Econ

Which of the following firms is most likely to be an monopoly?

A local distributor of electricity

Shutdown point is when

AVC is lowest

Choose the statement that is incorrect. Initially as output increases, average fixed cost and average variable cost decrease, so average total cost decreases and the ATC curve slopes downward. The shape of the ATC curve combines the shapes of the AFC and AVC curves. The ATC curve eventually slopes upward because average variable cost eventually increases. An increases in output always increases average total cost.

An increases in output always increases average total cost.

Choose the statement that is incorrect. When a firm engages in discrimination between two types of buyers _______. Consumer surplus increases Producer surplus increases The firm sells a greater quantity Economic profit decreases

Economic profit decreases

Choose the statement that is incorrect. According to social interest theory, the political and regulatory process allocates resources efficiently. According to capture theory, regulation serves the self-interest of the producer. During the past 30 years, deregulation has occurred in domestic air transportation, telephone service, interstate trucking, and banking and financial services. Regulation is a guaranteed solution to the dilemma presented by natural monopoly.

Regulation is a guaranteed solution to the dilemma presented by natural monopoly.

Choose the statement that is incorrect. Monopoly creates a deadweight loss and is inefficient. The social cost of monopoly can exceed the deadweight loss because of rent seeking. Rent seeking is the pursuit of wealth by capturing economic rent. Surplus from economic profit is called economic rent, and surplus from consumer surplus is called consumer rent.

Surplus from economic profit is called economic rent, and surplus from consumer surplus is called consumer rent.

Choose the statement about a perfectly competitive market that is incorrect. The market demand curve is horizontal at the market price. Each firm takes the market price as given and produces its profit-maximizing output. Market demand and market supply determine the market price and market output. The market supply curve is upward sloping at prices above the shutdown price.

The market demand curve is horizontal at the market price.

Choose the correct statement. When marginal product exceeds average product, average product is rising. When average product is rising, marginal product is rising. When marginal product is falling, average product is falling. When average product exceeds marginal product, marginal product is rising.

When marginal product exceeds average product, average product is rising.

JK Rowling's copyright on the Harry Potter series of books is an example of

a legal barrier to entry.

Consumers get the most value out of their resources at ________________________ and producers get the most value out of their resources at _________________________.

all points on the market demand curve; all points on the market supply curve

Over the output range for which marginal cost exceed average variable cost but is less than average total cost,

average fixed cost is falling more quickly than average variable is rising.

The activity of rent seeking shifts the firm's ________ _____ ____ curve upward.

average total cost

The long-run average cost curve traces out the lowest attainable _____ _____ ____ of producing each output.

average total cost

A firm experiences constant returns to scale when

average total cost does not change when output changes.

The output at which average product is a maximum is the same out put at which _______ ________ ____ is a minimum.

average variable cost

The output range over which average product increases is the output range over which _______ ________ ____ _________.

average variable cost decreases.

A monopoly arises for two keys, which are

barriers to entry and no close substitutes

A single-price monopoly

can sell a larger quantity only by setting a lower price

To increase output in the long run, a firm can

choose whether to change its plant as well as the quantity of labor it hires.

When the firm cannot lower its average total cost by changing its plant, then it is operating on its long-run average cost curve at a point with ________ ______ __ ____.

constant returns to scale

When a monopoly that produces a service practices perfect price discrimination,

consumer surplus is zero

The production function for a water bottling firm tells us that 2 workers working with 1 bottling machine can produce 10 bottles of water in a hour, and 2 workers working with 2 bottling machines can produce 16 bottles of water. When the firm increases the number of bottling machines from 1 to 2 and keeps the quantity of labor at 2 workers, it experiences

diminishing marginal product of capital.

When the firm can lower its average total cost by decreasing its plant, then it is operating at a point on its long-run average cost curve with ____________ __ _____.

diseconomies of scale

If diseconomies of scale are present and the firm ________ all its inputs, its output ____ ____ _______.

doubles; less than doubles.

