Econ final test!!!!
In the short run if AVC < P < ATC, a perfectly competitive firm:
produces output and incurs an economic loss
In the long run
All factors are variable
If external costs exist, the competitive market:
Allocates resources inefficiently
If the marginal social benefit received from a good is greater than the marginal social cost of production:
An increase in production will improve societ's well-being
Tank makes earbuds. When Tanko produces 20 sets of earbuds, it's average variable cost is $5 per set, and average total cost is $8 per set. Tanko's
Average fixed cost is $3 per set
Marginal cost _______ over the range of increasing marginal returns and _______ over the range of diminishing marginal returns.
Decreases, Increases
Diminishing marginal returns occur when
Each additional unit of a variable factor adds less to total output than the previous unit
If firms are taking economic losses in the short run, firms will leave the industry, industry output will ___ and economic losses will ____ in the long run.
Fall, Fall
The tendency of people or firms to consume a public good with out paying for it is called the _______ problem.
Free-Rider
If your firm is operating in the negatively sloped portion of a long-run average total cost curve, then your production exhibits:
Increasing returns 2 scale
No individual is willing to provide the efficient level of a public good, since the:
Individual's marginal benefit is less than the marginal social benefit
In a perfect competition, the assumption of entry and exit implies that in the ___ run, all firms will earn ____ economic profit.
Long, Zero
In perfect competition, the profit-maximizing level of outcome occurs where the:
MR=MC above minimum AVC
The addition 2 the total revenue from selling one more unit of the good is
Marginal Revenue
When the market does NOT result in an efficient allocation of scarce resources economists say there has been:
Market failure
Public goods differ from common resources in that both are ___, but public goods are _____, while common resources are ______.
Nonexcludable, nonrival in soncumption, rival in consumption.
Most neighborhood streets are illuminated at night by lights, the lights are ____ and ____. Therefore, they are likely to be _____ by the competitive market.
Nonviral, Nonexcludable, Underprovided.
If price inputs are unchanged:
(dealing with) Economies of Scale
Which of the following are true? 1. An inefficiency occurs if there's too much pollution 2. An inefficiency occurs if there's too little pollution 3. It is possible for there to be an efficient level of pollution
1,2,3 ALL
If Hank and Helen have 100 farms in a perfectly competitive industry and if the price is $4, in the short run industry will supply ____ lbs.
400
When a good is non excludable:
A free rider problem will arise
What is most likely a common resource? A. Public Park B. Pair of pants C. Fire department D. Super bowl
A. Public Park
If a good is subject to the free-rider problem, and an inefficiently high level of consumption, the good must be an:
Common resource
A private good is a good or service for which exclusion is _____ and which is _____ in consumption.
Possible, rival.
In a perfect competition
Price and marginal revenue are the same
When a firm cannot affect the market price of the good that it sells, it's said to be a :
Price taker
In the case of producing a good with a negative externality, a firm will likely consider only the:
Private marginal costs of production and not the marginal costs, which cause more output than is socially optimal
Maximizing profits also means that a firm is attempting to:
Produce at the output level where the difference between total revenue and total cost is greatest
A perfectly competitive firm's marginal cost curve above the average variable cost curve is its ___ curve.
Short-run supply
The perfectly competitive model assumes all of the following EXCEPT:
That firm's attempt 2 maximize their total revenue.
The break-even price for a perfectly competitive firm is equal to
The minimum value of average total cost
Average Total Cost = ?
Total cost/Quantity
The total cost curve for a snowmobile dealership shows how ___ cost depends on the quantity of ____
Total, output
Average total cost is the ratio of ____ cost to _______
Total; Quantity of output
Marginal Costs can be calculated as
Triangle TC/Triangle Q, where TC is the total cost and Q is output; Triangle VC/Triangle Q, where VC is variable cost and Q is output; and as the slope of the total cost curve.
Which statement is TRUE?
if price falls below average variable cost, the firm will shut down in the short run.
Encouragement of voluntary contributions to the provision of goods:
may lead to provisions of goods
Point below D curve:
negative externality
In the short run, is P<AVC at the quantity where MR=MC, a perfectly competitive firm produces ____ and takes an economic ____
no output, loss
National defense and e-book are similar in that both are ____, but they differ in that national defense is ____, while e-books are not.
nonrival in consumption, nonexcludable.
competitive markets ____ goods with negative externalities and ____ provide goods with positive externalities:
over provide, under provide
In a perfectly competitive industry, each firm:
produces a standardized product
pigouvian tax
taxed designed to reduce external costs
