Microeconomics Final Study Guide

rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium.

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

average fixed cost is high

Average total cost is very high when a small amount of output is produced because

marginal revenue is less than price

Because a monopolist must lower its price in order to sell another unit of output

marginal product is falling.

Refer to the above diagram. At output level Q

A. marginal product is falling.

Refer to the above diagram. At output level Q A. marginal product is falling. B. marginal product is rising. C. marginal product is negative. D. one cannot determine whether marginal product is falling or rising.

is measured by both QF and ED

Refer to the above diagram. At output level Q average fixed cost:

0BEQ plus BCDE

Refer to the above diagram. At output level Q total cost is:

the average fixed cost at each level of output.

Refer to the above diagram. The vertical distance between ATC and AVC reflects:

third worker

Refer to the below data. Diminishing marginal product of labor become evident with the addition of the

$8

Refer to the below data. The average fixed cost of producing 3 units of output is:

$16

Refer to the below data. The average total cost of producing 3 units of output is:

$8

Refer to the below data. The marginal cost of producing the sixth unit of output is:

is 5

Refer to the below data. The marginal product of the fourth worker

15 units of output.

Refer to the below data. The marginal product of the sixth worker is

cannot be determined from the information given.

Refer to the below data. The profit-maximizing output for this firm:

$37

Refer to the below data. The total variable cost of producing 5 units is:

total product is 18.

Refer to the below data. When two workers are employed:

economic profits will be zero

Refer to the below diagram for a purely competitive producer. If product price is P3

between P2 and P3.

Refer to the below diagram for a purely competitive producer. The firm will produce at a loss at all prices:

the bcd segment and above on the MC curve

Refer to the below diagram for a purely competitive producer. The firm's short-run supply curve is:

P2

Refer to the below diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is:

produce 44 units and earn only a 0 profit

Refer to the below diagram. At P2, this firm will:

produce 40 units and incur a loss

Refer to the below diagram. At P3, this firm will

shut down in the short run.

Refer to the below diagram. At P4, this firm will:

BCDE

Refer to the below diagram. At output level Q total fixed cost is

0BEQ

Refer to the below diagram. At output level Q total variable cost is:

a profit of ABGH

Refer to the below diagram. At the profit-maximizing output, the firm will realize:

BCFG

Refer to the below diagram. At the profit-maximizing output, total fixed cost is equal to:

0AHE

Refer to the below diagram. At the profit-maximizing output, total revenue will be:

0CFE

Refer to the below diagram. At the profit-maximizing output, total variable cost is equal to

P1

Refer to the below diagram. This firm will earn a positive profit if product price is:

E units at price A.

Refer to the below diagram. To maximize profit this firm will produce:

Will be 0.

Refer to the below graph. Assume the market is monopolistic competition. In the long run, the profits of one firm:

Cannot be determined from the information given

Refer to the below graph. The monopolist's profits

0J

Refer to the below graph. The profit-maximizing monopolist in it will set its price at:

P3

Refer to the below graph. The pure monopolist firm will charge a price of:

Has a loss per unit equal to DE

Refer to the below graph. This monopolist:

S will decrease, P will increase

Refer to the below graphs. What will happen in the long run to industry supply and the equilibrium price of the product?

The firm is experiencing economic losses

Refer to the below graphs. Which statement is true?

$250

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101st unit of output?

$4,800

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $4,500. The marginal cost of producing the 101st unit of output is $300. What is the total cost of producing 101 units?

$3

A firm in a competitive market has the following cost structure. What is the lowest price at which this firm might choose to operate?

average variable cost is $3

A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100

are short-run decisions

A local playground equipment company plans to operate out of its current factory, which is estimated to last 30 years. All cost decisions it makes during the 30-year period...

is imperfectly competitive, but not all imperfectly competitive markets are monopolistically competitive.

A monopolistically competitive market

it produces a smaller level of output than would be produced in a competitive market.

A monopoly is an inefficient way to produce a product because

how a firm turns inputs into output

A production function describes...

Profits will decrease

A purely competitive firm, as shown below, will face what kind of change in profits over the long run, assuming industry demand is constant?

was paid in the past and will not change regardless of the present decision

A sunk cost is one that

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

Accounting profits are typically

c. (i), (ii), and (iii)

Allowing an inventor to have the exclusive rights to market her new invention will lead to (i) a product that is priced higher than it would be without the exclusive rights. (ii) desirable behavior in the sense that inventors are encouraged to invent. (iii) higher profits for the inventor.

cannot affect market price

An individual firm in a perfectly competitive market

is a type of imperfectly competitive market.

An oligopoly...

diminishing marginal product

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

economies of scale

As the firm in the above diagram expands from plant size #1 to plant size #3, it experiences:

in the short run but not in the long run.

