cengage homework
Figure 7-2 shows the relationship among the various costs of a perfectly competitive firm. Suppose the market price equals $88 and the firm is currently producing 600 units of output. In this situation, the firm:
is maximizing profit.
A monopolistic competitor is like a monopolist in that
it faces a downward-sloping demand curve
A profit-maximizing, perfectly competitive firm would never operate at an output level where:
it would not cover all of its variable costs.
A price-taking firm will tend to expand its output as long as price exceeds average variable cost and:
its marginal cost is less than the market price.
A perfectly competitive firm has no influence over price because:
its output is insignificant relative to the market as a whole.
A perfectly competitive firm looking to maximize its profits would want to maximize the difference between:
its total revenue and its total cost.
When there are economies of scale in production, _____.
long-run average total cost decreases as output expands
The equilibrium price and quantity for a collusive oligopoly are determined by the intersection of the _____ curve and the horizontal sum of the short-run _____ curves for the oligopolists.
marginal revenue; marginal cost
In a collusive oligopoly, joint profits are maximized when the price of a good is based on the:
market demand schedule and marginal cost schedules of oligopolists.
Under perfect competition, in long-run equilibrium, _____.
the demand curve facing individual firms will fall to the level tangent to the minimum average total cost curve
Brad worked as a contractor for a year, earned revenues of $120,000, and incurred an explicit cost of $70,000. If he could have earned $80,000 working for a computer company, his accounting profit as a contractor would be _____
$50,000
The following graph shows a monopolistically competitive firm. Which of the following is the total revenue of the firm at the profit-maximizing level of output? Figure 9-1
$875
Scarlett recently began running her husband's lumber mill. Last month, the mill made a revenue of $5,000 and paid $3,400 in out-of-pocket costs. The lumber mill made an economic profit of $1,600 last month.
fasle
Monopolistic competition is characterized by:
firms earning zero economic profits in the long run
In a monopolistically competitive market, _____.
firms sell differentiated products
The figure below shows how the quantity of bicycles produced per week varies with the number of workers employed per week. Based on the figure, if the firm's goal is to maximize weekly output, the firm should employ _____.
four workers
The table below shows how a factory's output varies with the number of workers employed each week. Based on the table, marginal product begins to diminish when the _____ worker is employed.
fourth
The table below shows the total number of oranges picked by different pickers. Based on the table, the marginal product of labor diminishes with the addition of the _____ picker.
fourth
Monopolistic competitors and perfect competitors are alike in that they:
have a large number of sellers in the market.
Oligopolies are characterized by:
high barriers to entry.
Economic profits differ from accounting profits because:
implicit costs are included in economic profit but not in accounting profit.
The demand curve facing an individual firm in a perfectly competitive market:
is a reflection of the firm's small size relative to the total market.
The value of elasticity of the demand curve facing a perfectly competitive firm:
is equal to infinity.
The marginal product of capital:
is equal to the increase in output obtained from a one-unit increase in capital, holding other factors constant.
A firm produces 1,000 units of output at an average variable cost of production of 50 cents. The firm's total fixed costs equal $700. The total cost of producing 1,000 units of output equals:
$1,200
If the average total cost of producing 20 units of output is $15 and the average total cost of 21 units of output equals $15, then the marginal cost of the 21stunit is _____.
$15
If Randy's fixed cost totals $800 and the variable cost per unit is $10 for 100 units, his average total cost equals _____.
$18.00
The following graph shows a monopolistically competitive firm. Which of the following is the maximum amount of profit the firm could earn? Figure 9-1
$210
The table below shows the amount of output produced and the costs incurred by a firm. Based on the table, the average variable cost incurred by the firm for producing 2 units of output is _____. Table 6-4
$25
Lintell Inc. earned a total revenue of $10 million for the financial year 2013-14. The company incurred a total cost of $6.9 million. Lintell Inc. earned a profit of:
$3.1 million.
The table below shows how total cost varies with output in a factory producing bicycles. Based on the table, the marginal cost of producing the fourth bicycle equals _____.
$3.50
The table below shows the amount of output produced and the costs incurred by a firm. Based on the table, the average total cost incurred by the firm for 4 units of output is _____.