If the monopoly produces a quantity at which marginal revenue exceeds marginal cost,

economic profit increases if output increases

When the firm can lower its average total cost by increasing its plant, then it is operating a point on its long-run average cost curve with _________ __ ____.

economies of scale

A natural monopoly regulated by a marginal cost price rule is

efficient and incurs an economic loss

In a market in which the smallest output at which long-run average cost reaches its lowest level is larger relative to market demand, the market is

either an oligopoly or monopoly.

A price cap regulation is a

price ceiling

A perfect price discriminating monopoly produces

the same quantity of output as a perfectly competitive market

Choose the statement that is incorrect. A firm practices price discrimination when it sells different units of a good or service for different prices. A monopoly faces a market constraint because to sell a larger quantity, it must set a lower price. A firm practices price discrimination to maximize profit. A firm that practices price discrimination is a monopoly.

A firm that practices price discrimination is a monopoly.

Choose the correct statement. At outputs greater than the minimum efficient scale, a firm experiences economies of scale. A firm's minimum efficient scale is the smallest quantity of output at which long-run average cost reaches its lowest level. A firm's minimum efficient scale increases when the number of people employed increases. At outputs less than the minimum efficient scale, a firm experiences diseconomies of scale.

A firm's minimum efficient scale is the smallest quantity of output at which long-run average cost reaches its lowest level.

Choose the statement that is incorrect. Perfect competition arises if the minimum efficient scale of a single producer is small relative to the demand for the good or service. Perfect competition arises if each firm is perceived to produce a good or service that has no unique characteristics. In a perfectly competitive market, sellers and buyers are well informed about prices. In a perfectly competitive market, barriers to entry exist.

In a perfectly competitive market, barriers to entry exist.

Joe's Shiny Shoes is a firm that operates in a competitive market. If the number of firms in the shoe market increases, Joe will ___ _____ _________.

cut back production

With competitive rent seeking, a single-price monopoly's

deadweight loss increases

The market for strawberries is in long-run equilibrium. Then a medical paper explains the health benefit of strawberries, which increases the demand for strawberries. As a result, some firms will _____ the market, and the market supply curve will shift ________.

enter; rightward

The market for portable CD players is in long-run equilibrium. Then the demand for portable CD players decreases. As a result, firms will ____ the market, and the market supply curve will shift ________.

exit; leftward

When economies of scale enable one firm to supply the entire market at the lowest possible cost, the

firm is a natural monopoly.

The short-run market supply curve is

horizontal at the shutdown cost

To increase output in the short run, a firm must

increase the quantity of a variable factor of production.

If marginal cost exceeds average total cost and output increases, average total cost _________ and average variable cost _________.

increases; increases

Most production processes experience __________ marginal returns initially, but all production processes eventually reach a point of ____________ marginal returns.

increasing; diminishing

A profit-maximizing monopoly never produces an output in the ________ range of its ______ curve.

inelastic; demand

A sunk cost is

irrelevant to a firm's current decisions.

In perfect competition, each firm

is a price taker

The social cost of a monopoly

is greater with rent seeking than it otherwise would be

A firm's supply curve

is the same as the marginal cost curve at all points above minimum average variable cost

When a firm is producing a given output at the least possible cost,

it is operating on its long-run average cost curve.

When some firms exit a market in which firms incur economic losses, the market supply curve shifts ________ and the market price _____. Each remaining firm's economic loss __________.

leftward; rises; decreases

Sam's Surfboards is the sole renter of surfboards on Big Wave Island. For Sam's Surfboards, the change in total revenue for each additional surfboard rental is always

less than the rental price of a surfboard

A competitive market is in long-run equilibrium. Some firms in the market adopt new technology that reduces the average total cost of producing the good. In the long run, the price is _____ and firms with the new technology make _____ economic profit. In the long run, firms with the old technology ____________________.

lower; zero; switch to the new technology or exit the market.

