unit 5
the marginal product of labor can be defined as the change in
output divided by the change in labor
the demand curve for a good is a line that relates
price and quantity demanded
in a long run equilibrium the marginal firm has
price equal to average total cost, total revenue equal to total cost, and economic profit equal to zero
in the short run a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the
price is greater than average variable cost
when drawing a demand curve
price is measured along the vertical axis, and quantity demanded is measured along the horizontal axis
total revenue equals
price times quantity
the signals that guide the allocation of resources in a market economy are
prices
a production function is a relationship between inputs and
quantity of output
an increase in quantity demanded
results in a movement downward and to the right along a demand curve
an increase in demand is represented by a
rightward shift of a demand curve
a monoply is a market with one
seller and that seller sets the price
the quantity supplied of a good is the amount that
sellers are willing and able to sell
price discrimination is the business practice of
selling the same good at different prices to different customers
the first major peace of antitrust legislation was the
sherman act
the market demand curve for a monopolists is typically
downward sloping
when new firms have an incentive to enter a competitive market, their entry will
drive down profits of existing firms in the market
at the profit maximizing level of output
marginal revenue equals marginal cost
roger owns a small health store that sells vitamins in a perfectly competitive market. if vitamins sell for $12 per bottle and the average total cost per bottle is $12.50 at the profit maximizing output level, then in the long run
some firms will exit from the market
an example of a perfectly competitive market would be the
soybean market
in the market economy
supply and demand determine prices and prices, in turn, allocate the economy's scarce resources
for a construction company that builds houses, which of the following costs would be a fixed cost?
the 30000 per year salary paid to the company's bookkeeper
a monopoly firm is a price
maker and has no supply curve
what is not a characteristic of a monopoly
one buyer
in a competitive market the price $8, a typical firm in the market has ATC= $6 AVC=$5 and MC=$8.
$2 per unit
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
$80
when the price of a good is $5 the quantity demanded is 100 units per month, when the price is $7 the quantity demanded is 80 units per month using the midpoint method the price elasticity of demand is about
0.67
if the price elasticity of a demand for a good is 2.0 then a 10 percent increase in price results in a
20 percent decrease in the quantity demanded
the carolina christmas tree corporation grows and sells 500 christmas trees. the average cost of production per tree is 50. each tree sells for a price of 65. the carolina christmas tree corporations total revenues are
32500
anya has decided to start her own hair styling salon. to purchase the necessary equipment, anya withdrew 10000 from her savings account, which was earning 3% interest and borrowed an additional 5000 from the bank at an interest rate of 8%. what is anyas annual opportunity cost of the financial capital that has been invested in the business
700
which of the following is an example of public ownership of a monopoly
U.S postal service
which of the following changes would not shift the demand curve for a good or service
a change in the price of the good or service
a leftward shift of a demand curve is called
a decrease in demand
an industry is a natural monopoly when
a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms
in a competitive market the quantity of a product produced and the price of the product are determined by
all buyers and all sellerss
which of the following statements best expresses a firm's profit maximizing decision rule
all of the above are correct
if the demand for a product increases then we would expect the equilibrium price
and equilibrium quantity both to increase
in competitive markets buyers
and sellers are price takers
for a monopoly
average revenue exceeds marginal revenue
the firms efficient scale is the quantity of output that minimizes
average total cost
profit maximizing firms in competitive industires with free entry and exit face a price equal to the lowedt possible
average total cost of production
if consumers view cappuccinos and lattes as substitutes, what would happen to the equilibrium price and quantity of lattes if the price of cappuccinos falls
both the equilibrium price and quantity would decrease
if macaroni and cheese is an inferior good, what would happen to the equilibrium price and quantity of macaroni and cheese if consumers incomes rise
both the equilibrium price and quantity would decrease
which of the following statements is correct
buyers determine demand and sellers determine supply
demand is said to be price elastic if
buyers respond substantially to changes in the price of the good
which of the following events must cause equilibrium quantity to rise
demand and supply both increase
a table that shows the relationship between the price of a good and the quantity demanded of that good is called a
demand schedule
a monopoly
can set the price it charges for its output but faces a downward sloping demand curve so it cannot earn unlimited profits
lead is an important input in the production of crystal, if the price of lead decreases then we would expect the supply of crystal to increase
crystal to increase
for a good that is a necessity
demand tends to be inelastic
a decrease in input costs to firms in a market will result in an
decrease in equilibrium price and an increase in equilibrium quantity
an increase in the prices of a good will
decrease quantity demanded
