failing to produce at the profit-maximizing output. The firm's profits will be lower.
Which of the following sections of a long-run average total cost curve depicts constant returns to scale?
The flat section
From society's standpoint, what are the effects of collusion in an oligopolistic industry?
The same as a monopoly
A decrease in demand while holding supply constant results in _______.
a decrease in both equilibrium price and quantity
Consumers must make choices about what to buy and what to forgo to fulfill wants because ______.
consumers' incomes are limited
Simultaneous_____ is a product's ability to satisfy a large number of consumers at the same time
consumption
Economic principles are generalizations that are
expressed as the tendencies of average consumers, workers or firms
Economic principles are generalizations that are ______.
expressed as the tendencies of average consumers, workers or firms
Concentration ratios that use national market share numbers are limited in usefulness because they ______.
fail to account for highly localized industries
A price _____ (one word) is a minimum price fixed by the government, generally imposed above the equilibrium price.
floor
A decreasing-cost industry is one in which firms experience ______ costs as their industry ______.
higher; contracts lower; expands
The equilibrium price where the quantity demanded equals the quantity supplied is otherwise known as the __________ price
market-clearing
In which market model do firms rely on product differentiation to distinguish themselves from the competition?
monopolistic competition
The restaurant, legal assistance, and clothing industries are each illustrations of:
monopolistic competition
In general, industries that typically have lower Herfindahl index values are
monopolistically competitive
Entry is completely blocked to competitors in the case of pure______
monopoly
At the profit-maximizing output, a monopolist's _____ is higher than marginal cost; therefore, a monopolist has alloctive inefficiency
price
Antitrust laws in the United States ______.
prohibit price fixing
Advertising can reduce efficiency by ______.
providing misleading information manipulating consumer preferences
If a good is nonrival and nonexcludable then it is known as a
public good
Barriers to entry into an oligopoly most resemble those of a ______
pure monopoly
Firms are more likely to cheat on a collusive agreement when the economy is experiencing a (Enter one word).
recession
The characteristics of a private good include ____ in consumption and excludability.
rivalry
Patents and patent laws aim to protect the inventor from
rivals
The four-firm concentration ratio is based on the ___.
sales of the largest firms in an industry
______ economic resources means limited goods and services.
scarce
What aspect of the market defines the crucial difference between a pure monopolist and a purely competitive seller?
the demand curve
Increased fixed costs shift the average fixed cost and the average total cost curves _________.
upward
The pleasure, satisfaction, or happiness obtained from consuming a good or service is known as
utility
The pleasure, satisfaction, or happiness obtained from consuming a good or service is known as ________
utility
A firm can directly and immediately control its marginal costs by its controlling its ________ costs.
variable
When total product is at its maximum, marginal product is ______.
zero
The average variable cost curve is
u-shaped
What is another term for economies of scale?
Economies of mass production
Accounting profit is what remains after a firm has paid its _______ costs.
explicit
The supply curve for any good, private or public is ______.
its marginal-cost curve
An oligopolistic firm's marginal revenue curve is made up of two segments if ______.
its rivals match a price cut but ignore a price increase
An oligopoly firm's demand curve will be kinked if ______.
its rivals match price decreases but ignore price increases
In the _______ model of oligopoly, firms react to price decreases but ignore price increases by other firms.
kinked-demand
The work-related activities of a teacher and doctor fall under the resource category of
labor
The work-related activities of a teacher and doctor fall under the resource category of _______.
labor
What do economists call the physical actions and mental activities that people contribute to the production of goods and services?
labor
From an economic standpoint, ______ includes all natural resources used in the production process.
land
Government creates_____ barriers to entry.
legal
The marginal-product curve is a mirror image of the ______ curve.
marginal-cost
A good is ______ when a seller can prevent people who did not pay for a product from obtaining its benefits.
Excludable
Which of the following is considered a barrier to entry into an industry?
Ownership of essential property
Which of the following types of goods affect the demand for another product due to a change in their price?
-Complementary goods -Substitute goods
Which of the following are determinants of supply?
-Resource prices -Taxes and subsidies -Technology
In pure competition, if the first unit of output sold increases total revenue from $0 to $131, marginal revenue for that unit is $131. If the second unit sold increases total revenue from $131 to $262, marginal revenue is again $131. The third unit sold increases total revenue to $______ and marginal revenue is now $______.
393; 131
Economists group industries into distinct market structures.
4
What is average total cost if total cost is $100, variable costs are $75, fixed costs are $25, and output is 25?
4
If the four largest firms in an industry produce 20, 10, 7, and 3 units of output, respectively, and total industry output is 100 units, then the four-firm concentration ratio equals ______.
