Micro Final

If the demand increases in a perfectly competitive market, firms will likely

enter the market in hopes of capturing some profits

Economic profits are calculated by subtracting

explicit and implicit costs from total revenue.

When some firms leave a perfectly competitive market, the price

increases, and profits of those left rise

If a firm decides to produce no output in the short run, its costs will be

its fixed costs

The monopolist's cost curves differ from those of a perfectly competitive firm in that the

marginal cost curve is downward sloping instead of flat

For most producing firms

marginal cost rises as output is carried to a certain level, and then begins to decline

Implicit costs are

nonexpenditure costs

A firm realizes that the market price has fallen below its average total costs, and it is now earning a loss. What is the best action for the firm to take in the short run

produce where MC = MR to minimize losses if P is greater than AVC.

For a firm in a perfectly competitive market, if it is producing at a level of output where marginal costs are less than marginal revenue it

should increase production to increase profits

Most U.S. firms face

some degree of competition

A firm realizes that the market price has fallen below its average total costs, and it is now earning a loss. What is the best action for the firm to take in the short run

stay open if price is greater than average variable costs

Implicit and explicit costs are different in that

the former refer to non-expenditure costs and the latter to monetary payments

When firms are faced with repeating games, such as the prisoner's dilemma, they

are more likely to collude

The short run is characterized by

at least one fixed resource

Diseconomies of scale means that

a firm's long-run average total cost curve is rising

An explicit cost is

a money payment made for resources not owned by the firm itself

A cartel is

a number of firms who collude to make collective production decisions about quantities or prices

When a Nash equilibrium is reached

no one has an incentive to break the equilibrium by changing his strategy

If a firm in a perfectly competitive market price of $5, and it decides to produce 400 units, the firm's total revenue will be

$2000

Which of the following is a short-run adjustment

A local bakery hires two additional bakers.

When one strategy is always the best for a player to choose, regardless of what other players do, it is called

a dominant strategy

An outcome in which all players choose the best strategy they can, given the choices of all other players, is called

a Nash equilibrium

A number of firms who collude to make collective production decisions about quantities or prices is called

a cartel

A Nash equilibrium is

an outcome in which all players choose the best strategy they can, given the choices of all other players

Fixed cost is

any cost which does not change when the firm changes its output

In the short run, a firm that finds itself earning a loss should compare the market price to which cost in order to determine how to minimize its losses

average variable costs

In the short run, the relevant costs for a firm to consider whether to shut down production are

average variable costs

One reason a government might choose to protect monopoly rights in an industry is

because it is in the public's interest to do so. to benefit insiders. to encourage innovation.

An essential characteristic of a perfectly competitive market is

buyers and sellers have no control over the market price

In the short run, monopolistically competitive firms:

can earn positive economic profits by acting like a monopolist

Cartels

can effectively sustain large profits in the long run. are usually illegal. can create outcomes similar to a monopoly.

When someone has market power, it means they

can noticeably affect the market price

The existence of a monopoly

causes consumers to get less at a higher price. creates market inefficiencies. and causes reduction in the total surplus

Marginal cost is the

change in total cost that results from producing one more unit of output

The act of firms working together to make decisions about price and quantity is called

collusion

Collusion is

difficult to maintain since firms always have an incentive to renege

One way for firms to analyze their choices in an oligopoly is by using

game theory

An essential characteristic of a perfectly competitive market is

goods are standardized

Standardized goods are

goods which are easily substitutable and not distinguishable.

Accounting profits are typically

greater than economic profits because the former do not take implicit costs into account

A price taker is a buyer or seller who

has no control over setting the market price

Most countries

have laws against firms making agreements about prices or quantities

The opposite of being a price taker is:

having market power

To economists, the main difference between the short run and the long run is that

in the long run all resources are variable, while in the short run at least one resource is fixed

A good that is perfectly standardized is

indistinguishable to others in the market

For a firm in a perfectly competitive market, if it is producing at a level of output where marginal costs are equal than marginal revenue it

is producing a profit-maximizing quantity

For firms that sell one product in a perfectly competitive market, the market price

is taken as a constant by individual firms. will remain constant regardless of an individual firm's output decision

Marginal product (of labor) is

may initially increase, then diminish, and ultimately become negative.

Costs to an economist

may or may not involve monetary outlays

A firm that is the sole producer of a good or service with no close substitutes is called a

monopolist

For a monopolist, at the profit-maximizing level of output

price is chosen according to demand

Collusion is

the act of firms working together to make decisions about price and quantity.

Normal profit is

the return to the entrepreneur when economic profits are zero.

For firms that sell one product in a perfectly competitive market, marginal revenue is always

the same as market price

The amount of calendar time associated with the long run

varies from industry to industry

One barrier to entry into a monopoly market is

very large fixed costs relative to variable costs. the existence of large economies of scale. the high cost of required infrastructure for an industry.

A dominant strategy is

when one strategy is always the best for a player to choose, regardless of what other players do