$30
If average total cost is $40 and average variable cost is $20 at 10 units of output and the marginal cost of the 11th unit is $30, what is the average total cost of 11 units?
$39.09.
A firm produces 200 units of output at a total cost of $1,000. The firm's total fixed cost equals $200.The firm's per-unit average variable cost is _____.
$4
The table below shows how total cost varies with output in a factory producing watches. Based on the table, the marginal cost of producing the third watch equals _____.
$4
The table below shows the amount of output produced and the costs incurred by a firm. Based on the table, the total fixed cost incurred by the firm is _____.
$40
Lintell Inc. earned a total revenue of $9.3 million and incurred an explicit cost of $3.6 million for the financial year 2013-14. The owner of the company could earn an annual salary of $0.5 million if he joined another firm. Lintell Inc.'s economic profit for 2013-14 was:
$5.7 million.
When long-run average total cost does not change as output varies, firms experience constant returns to scale.
false
Table 7-1 shows revenue and cost data for a perfectly competitive firm. What is the value of the variable Z shown in the table?
-$35
The figure below shows how the quantity of bicycles produced per week varies with the number of workers employed per week. Based on the figure, the marginal product of the fifth worker hired each week is _____.
-15 bicycles
Figure 7-3 shows the demand, marginal cost, and average cost curves of a perfectly competitive firm. How many units of output per day should the firm produce if it wants to maximize its profits (or minimize its losses)?
100
The table below shows how total cost varies with output in a factory producing watches. Based on the table, if the total fixed cost is $20, the average variable cost of producing 5 units of output is _____.
15
The table below shows how a factory's output varies with the number of workers employed each week. Based on the table, the marginal product of the fifth worker hired is:
18 units of output.
Table 7-1 shows revenue and cost data for a perfectly competitive firm. What is the value of the variable X shown in the table?
20
The figure below shows the change in the quantity of bicycles produced per week due to changes in the number of workers employed per week. Based on the figure, the marginal product of the second worker is _____.
20 bicycles
The following graph shows a monopolistically competitive firm. Which of the following is the total cost of the firm at the profit-maximizing level of output? Figure 9-1
665
Which of the following best resembles a perfectly competitive market?
A.the stock market
Whenever marginal revenue is greater than marginal cost, a profit-maximizing firm should reduce its output.
false
A perfectly competitive firm cannot make economic profits in the long run because:
B. there are no barriers to entry into the industry.
Which of the following is true of perfect competition?
Because perfectly competitive markets have many buyers and sellers, each firm is so small in relation to the industry that its production decisions have no impact on the market price.
The following payoff matrix shows the possible profits that each firm will earn under different pricing strategies. The firms can choose to have lower prices in order to lure away customers from the competitors or higher prices in order to increase their profits. The profits are measured in million dollars. Which of the following is most likely to be true of the game? Figure 9-5
Both firms would be better off if they collude and keep their prices high
If a perfectly competitive industry is neither expanding nor contracting, we would typically expect:
that the price of the good will be stable.
An example of an implicit cost of production is:
the cost of space in someone's home that is used as his or her home office.
Productive efficiency occurs in perfect competition because the firm produces at the minimum of the:
C. average total cost curve
Which of the following is true of game theory?
Cooperation is more likely to occur in repeated games than in one-shot games.
The per-unit cost of total output is known as _____.
average total cost
Which of the following is not a source of product differentiation?
Differences in the cost of production of products
Which of the following is a reason for the presence of barriers to entry in an oligopolistic market?
Economies of scale
Figure 7-6 shows a firm in a perfectly competitive market in the long run. Which of the following is most likely to happen in the given market?
Existing firms would be likely to exit, increasing the market price.
If average fixed cost and average variable cost are added, the result is:
average total cost.
Figure 7-8 shows a firm in a perfectly competitive market. Which of the following is most likely to happen in the given market?
Firms would neither enter nor exit, and the market price would remain unchanged.
Which of the following is true of a perfectly competitive firm?
In a perfectly competitive market, producers and consumers have complete knowledge of the market.
Brady, a farmer, sells wheat in a market where sellers are price takers. Which of the following is true of Brady's production and pricing decisions?