when a monopolists increases the amount of ouput that is produces and sells, the price of its output
decreases
two goods are substitutes when a decrease in the price of one good
decreases the demand for the other good
when a monopolists increases the amount of output that it produces and sells, average revenue
decreases, and marginal revenue decreases
if government regulation sets the maximum price for a natural monopoly equal to its marginal cost, then the natural monopolists will
earn economic losses
drug companies are allowed to be monopolists in the drugs they discover in order to
encourage research, increase the overall welfare of society through better health because drug companies continually produce better medications, and increase the availability of expensive but useful medications
what is not a characteristic of a competitive market
entry is limited
a monopolists average revenue is always
equal to the price of its product
the unique pint at which the supply and demand curves intersect is called
equilibrium
suppose that demand for a good increases and at the same time supply of the good decreases. what would happen in the market for the good
equilibrium price would increase but the impact on equilibrium quantity would be ambiguous
a firms opportunity costs of production are equal to its
explicit costs+implicit costs
if textbooks and study guides are complements then an increase in the price of textbooks will result in
fewer study guides being sold
soup is an inferior good if the demand
for soup falls when income rises
the midpoint method is used to compute elasticity because it
gives the same answer regardless of the direction of change
most markets in the economy are
highly competitive
in general elasticity is measure of
how much buyers and sellers respond to chanes in market conditions
a rightward shift of a supply curve is called an
increase in supply
exceptionally favorable growing conditions in the vineyards of napa valley would cause an
increase in the supply of wine, decreasing price
which field of economics studies how the number of firms affects the prices in a market and the efficiency of market outcomes
industrial organizations
a person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is
inelastic
other things equal when the price of a good rises the quantity supplied of the good also rises and when the price falls the quantity supplied falls as well. this relationship between price and quantity supplied
is referred to as the law of supply
a monopoly is an inefficient way to produce a product because
it produces a smaller level of output than would be produced in a competitive market
a firm that shuts down temporarily has to pay
its fixed costs but not its variable costs
if a competitive firm is selling 500 units of its product at a price of $8 per unit and earning a positive profit, then
its total cost is less than $4000
suppse that a doggie day care firm uses only two inputs: hourly workers and a building. in the short run the firm most likely considers
labor to be variable and capital to be fixed
which of the following is likely to have the most price elastic demand
lattes
suppose jan started up a small lemonade stand business last month. variable costs for jans lemonade stand now include the cost of
lemons and sugar
a group of buyers and sellers of a particular good or service is called a
market
total cost is the
market value of the inputs a firm uses in production
economists normally assume that the goal of a firm is to
maximize its profit
a perfectly price discriminating monopolists is able to
maximize profit and produce a socially optimal level of output
goods with many close substitutes tend to have
more elastic demands
if a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will
more than triple, less than triple, and exactly triple
an increase in the price of blueberries would lead to a
movement up and to the right along the supply curve for blueberries
in a competitive market the current price is $6. the typical firm in the market has ATC= $5 and AVC= $4.5
new firms will likely enter this market to capture some of the economic profits
you lose your job and as a result you buy fewer itunes music downloads. this shows that you consider itunes music downloads to be a
normal good
in markets, prices move toward equilibrium because of
the actions of buyers and sellers
in a competitive market the current price is $5. the typical firm in the market has ATC= $5 and AVC= $4.50
the firm will earn zero profits in both the short run and long run
which of the following statements is not correct
the government may break up a natural monopoly to lower the price charged to customers
other things equal, when the price of a good rises, the quantity demanded of the goods falls and when the price falls the quantity demanded rises. this relationship between price and quantity demanded is referred to as
the law of demand
which of these curves is the competitive firms short run supply curve
the marginal cost curve above average variable cost
one assumption that distinguishes the short run cost analysis from long run cost analysis for a profit maximizing firm is that in the short run
the size of the factory is fixed
a decrease in the number of sellers in the market causes
the supply curve to shift to the left
when the price of a good or service changes
there is a movement along a given supply curve
in the long run a firm will exit a competitive industry if
total revenue exceeds total cost and the price exceeds average total cost
for a firm operating in competitive industry, which of the following statements is not correct
total revenue is constant
profit is defined as
total revenue minus total cost
what is the closest to being a perfectly competitive firm
wheat farmer in kansas
the demand curve for coffee shifts
when a determinant of the demand for coffee other than the price of coffee changes
the quantity demanded of a good is the amount that buyers are
willing and able to purchase
