Econ Midterm 2 Preview

total cost per unit is equal to

average total cost ATC = TC/Q

total variable cost divided by the amount of output produced is equal to

average variable cost AVC = TVC/Q

a monopoly is not really a monopoly when there are no _ to entry

barriers

impediments that prevent firms from entering a market or industry are known as

barriers to entry

fixed costs of production in the short run

cannot be reduced by producing less output

because monopolies have market power and can influence the price of the goods they sell, they tend to produce lower output and charge a higher price than would prevail in a _ equilibrium

competitive

a perfectly competitive market involves firms that produce identical products. this guarantees

consumers recieve the lowest prices

price _ is the practice of selling the same good or service to different consumers at different prices

discrimination

Perfect Competition Characteristics

* identical/homogeneous product * price takers * firms can enter or exit the market without cost

a firm sustains a loss if

TR < TC

a situation in which a particular strategy yields the highest payoff, regardless of the other players strategy, is

a dominant strategy

by charging consumers the highest price they are willing and able to pay, _ extracts all surplus from consumers, yielding higher profits than any other pricing method available to the firm

a pure monopoly

zero _ profit is when the firms revenue equals its economic costs without a loss

economic

the costs associated with the use of resources are called

economic costs

the lowest level of output at which the long run average total cost is minimized is called minimum _ scale

efficiency

because the cost of a container is proportional to its surface area, by doubling the diameter of a container, a producer can

experience economies of scale

by charging consumers the highest price they are willing and able to pay, the pure monopoly

extracts all surplus from consumers

in a perfectly competitive market, we assume the product is in the minds of consumers

homogeneous

as the market price _, all else held constant, a profit maximizing firm can afford to expand its production

increases

fixed costs are those costs that are

independent of the amount of output a firm produces in the short run

decreasing marginal returns are a characteristic of production whereby the marginal product of the next unit of a variable resoruce utilized is _ than that of the previous variable resource

less

decreasing _ returns are a characteristic of production whereby the marginal product of the next unit of a variable resource utilized is less than that of the previous variable resource

marginal

the extra or additional cost associated with the production of an additional unit of output is the _ cost

marginal

a profit maximizing firm should produce a level of output where

marginal revenue equals marginal cost

in the short run, the supply curve for a firm is the _ cost curve above or equal to the average _ cost curve

marginal, variable

the HHI is expressed as a number between 0 and 10,000, where 10,000 represents a pure _

monopoly

_ interdependence is a situation in which the strategy followed by one producer will likely affect the profits and behavior of another producer

mutual

zero accounting profit means that the value of economic profit is _

negative

_ profit is also known as zero economic profit

normal

the market condition in which firms do not face incentives to enter or exit the market and firms earn a _ profit is known as long run equilibrium

normal

costs that do not change with the amount of _ produced are fixed costs

output

the practice of selling the same good or service to different consumers at different prices is called _ discrimination

price

the practice of selling the same good or service to different consumers at different consumers at different prices is called

price discrimination

total revenue equals

price times quantity

which of the following is not a characteristic of an oligopoly

producers who are price takers

allocative efficiency is

producing the goods and services that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost

producing output at the lowest possible total cost per unit of production is

productive efficiency

(P-ATC) x Q equals

profit

all firms maximize _ by producing the quantity of output at which the marginal revenue is equal to the marginal cost

profit

for the profit maximizing level of output, the price charged by a monopoly is not just different but greater than marginal _

revenue

total _ equals price times quantity

revenue

normal profit is also known as zero _ profit

economic

for a monopoly, the marginal revenue is below the demand curve because

the monopoly has to lower the price on all units to sell more

total variable costs =

total costs - fixed costs

average fixed cost =

total fixed costs / number of units

average variable cost =

total variable costs / number of units

there are important exceptions in which monopolies are actually encouraged to incentivize positive outcomes (true or false)

true

the marginal cost curve must intersect both the average _ cost and average _ cost curves at their respective minimum points

variable, total