It would be senseless for Brady to try to increase sales by lowering the price of his product. His entire output can be sold at the market price.
Suppose Billy sells burgers in Sierra Island and the market for fast-food burgers is monopolistically competitive. Which of the following is most likely to be true of Billy's burger stand at short-run equilibrium?
Its marginal revenue curve would lie below the demand curve.
In the short run, a perfectly competitive firm will maximize profit by producing where:
MC = MR.
Which of the following is a unique characteristic of an oligopolistic market structure?
Mutual interdependence among firms
Which of the following is a characteristic of perfect competition?
Negligible barriers to entry or exit
Figure 7-7 shows a firm in a perfectly competitive market. Which of the following is most likely to happen in the given market?
New firms would be likely to enter, decreasing the market price.
Which of the following is a characteristic of a perfectly competitive industry in long-run equilibrium?
No firm earns an economic profit.
The following graphs show two firms operating in a monopolistically competitive market. In Graph A, the profit-maximizing firm is making a profit, shown by the area _____. Figure 9-2
P1XYW
Which of the following market structures is characterized by many sellers, easy entry, and homogeneous products?
Perfect competition
Which of the following observations is true?
Sunk costs are irrelevant for any future action.
Identify the correct statement about game theory.
The Nash equilibrium is a dominant strategy.
Marginal revenue is:
The addition to total revenue from selling one more unit of output
Which of the following is not an explicit cost to the owner of a local pizza parlor?
The cost of using his garage as the parlor
The following graph shows a firm producing jeans in a monopolistically competitive market. The firm faces a downward-sloping, linear demand curve, D. The marginal revenue curve of the firm is shown by MR. AC and MC are the average total cost and marginal cost curves of the firm. Which of the following is likely to true of the firm at the profit-maximizing point? Figure 9-3
The firm will charge $50 per pair of jeans
The following graph shows a firm producing jeans in a monopolistically competitive market. The firm faces a downward-sloping, linear demand curve, D. The marginal revenue curve of the firm is shown by MR. AC and MC are the average total cost and marginal cost curves of the firm. Which of the following is most likely to be true of the firm at the profit-maximizing point? Figure 9-3
The firm will earn zero economic profits.
Which of the following is most likely to be a variable cost?
The payment for the raw materials used in manufacturing goods
Which of the following is true of an oligopoly market?
The presence of economies of scale discourages new firms from entering the market.
Which of the following statements is true of a short-run market supply curve?
The short-run market supply curve is the summation of all the individual firms' supply curves.
Which of the following is true of long-run equilibrium under perfect competition?
There is no incentive for firms to enter or exit the industry.
The figure below shows the relationship between the quantity of output produced and the cost per unit. Based on the figure, Y represents _____.
average variable cost
A difference between the long run and the short run is that:
a firm is unable to vary some of its factors of production in the short run, while all the factors of production are variable in the long run.
The short run is:
a period in which firms are unable to change their scale of production.
Refer to Figure 7-1. Graphs A and B together demonstrate the effect that a change in market demand has on the demand curve faced by an individual firm. In this case, the firm is
a price taker.
When economic profits in an industry are zero and implicit costs are positive, _____.
accounting profits will be greater than zero
Under perfect competition, in long-run equilibrium, _____.
all firms suffer zero economic losses
Perfect competition describes:
an industry in which numerous price-taking firms produce identical products.
An implicit cost is:
an opportunity cost to a firm.
An explicit cost is:
an out-of-pocket expense
Firms will continue to enter a competitive industry until:
any economic profits have been competed away.
Firms will continue to enter a competitive industry until:
any economic returns have been competed away
Total variable costs:
are costs that increase as production increases.
A successful cartel restricts supply so that each member firm:
behaves as a monopolist
Economic profits are calculated after taking into account:
both implicit and explicit costs.
In the prisoners' dilemma, _____.
both prisoners have a dominant strategy to confess
Figure 7-1 shows the market demand curve and an individual firm's demand curve in a perfectly competitive market. In Graph A, the market demand has increased from d0to d1and, as a result, _____.
both the market price and the price of the price-taking firm have risen to $6
A firm facing a horizontal demand curve:
can increase its output as much as it wants at a given price.