In a market undergoing technological change, firms that adopt the new technology __________________. Firms that stick the old technology _____________________.

make an economic profit and there is entry by new technology firms; either exit the market or switch to the new technology

The cell phone market is in long-run equilibrium. Then the demand for cell phones increases permanently. As a result, firms will _____ __ ________ ______. Some firms will _____ the market, and the market supply curve will shift _________.

make an economic profit; enter; rightward

If firms in a competitive market are ______ _ ________ _________ _____, then there is an incentive for firms to _____ the market.

making a positive economic profit; enter

The market for pizza is perfectly competitive and has 1,000 firms. Each firm is identical. In long-run equilibrium, each firm is ______ ___ _________ _____.

making zero economic profit

A monopoly can price discriminate among groups of buyers if ________ ______ ______ across the two groups.

marginal benefit differs

In a competitive market, the market demand curve measures

marginal social benefit if the people who consume a good or service are the only ones who benefit from it

In a competitive market, the market supply curve measures

marginal social cost if the firms that produce a good or service bear all the costs of producing it

The smallest quantity of output at which long-run average cost is at a minimum is a firm's _______ _________ ______.

minimum efficient scale

If a monopoly can perfectly price discriminate, it is ____ efficient than a single-price monopoly.

more

A monopoly

never produces an output in the inelastic range of the market demand because it could charge a higher price, produce a smaller quantity, and increases its profit

An example of a highly competitive market is the market for _____.

pizza

In perfect competition, a firm maximizes its economic profit if it produces the output at which _____ _____ _______ ____.

price equals marginal cost

Perfect competition achieves efficiency if

price equals marginal social benefit for consumers and price equals marginal social cost for producers

When a firm practices perfect price discrimination all of the following occurs except

producer surplus decreases

When new firms enter a perfectly competitive market in which firms are making an economic profit, the market supply curve shifts _________ and the market price _____. Each firm's output _________.

rightward; falls; decreases

An increase in the wage rate that a firm pays its workers

shifts both its marginal cost curve and its average total cost curve upward.

If total fixed cost increases, then the average total cost curve ______ ______ and the marginal cost curve ____ ___ _____.

shifts upward; does not shift

In the short run, equilibrium market price and market output are determined by

short-run market supply and market demand

The past expenditure on a plant that has no resale value is called ____ cost.

sunk

When a perfectly competitive industry is taken over by a single firm, the competitive industry's ______ curve becomes the monopoly's ________ ____ curve.

supply; marginal cost

Sam's Surfboards is the sole renter of surfboards on Big Wave Island. If marginal revenue is positive eat the actual number of surfboard rentals made each hour, then

the demand for surfboard rentals is elastic.

The law of diminishing returns says that as the firm uses more of ___ ________ ______ __ __________, marginal product of the variable factor eventually diminishes.

the fixed factor of production

The firm's production function is the relationship between

the maximum output attainable and the quantities of both labor and capital.

Total product is

the maximum output that a given quantity of labor can produce.

Along the short-run market supply curve,

the number of firms remains constant.

In economics, the short run is the time frame in which _________________, and the long run is the period of time in which __________________.

the quantities of some factors of production are fixed; the quantities of all factors of productions can be varied

A monopoly that can perfectly price discriminate has a marginal revenue curve that is ___ _____ __ the demand curve for the good that the monopoly produces. If a monopoly can perfectly price discriminate, it produces __ deadweight loss.

the same as; no

The only costs that influence a firm's current decisions are

the short-run cost of changing its labor inputs and the long-run cost of changing its plant.

At competitive equilibrium,

the sum of consumer surplus and producer surplus is maximized

In perfect competition,

there are no restrictions on entry into the market.

The U shape of the average total cost curve arises because of spreading total _____ cost over a larger output and eventually ___________ returns.

total; diminishing