Econ Test #2

A perfectly competitive firm is producing 50 units of output and selling at the market price of 23. the firms average total cost is 20. what is the firms total cost?

$1,000

The square of the percentage market share of each firm summed over the 50 largest firms in a market is the

Herfindahl-Hirschman Index

in a monopoly, produces ______ and consumers ______.

gain; lose

A perfectly competitive firm definitely earns an economic profit in the short run if price is

greater that average total cost

the good produced by a monopoly

has no close substitutes

in the long run, a firm in monopolistic competition ______ a markup of price over marginal cost and a firm in perfect competition ______ a markup of price over MC

has; does not have

In the short run, a perfectly competitive firm ______ earn an economic profit and _____ incur an economic loss

might; might

if the HHI for the widget industry is 1200, then the market structure is

monopolisitic competititon

If the Herfindahl - Hirschman Index in the market for single - use equals, 10,000, then single -- use camera industry is best characterized as

monopoly

Two types of barriers to entry are called ____ barriers to entry and _____ barriers to entry

natural; legal

if firms in a monopolistic competition are earning economic profits, eventually

new firms enter the industry

if perfectly competitive firms are making an economic profit then

new firms will enter the market

if firms in monopolistic competition are earning economic profits, then

new rivals enter the industry and the demand for any sellers good decreases

A ____ monopoly sells different units of its good or service for _____.

price--discriminating; different prices and single--price; the same price

each firm in a perfectly competitive industry ....

produces a good that is identical to that of the other firms

one of the major benefits to society of monopolistic competition

product differentiation

when new firms enter a perfectly competitive market, the market supply curve shifts _____ and the price _______.

rightwards; falls

Under earnings - sharing regulation , if a firms profits ___ above a certain level, they must be shared with the firm's _____

rise; customers

A natural monopoly exists when

one firm can supply an entire market at a lower average total cost than can two or more firms

Monopoly

one supplier

Under which of the following is consumer surplus zero

only perfectly price-- discriminating monopoly

If a perfectly competitive firm is maximizing its profit and is earning an economic profit, then....

price equals MR MR = MC price is greater than ATC

Suppose Pat's Paints is a perfectly competitive firm. If Pat's Paints' marginal revenue equals $5 per can and Pat decides to sell 100 cans of paint, Pat's total revenue is...

$500

A perfectly competitive firm is producing 50 units of output and selling at the market price of 23. the firm's average total cost is 20. what is the firms economic profit

150.00

when of the following four - firm concentration ratios would be the best indication of a perfectly competitive industry

2 percent

if there are four firms in an industry with market shares of 50 percent, 40 percent, 5 percent, and 5 percent, the Herfindahl - Hirschman index is

4150

TR =

P x Q sold

to eliminate losses in a perfectly competitive market, firms exit the industry. this exit results in

a decrease in market supply

In order to price discriminate,

a firm must sell a good or service that cannot be resold

Compared to a perfectly competitive market, a single -- price monopoly sets

a higher price

what does monopolistic competition have in common with perfect competition

a large number of firms and freedom of entry and exit

if we compare a perfectly competitive market to a single -- price monopoly with the same costs, the monopoly sells

a smaller quantity at a higher price

if it does not shut down, a perfectly competitive firm produces where marginal cost is equal to the marginal revenue

always to maximize its profit

if the four -- firm concentration ratio for the market for diapers in 73 percent, then this industry is best characterized as

an oligopoly

Natural barriers to entry arise when, over the relevant range of output, there

are economies of scale

patents

are legal barrier to entry

if perfectly firms are earning an economic profit, the economic profit

attracts entry by more firms, which lowers the price

for a firm in monopolistic competition, the efficient scale is the amount of output at which _____ is a maximum

average total cost

A perfectly competitive firm should shut down in the short -- run if price falls below the minimum of