In an oligopoly market, such as the U.S. domestic airline industry, United Airlines would:
carefully anticipate Delta, American, and Southwest's likely responses before it raised or lowered fares.
One reason collusive oligopolies are usually short lived is that firms participating in the collusion:
cheat on one another.
Figure 7-5 shows cost and revenue curves for a perfectly competitive firm. If P represents the market price for a price-taking firm, the best course of action in the short run for the firm is to:
continue operating because price exceeds average variable cost.
Under oligopoly, a few large firms control most of the production and sale of a product because:
economies of scale make it difficult for small firms to compete
A firm sells grapefruit in a perfectly competitive market at a price of $1.50 per pound. The firm's marginal revenue:
equals $1.50.
A firm that is earning zero economic profits has a strong incentive to exit the industry.
f
Cartels are legal in many countries, including the United States.
f
Collusive oligopoly behavior guarantees economic profits in the long run.
f
Firms should shut down in the short run whenever price is less than the average total cost.
f
In a constant-cost industry, the cost curves of individual firms will shift upward as the industry output expands.
f
In order to maximize profits, a firm should produce the level of output at which total revenue is maximized.
f
In short-run equilibrium in a perfectly competitive market, firms always make zero economic profits.
f
In the long run, a perfectly competitive firm is expected to generate high economic profits.
f
Monopolistic competition differs from perfect competition only in terms of the number of firms participating in the market
f
Monopolistic competition is a market structure characterized by many small firms selling a homogeneous product.
f
The behavior of an individual perfectly competitive firm has a perceptible influence on the market price.
f
The demand curve faced by a perfectly competitive firm is vertical.
f
The minimum efficient scale is the level of output at which the long-run average total costs are maximized.
f
A firm that is earning zero economic profits has a strong incentive to exit the industry.
false
Diseconomies of scale are most likely at very low levels of output.
false
In the long run, firms can vary all inputs in the production process.
false
Monopolistic competition differs from perfect competition only in terms of the number of firms participating in the market.
false
Sunk costs are important for current business decisions.
false
The total fixed cost curve is an upward-sloping curve that starts from the origin.
false
Total cost equals total variable cost plus marginal cost.
false
In Rhode Island, there are a large number of qualified, primary-care physicians whose services are highly personalized. In addition to price, factors such as age, sex, location, and personality influence the choice of physicians. Thus, it can be said that the primary-care physician market is most probably a:
monopolistically competitive
The table below shows the number of oranges picked by different pickers. Based on the table, the total output of labor diminishes with the addition of the _____ picker.
ninth
In the long run, a monopolistically competitive firm operates _____.
on the declining portion of its average total cost curve
The restaurants in San Francisco can probably be categorized as examples of firms:
operating in a monopolistically competitive market..
A perfectly competitive firm faces a demand curve that is:
parallel to the horizontal axis.
When a monopolistically competitive firm is at long-run equilibrium, _____.
price exceeds marginal cost
A perfectly competitive, increasing-cost industry is initially in long-run equilibrium. If a permanent increase in demand occurs, then at the new long-run equilibrium, _____.
price will be higher and total output will be greater than before
The following graphs show two firms operating in a monopolistically competitive market. The firm illustrated in Graph A will experience a _____ at a quantity _____. Figure 9-2
profit; of q1
The following graphs show two firms operating in a monopolistically competitive market. The firm illustrated in Graph A maximizes profits by producing at a level of output _____ and charging a price _____. Figure 9-2
q1; P1
Monopolistic competition is common in:
retail selling
If the market demand curve in a perfectly competitive industry shifts left, the demand curve for each existing firm will:
shift down
The entry of new firms into an industry will:
shift the industry supply curve to the right.