40%
If the four largest firms in an industry product 20, 10, 7 and 3 units of output, respectively, and the total industry output is 100 units, then the four-firm concentration ratio equals ________%.
40%
A comparison of the marginal cost of a project or program with the marginal benefits is known as ______.
A cost-benefit analysis
Which of the following describes a budget line?
A curve showing various combinations of two products a consumer can purchase with a specific amount of income.
With economies of scale, a 10% increase in all resources that causes a 20% increase in output results in which of the following?
A decline in average total cost (ATC)
______,while holding demand constant, results in an increase in the equilibrium price of the good, but a decrease in the equilibrium quantity of the good.
A decrease in the supply of a good
Which of the following illustrates constant returns to scale?
A firm's 10% increase in given inputs, causing a proportionate 10% increase in output
Which of the following explains the concept of explicit costs?
A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services. A firm's monetary payments made for the use of resources owned by others.
Which of the following are the characteristics of a competitive market?
A large number of buyers and sellers Standardized products
Which of the following enables society to produce more goods with current resources?
Advances in technology
Average fixed cost equals total fixed cost divided by the ______
Amount if output
Normative economics is ______.
Based on value judgments
Based on the payoff matrix, collusion between Chicpo and Dramco would result in policies represented by cell
D
A government agency that is supposed to supervise a particular industry is said to have suffered regulatory _____________ if its regulations and enforcement activities come to be heavily influenced by the industry it is supposed to be regulating.
Capture
What is it called when a group of producers creates a formal written agreement stating the level of output by each firm and the prices that must be charged?
Cartel
Subtracting explicit and implicit costs from total revenue yields which of the following?
Economic profit
Subtracting implicit costs from accounting profit yields which of the following?
Economic profit
What is the differnce in demand between a purely competitive seller and a monopolist?
Demand for the purely competitive seller is perfectly elastic, and demand for the monopolist is not.
What is it called when demand fails to account for the buyer's full willingness to pay?
Demand-side market failure
Less coordinated decision making by executives and supervisors leads to of scale.
Diseconomies
By using economies of scale, successful start-up firms are able to shift their short-run cost curves in which directions?
Downward and to the right
A firm may refrain from competing as hard as possible if they feel that their rivals are doing the same. When is this likely to occur?
During a repeated game
Why does each monopolistically competitive firm generally have limited control over market price?
Each firm has a relatively small percentage of the total market.
Which aspect of pork-barrel politics refers to expenditures specifically designated to benefit a politician's local district or constituency?
Earmarks
profits in a competitive industry will attract new firms into the industry.
Economic
Determining normal profit involves estimating which of the following?
Forgone entrepreneurial income
Which of the following are examples of implicit costs?
Forgone wages Forgone rent
Which of the following best describes oligopoly?
Involves only a few sellers of a standardized or differentiated product, so each firm is affected by the decisions of its rivals.
Which of the following are characteristics of public goods?
Non-excludability Non-rivalry
Which of the following are characteristics of public goods?
Non-excludability, Nonrivalry
Which of the following highlight the free-rider problem associated with a public good?
Nonpayers can obtain benefits from the use of a good or service. There is no potential for revenue or profits
-------competition is competition illustrated through product differentiation and advertising.
Nonprice
Which type of good can be consumed by one person without precluding consumption of the good by others?
Nonrival
________________ in consumption means that one person's consumption of a good does not preclude consumption of the good by others.
Nonrivalry
What determines the shape of the long-run average-total-cost curve?
Technology
As firms exit the industry in the long run, market price rises and the losses for the remaining firms begin to subside. Firms will continue to exit until which of the following happens?
There are no economic losses.
Which of the following highlight the free-rider problem associated with a public good?
There is no potential for revenue or profits; Non-payers can obtain benefit from the use of a good or service.
What is the relationship between productivity (MP & AP) and cost (MC & AVC) curves?
They are mirror reflections of each other. As productivity curves are rising, cost curves are falling. As productivity curves are falling, cost curves are rising.
How are marginal costs and average fixed costs related?
They are not related.
Which of the following reasons explains why a professional sport team can be considered a monopoly?
They are the sole suppliers of specific services in a large geographic area
In a supply and demand chart for a public good, which of the following equates to a marginal-benefit curve?
Willingness-to-pay curve
In a supply and demand chart for a public good, which of the following equates to a marginal-benefit curve? Multiple choice question.
Willingness-to-pay curve
The willingness and ability of a consumer to buy a normal product falls because of ______.
a fall in income
What is the definition of explicit costs?
a) A firm's monetary payments made for the use of resources owned by others. c) A firm's monetary payments for those who supply labor services, materials, fuel, and transportation services.
