ECON 2020 QA

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

a one-unit decrease in output will increase the firm's profit.

If the value of the marginal product of labor exceeds the wage, then hiring another worker

increases the firm's profit.

The minimum points of the average variable cost and average total cost curves occur where the

marginal cost curve intersects those curves.

If marginal cost is rising,

marginal product must be falling.

A perfectly price-discriminating monopolist is able to

maximize profit and produce a socially optimal level of output.

Which of the following explains why long-run average total cost at first decreases as output increases?

Gains from specialization of inputs

A local cable TV provider would be most likely to have monopoly power?

True

Even with market power, monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

True

For all firms, average revenue equals the price of the good.

True

Shut down if TR < VC represents the firm's short-run condition for shutting down?

True

Monopolies are socially inefficient because the price they charge is

above marginal cost.

The process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference is known as

arbitrage.

For an individual firm operating in a competitive market, marginal revenue equals

average revenue and the price for all levels of output.

When firms are said to be price takers, it implies that if a firm raises its price,

buyers will go elsewhere.

The social cost of a monopoly is equal to its

deadweight loss.

Tom produces commemorative t-shirts in a competitive market. If Tom decides to decrease his output, this will

decrease his revenue, since his output has decreased and the price remains the same.

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

diminishing marginal product.

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue

does not change.

If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will

exactly triple.

When new firms enter a perfectly competitive market,

existing firms may see their costs rise if more firms compete for limited resources.

In the long run,

inputs that were fixed in the short run become variable.

When a factory is operating in the short run,

it cannot adjust the quantity of fixed inputs.

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers

labor to be variable and capital to be fixed.

In order to sell more of its product, a monopolist must

lower its price.

Antitrust laws have economic benefits that outweigh the costs if they

prevent mergers that would decrease competition and raise the costs of production.

The deadweight loss associated with a monopoly occurs because the monopolist

produces an output level less than the socially optimal level.

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

profit is maximized.

Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to

remain unchanged.

The most likely explanation for economies of scale is

specialization of labor.

For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because

the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region.

A natural monopoly occurs when

there are economies of scale over the relevant range of output.

Price discrimination is a rational strategy for a profit-maximizing monopolist when

there is no opportunity for arbitrage across market segments.