Assume a certain firm regards the number of workers it employs as variable but regards the size of its factory as fixed. This assumption is often realistic

$1,600

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is

maximizing profit

By comparing marginal revenue and marginal cost, a firm in a competitive market is able to adjust production to the level that achieves its objective, which we assume to be

(ii) only

Economic welfare is generally measured by (i) profit. (ii) total surplus. (iii) the price consumers pay for the product

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

Fixed cost is:

the law of diminishing product of labor

If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes:

marginal cost must be less than average total cost.

If average total cost is declining, then:

Supply curve to the left, and the market price will increase

If firms are losing money in a purely competitive industry, then in the long run this situation will shift the industry:

Supply curve to the right, and the market price will decrease

If firms enter a purely competitive industry, then in the long run this change will shift the industry

fewer firms in the market.

If the market starts in equilibrium at point Z in panel (b), a decrease in demand will ultimately lead to

continue to operate in both the short run and long run.

Mrs. Smith operates a business in a competitive market. The current market price is $8.50. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

total fixed cost, total variable cost, and total cost respectively.

In the above diagram curves 1, 2, and 3 represent:

MC, ATC, AVC, and AFC curves respectively

In the above figure, curves 1, 2, 3, and 4 represent the

Point B, where MR = MC, represents the point where the profit is maximized

In the figure below:

able to adjust to market conditions.

In the transition from the short run to the long run, the number of firms in a competitive industry is

make more than 20 wedding cakes per month

Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $200. In order to maximize profits, Laura should

Marginal cost = marginal revenue

Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by:

marginal revenue exceeds his marginal cost

Mr. Rogers sells colored pencils. The colored-pencil industry is competitive. Mr. Rogers hires a business consultant to analyze his company's financial records. The consultant recommends that Mr. Rogers increase his production. The consultant must have concluded that Mr. Roger's

Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.

Suppose a firm in a competitive industry has the following cost curves

Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.

Suppose a firm in a competitive industry has the following cost curves. If the price is $2 in the short run, what will happen in the long run?

$200,000 and its economic profits were zero.

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were:

profits were zero and its economic losses were $500,000

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting:

zero economic profits in the short run.

Suppose that a firm in a competitive market has the following cost curves:

Decreasing price and increasing output

Suppose that a monopolist calculates that at present output and sales, marginal cost is $1.00 and marginal revenue is $2.00. He or she could maximize profits by:

It doesn't change.

Suppose the market for wheat is perfectly competitive. Fed up with low prices, a wheat grower in Texas decides he won't take his output to market and, instead, dumps all his wheat into the Red River. What happens to the market price of wheat?

increasing marginal product, followed by diminishing marginal product.

The above diagram shows the short-run average total cost curves for five different plant sizes of a firm. The shape of each individual curve reflects:

the firm does not have sufficient time to change the size of its plant.

The basic characteristic of the short run is that:

downsloping, perfectly elastic

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.

$700

The diagram depicts the market situation for a monopoly pastry shop called Bearclaws. Based upon the information shown, what are total costs for Bearclaws, given that it maximizes profits?

$980

The diagram depicts the market situation for a monopoly pastry shop called Bearclaws. ​Based upon the information shown, what is total revenue for Bearclaws, given that it maximizes profits?

In the elastic portion of the demand curve

The profit-maximizing monopolist will usually set a price:

5 units

The table below shows the price and cost information for a firm that operates in a perfectly competitive market. Based upon this information, the profit maximizing output level is

$6

The table below shows the price and cost information for a firm that operates in a perfectly competitive market. Using this information, determine the average variable cost (AVC) when Q = 5.

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

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

b. 40

What is total output when 1 worker is hired? a. 45 b. ​40 c. ​85 d. ​0

$80

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

(P - ATC) × Q

When a profit-maximizing firm is earning profits, those profits can be identified by

drive down profits of existing firms in the market

When new firms have an incentive to enter a competitive market, their entry will

there are opportunities to increase profit by increasing production.

When price is greater than marginal cost for a firm in a competitive market

Marginal revenue is less than price

Which is true with respect to the demand of a monopolist?

AFC

Which of the following curves is not U-shaped?

Economic profit = accounting profit - implicit costs

Which of the following definitions is correct?

D. When MP is rising MC is falling, and when MP is falling MC is rising

Which of the following is correct? A. There is no relationship between MP and MC. B . When AP is rising MC is falling, and when AP is falling MC is rising. C. When MP is rising MC is rising, and when MP is falling MC is falling. D. When MP is rising MC is falling, and when MP is falling MC is rising.

(ii) and (iii) only

Which of the following markets impose deadweight losses on society? (i) perfect competition (ii) monopolistic competition (iii) monopoly

Panel A

Which panel could represent the demand curve facing a local cable television provider if that firm in a monopolist?