In a monopolistically competitive market structure, because each good sold in the market is _____, each firm _____.
slightly different; is considered a price maker
Constant returns to scale indicate that a firm experiences:
stable per-unit costs of production as the scale of output expands
David was taken to a concert by his friend who promised it would be very good. David paid for his own ticket. However, David did not like the concert and left before it ended. Therefore, David incurred a(n) _____ in buying the ticket.
sunk cost
Rachel bought a sandwich maker. The shopkeeper assured her that it was a very good and useful product. After using the sandwich maker for two months, Rachel found that using it was time consuming and that it also consumed a lot of electricity. So, she stopped using it. Therefore, Rachel has incurred a(n) _____ in buying the sandwich maker.
sunk cost
9- Large oligopoly firms are often able to take advantage of significant economies of scale. As a result, they can often produce at a lower average total cost than can smaller firms.
t
A perfectly competitive firm faces a perfectly elastic demand curve.
t
Although there are certain inefficiencies associated with monopolistic competition, society receives a benefit from monopolistic competition in the form of product variety.
t
An increase in the price of raw materials will shift both the MC and the ATC curves upward.
t
Economic profits in a perfectly competitive industry will encourage the entry of new firms, which will shift the market supply curve to the right.
t
In a perfectly competitive market, marginal revenue is the same as the market price.
t
It is relatively easy for firms to enter and exit a perfectly competitive market.
t
Large oligopoly firms are often able to take advantage of significant economies of scale. As a result, they can often produce at a lower average total cost than can smaller firms.
t
Perfect competition is characterized by a large number of buyers and sellers with identical products and no significant barriers to entry.
t
The key difference between oligopoly and other market structures is the interdependence among producers.
t
Fixed costs are costs:
that do not vary with the level of output..
In a monopolistically competitive market structure, the force that leads to zero economic profits in the long run is:
the entry of new firms into the industry.
When a firm makes zero economic profit, it means that:
the firm is covering the total opportunity costs of its resources
In a perfectly competitive industry, influence over price is exerted by:
the forces of market supply and demand.
An example of an implicit cost of production is:
the income an entrepreneur could have earned working for someone else.
The figure below shows the long-run average cost curve for a firm. Based on the figure, Point A shows
the level of output at which the firm attains its minimum efficient scale
The following payoff matrix shows the possible profits that each firm will earn under different pricing strategies. The firms can choose to have lower prices in order to lure away customers from the competitors or higher prices in order to increase their profits. The profits are measured in million dollars. At the Nash equilibrium, _____. Figure 9-5
the payoff earned by General Mills and Kellogg's are $25 million and $30 million, respectively.
The shape of the long-run industry supply curve in a perfectly competitive industry is largely determined by:
the price of inputs as the industry expands
A game that demonstrates the basic problem confronting noncolluding oligopolists is known as _____.
the prisoners' dilemma
The figure below shows the long-run average cost curve of a firm. Based on the figure, the region y shows _____.
the range of output over which the firm attains constant returns to scale
The figure below shows the long-run average cost curve for a firm. Based on the figure, the region z shows _____.
the range of output over which the firm attains diseconomies of scale
The production function describes
the relationship between the quantity of inputs utilized and the quantity of output produced.
The figure below shows the change in the quantity of output produced along with the change in cost per unit. Based on the figure, D represents _____.
the total fixed cost curve
Under monopolistic competition, _____.
there are few barriers to entry
An economic profit of zero indicates a satisfactory situation for a firm.
true
Diseconomies of scale occur when firms cannot handle the complexities of large-scale management.
true
In the long run, the firm gets to choose which short-run curve it wants to use.
true
Marginal cost refers to the change in total cost for a one-unit change in output and also to the change in total variable cost for a one-unit change in output.
true
One would expect to observe a diminishing marginal product of labor when the office space is overcrowded.
true
The average fixed cost curve approaches the horizontal axis but never touches it.
true
The demand curve faced by an oligopolistic producer depends on how rival firms react to its prices and policies.
true
The long-run average total cost curve is less U-shaped than the short-run average total cost curve.
true
The long-run average total cost curve owes its U-shaped structure to the economies and diseconomies of scale.
true
The total cost curve lies above the total variable cost curve.
true
There are significant technological barriers to entry that help make the automobile industry oligopolistic.
true
Unlike perfectly competitive firms, monopolistically competitive firms do not attain productive efficiency.
true
If a perfectly competitive industry uses a large proportion of the available inputs in a resource market, then the long-run market supply curve for the industry will most likely be:
upward sloping.