average variable costs

To be able to price discriminate, a firm must

be able to identify and separate different types of buyers

why can a monopoly make an economic profit in the long run

because the firm protected by barriers to entry

a differentiated product has

close but not perfect substitutes

A single- price monopoly transfers

consumer surplus to producers

compared to a similar perfectly competitive industry, a single -- price monopoly

creates a deadweight loss and decreases consumer surplus

when firms in a perfectly competitive market incur economic losses, exit by some firms means the market supply will

decrease

Firms exit a competitive market when they incur an economic loss. in the long run, this exit means that the economic losses of the surviving firms

decrease until they equal zero

when firms in monopolistic competition incur an economic loss, some firms will

exit the industry, and demand will increase for the firms that remain

if firms in a perfectly competitive market have economic losses, then as time passes firms _____ and the market _______.

exit; supply curve shifts leftward

with perfect price discrimination, the quantity of output produced by a monopoly is ____ the quantity produced by a perfectly competitive industry

equal to by NOT greater than

for a perfectly competitive firm, marginal revenue is

equal to the price

The marginal revenue curve for a perfectly competitive firm is

horizontal

Price cap regulation is defined as regulation that

imposes a price ceiling on the regulated firm

if new firms enter a perfectly competitive industry, the market supply

increases

if a perfectly competitive firm finds that price is less than its ATC, then the firm

is incurring an economic loss

when a firm is able to engage in perfect price discrimination, its marginal revenue curve

is the same as its demand curve.

with perfect price discrimination the level of output

is the same as the amount produced in a perfectly competitive market

a perfectly competitive firm's short --- run supply curve is

its marginal cost curve above the AVC curve

compared to a perfectly competitive industry, a single -- price monopoly purchase

less output

in the long run, firms in monopolistic competition produce at a level that is _____ the efficient scale of output

less than

in the long run, perfectly competitive firms will exit the market if the price is

less than average total costs

excess capacity exists when a firm produces

less than the quantity that minimizes ATC

A market is considered competitive if the Herfindahl Hirschman Index (HHI) is ______ and its four - firm concentration ratio is ______

low; low

in the long run in monopolistic competition, firms

make zero economic profit

Monopolistic competition is defined as a type of market structure in which

many firms produce the good

A firm in perfect competition is a price taker because

many other firms produce identical products

A firm maximizes its profit by producing the amount of output such that

marginal revenue equals marginal cost

The maximum profit for a single -- price monopoly is found when the firm produces the level of output so that

marginal revenue equals marginal cost

in monopolistic competition, the entry of new firms

shifts existing firms, demand curves leftward

in monopolistic competition, the products of different sellers are

similar but slightly different

The Herfindahl - Hirschman Index is the _____ of the percentage market share of each firm summed over the largest 50 firms in a market

square

The Herfindahl-Hirschman Index measures market concentration in an industry by summing the square of the percentage market squares for

the 50 largest firms

For a monopoly, marginal revenue is equal to

the change in TR brought about by a one -- unit increase in quantity sold

Marginal Revenue

the change in total revenue from a one-unit increase in the quantity sold

with perfect price discrimination _____, and production is expanded until MR =

the firms demand curve become its marginal revenue curve; marginal cost

rent seeking is the act of obtaining special treatment by ____ to create ___

the government; economic profit

IF a producer wants a monopoly with a legal barrier to entry how can this be done

the producer can spend funds lobbying to attain passage of the legal barrier to entry the producer can purchase an existing monopoly the producer can make rent seeking expenditures

If a perfectly competitive firm raised the price of its product

the quantity of output it sells decreases to zero

The price charged by a perfectly competitive firm is

the same as the market price.

One requirement for an industry to be perfectly competitive is that...

there are no restrictions on entry into or exit from the market

To maximize its profits in the short run a perfectly competitive firm decides

what quantity of output to produce

If a firm in a perfectly competitive market faces an equilibrium price of $5.00 its marginal revenue

will also be $5.00

A monopoly produces a product ____ and there _____ barriers to entry into the market

with no close substitutes ; are

The deadweight loss with perfect price discrimination is

zero

In the long run, a perfectly competitive firm earns

zero economic profit