Econ Module 20-23

Orville's Ocular Paradise produces 10 pais of sunglasses. Its average total cost is $35, and its average fixed cost is $5. The average variable cost of producing 10 pairs of sunglasses is:

$30

a monopoly will have a Herfindahl-Hirschman index equal to:

10,000

Which cost concept is CORRECTLY defined?

ATC = AVC + AFC

an example of monopolistic competition is the _____ industry

restaurant

The marginal product is the change in _____ output resulting from a one-unit change in _____, assuming that all other factors of production are help constant

total; a fixed input

A _____ is an organization that produces goods or services for sale

firm

in monopolistic competition

firms earn zero economic profits in the long run

In an oligopoly

firms recognize their interdependence

an assumption of the model of perfect competition is

identical goods

markets for new drugs are not usually perfectly competitive since the companies that manufacture these drugs are usually granted patents, restricting entry into the industry (T/F)

true

The total cost curve becomes steeper as output increases because of:

decreasing returns to the variable input

The total product curve indicates the relationship between _____ when all other inputs are fixed

a variable input and output

If all firms in an industry are price takers:

an individual firm cannot alter the market price even if it doubles its output

an industry that is dominated by a few firms, each of which recognizes that its own choices can affect the choices of its rivals and vice versa, is

an oligopoly

In oligopoly, a firm must realize that

another major firm may dominate choices in the industry, and it will have to behave accordingly

Diminishing returns to an input occur when:

at least one input is fixed

In the short run:

at least one input is fixed

The long-run average total cost curve is tangent to an infinite number of short-run _____ cost curve

average total

When marginal cost is rising

both average variable cost and average total cost may be rising or falling

The marginal product of labor is the:

change in total product divided by the change in labor

The term diminishing returns refers to a:

decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant

The long run is planning period:

during which all inputs are variable

entry barriers

exist in monopoly and oligopoly markets

monopolistic competition is different from monopoly because firms

face some competition

If a perfectly competitive firm reduces its output, the market price will increase (T/F)

false

In the short run, fixed costs will _____ when a firms adds physical capital

increase

an oligopoly may result from

increasing returns to scale

the assumptions of perfect competition imply that:

individuals in the market accept the market price as given.

A fixed cost:

is positive, even if the firm doesn't produce any output in the short run

The marginal cost curve intersects the average variable cost curve at

its lowest point

A monopolist is likely to produce ____ and charge ____ than is a comparable perfectly competitive firm

less; more

The market for dentists in most communities can be considered ______ because there are a large number of similar, but not identical, substitutes in the market.

monopolistic competition

an industry with a large number of relatively small firms producing differentiated products in a market with easy entry and exit of firms is

monopolistically competitive

An industry with a single firm producing a product for which there are no close substitutes and that is protected by barriers to entry is an example of

monopoly

_____ firms have the most market power

monopoly

an industry with a single producer that sells a single product with no substitutes is a(n)

monpoly

a monopoly is a market characterized by a

single seller

The total cost curve shows how ____ cost depends on the quantity of ____.

total: output

Average total cost is

total cost divided by output

If the Herfindahl-Hirschman index (HHI) for an industry is 300, the industry is considered

unconcentrated

An input whose quantity can be changed in the short run is a(n) ______ input

variable

In the long run, all costs are:

variable

A fixed input is one:

whose quantity cannot be changed in the short run

The total product curve:

will become flatter as output increases if there are diminishing returns to the variable input

large barriers to entry in the gas station business explain why the two only gas stations in a small town

can earn economic profit in the long run

monopolistic competition is similar to perfect competition because firms in both market structures

do not face any barriers to entry to the industry in the long run

suppose that hiring one, two, three, or four workers at a glass factory generates a total output of 200, 350, 450, and 500 fancy glasses, respectively. The marginal product of the second worker is:

150

In economics, the short run is defined as:

a period in which at least one input is fixed

to be called an oligopoly, an industry must have

a small number of interdependent firms

In perfect competition, ______ are _____, and _____ are price takers

all goods; standardized; all market participants

an industry with a few interdependent firms is BEST described as being

an oligopoly

if marginal cost is GREATER than average total cost:

average total cost increasing

The idea of diminishing returns to input in production suggests that if a local university adds more service workers (for maintenance), the marginal product of labor for the service staff will:

decrease

diamond rings are relatively scarce because

diamond producers limit the quantity supplied to the market

In the short run, the average total cost curve slopes upward because of:

diminishing returns

Diminishing marginal returns occur when:

each additional unit of a variable factor adds less to total output than the previous unit

the most important source of oligopoly in an industry is

economies of scale

a natural monopoly exists when:

economies of scale provide large cost advantages to having one firm produce the industry's output

In economics, the short run is:

enough time to vary output but not plant capacity

In the U.S. economy, oligopoly is rare (T/F)

false

Of the four market structures, the only one that is characterized by product differentiation is oligopoly (T/F)

false

the hamburger industry has some differentiation and many firms, suggesting that the hamburger industry is more oligopolistic than it is monopolistically competitive (T/F)

false

a common example of monopolistic competition is the market for

gasoline for cars

In monopolistic competition, each firm

has some ability to set the price of its differentiated good

price takers are individuals in a market who:

have no ability to affect the price of a good in a market

An assumption if the model of perfect competition is:

identical goods

a monopolistically competitive industry is characterized by a ____ number of firms producing ____ products with ____ entry

large; similar; relatively easy

One characteristic of a perfectly competitive market is that there are ____ sellers of the good or service

many

an assumption of the model of perfect competition is

many buyers and sellers

The _____ is the increase in output that is produced when a firm hires an additional worker

marginal product

The shape of the marginal cost curve is the mirror image of the shape of the ____ curve

marginal product

When a firm has diminishing marginal returns, its:

marginal product is falling but is likely still positive

The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as:

market power

individuals in a market who must take the market price as given are:

price takers

A _____ actions have no effect on the market price of the good or service that they sell

price-taking producer's

a monopoly

produces a product with no close substitutes

In perfect competitive industry, each firm

produces a standardized product

A _____ function is a relationship between the quantity of inputs a firm uses and the quantity of output it produces

production

When marginal cost is ABOVE average variable cost, average variable cost must be:

rising

A firm's marginal cost is the:

slope of the total cost curve

oligopoly is a market structure that is characterized by a _____ number of _____ firms that produce _____ products

small; interdependent; identical or differentiated

If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a _____ share of the market, and consumers will consider her strawberries and her competitors' strawberries to be _____. Therefore, ____ advertising will take place in this market

small; standardized; little or no

The average total cost curve has a U shape because the ____ effect dominates al low levels of output, and the ____ effect dominates at high levels of output

spreading; diminishing returns

The wedding dress industry is monopolistically competitive. As a result:

tend to be differentiated among the many sellers serving this market

The perfect competitive model does not assume

that firms attempt to maximize their total revenue

perfect competition is characterized by:

the inability of any one firm to influence price

market structures are categorized by:

the number of firms and weather products are differentiated

A monopoly competitive industry, such as corn snack chips, and a perfectly competitive industry, like wheat farming, are alike in that

there any many firms in each industry

The _____ curve shows how the quantity of output depends on the quality of the variable input, for a given quantity of the fixed input

total product

Average variable cost is:

total variable cost divided by quantity

For Hillary, the marginal cost of producing one additional painting equals the change in ____ cost divided by the change in the ____ of paintings

total; number

A producer is a monopoly if it is the sole supplier of a good that has no close substitutes (T/F)

true

To maintain profits in the long run, a monopoly must be protected by barriers to the entry of other firms into the industry (T/F)

true

In contrast with perfect competition, a monopolist

may have economic profits in the long run

The market structure that is characterized by only a small number of producers is

oligopoly