The law of diminishing returns assumes that ______.
all units of labor input are of equal quality
Monopoly yields neither productive nor _______ efficiency
allocative
The equality of price and marginal cost yields Blank 1Blank 1 allocative , Correct Unavailable_ (allocative/productive) efficienc
allocative
The supply curve is ______ sloping curve.
an upward
Firms in oligopolistic industries are "price makers" because such firms ______.
are few in number
Concentration ratios are limited in that they:
are national in scope
Government licesing is a legal ___ to entry.
barrier
Two legal ___ to entry are patents and licenses
barriers
Normative economics is ______.
based on value judgments
Which of the following descries why marginal revenue is less than price in an imperfect market?
because the lower price of the extra unit of output also applies to all prior units of output.
What is one reason for economies of scale?
c) Labor specialization
A situation where firms meet to fix prices, divide markets, or restrict competition is called ______.
collusion
Normative, value-based policy questions or statements give rise to ______.
controversy or disagreement among economists
Advertising benefits society by ______.
conveying information to consumers. Reason: Monopolies do not benefit society and are hardly the result of advertising. Advertising provides consumers with information on product characteristics and prices.
In price discrimination, the price differences are not justified by _________ differences
cost
The optimal size and scope of a project or a government regulation are determined by comparing marginal _____ to marginal _____
cost , benefit
Strategies attempted by firms for increasing their profits include:
developing a new product that is popular with consumers. lowering production costs through improved business organization. lowering production costs through better technology.
Entry into monopolistically competitive industries is
easy compared to oligopoly or pure monopoly
The shape of the long-run supply curve for a constant-cost industry can best be described as:
horizontal
On a simple supply model, a change in quantity supplied is illustrated by a ______ and a change in supply is illustrated by a ______.
movement along the supply curve; shift of the supply curve
A ______ is a relatively rare market situation in which average total cost is minimized when only one firm produces the good.
natural monopoly
A _______ -monopoly is a single firm that has the bulk of sales in a specific market.
near
Because Intel provides 80% of the central microprocessors used in persoanl computers, it is a:
near-monopoly
Regulatory capture often occurs because
nearly everyone who knows the details of the regulated industry works in the industry
The goal of advertising a product to differentiate it from that of other competitor's products in order to make price less of a factor when a consumer makes a purchase is what is considered so-called
non-price competition
The ability of monopolistically competitive firms to engage in ________ competition makes the market situation more complex because of differentiated products and advertising.
nonprice
The goal of advertising a product to differentiate it from competitor's products so that price is less of a factor when a consumer makes a purchase is considered ______ competition.
nonprice
in consumption means that one person's consumption of a good does not preclude consumption of the good by others.
nonrivalry goods
An ___________ cost is the value or worth the resource would have in its best alternative use.
opportunity
Trade-offs arising from limited resources give rise to ______.
opportunity costs
Points lying ______ the production possibilities curve represent greater, but unachievable levels of output with current inputs, than that at any point on the curve.
outside
Two measures used to calculate industry concentration are
the four-firm concentration ratio and the Herfindahl index
Firms have a desire to cheat on a collusive agreement because ______.
their profits and sales will rise
A(n) ______ profit is equal to total revenue less explicit costs.
accounting
An _________ profit is equal to total revenue less explicit costs.
accounting
Productive efficiency requires that goods be produced ___.
in the least costly way
scarce economic resources
means limited goods and services
refers to the need to make choices because economic wants exceed economic means.
Economizing problem
What is the average product If total product is 30 and there are 3 units of labor?
10
In this table, at a price of $81.00, the loss-minimizing level of output is _____.
6 units
In this table, at a price of $131, the profit-maximizing level of output is _____ units of output.
9
In the payoff matrix what is the Nash equilibrium (dominant strategy)?
Cell A
The supply curve for a public good is society's marginal __________ curve
Cost
What is the only stable outcome in a payoff matrix?
Nash equilibrium
Private goods exhibit two consumption characteristics
Rivalry and excludability
Which best describes average product (AP)?
The output per unit of labor input
Total costs equal explicit costs plus implicit costs.
economic
True or false: Positive economics encourages value judgments.
false
Based on the payoff matrix shown, if Big Box makes the first move, what will Huge Box receive?
$0
What is another name for deadweight loss?
Efficiency loss
Which costs do not vary with changes in output?
Fixed
All following are examples of barriers to entry except______.
Income
A pure monopolist has no____ curve
supply
Marginal product is the slope of the ______ curve.
total product
Because consumers behave in a rationally self-interested manner, the consumer will purchase a good or service ______.
when the marginal benefit is greater than the marginal cost