ECON 102 Ch 14,15,16
If new firms enter a perfectly competitive industry, the market supply
increases.
If a firm shuts down, it
incurs an economic loss equal to its total fixed cost
In the long run, a perfectly competitive firm will
make zero economic profit.
If a perfectly competitive firm's average total cost is less than the price, then the firm
makes an economic profit
The perfectly competitive firm's supply curve is its
marginal cost curve above the average variable cost curve
For a perfectly competitive firm, profit maximization occurs when output is such that
marginal revenue (MR) = marginal cost (MC).
Each firm in a perfectly competitive industry
produces a good that is identical to that of the other firms.
A perfectly competitive firm
sells a product that has perfect substitutes.
When new firms enter the perfectly competitive Miami bagel market, the market
supply curve shifts rightward
Which of the following is the best example of a natural monopoly?
the cable television company in your hometown
Marginal cost equals
the change in total cost that results from a one-unit increase in output.
The marginal product of labor is
the change in total product divided by the increase in labor
Total cost includes
the cost of both variable and fixed resources.
A perfectly competitive market arises when
the market demand is very large relative to the output of one seller.
The law of decreasing returns states that as a firm uses more of a
variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually decreases
Natural barriers to entry arise when, over the relevant range of output, there
are economies of scale
One requirement for an industry to be perfectly competitive is that in the industry there
are many firms for whom the efficient scale of production is small.
Which of the following always decreases when output increases?
average fixed cost
A perfectly competitive firm will shut down when the price is just below the minimum point on the
average variable cost curve.
In the short run, a perfectly competitive firm
can possibly make an economic profit or possibly incur an economic loss
Arnie's Airlines is a monopoly airline that is able to price discriminate. If Arnie's decides to price discriminate, then
consumer surplus decreases.
When a firm adopts new technology, generally its
cost curves shift downward.
A permanent decrease in demand definitely
decreases the number of firms in the industry.
Diseconomies of scale is a result of
difficulties of coordinating and controlling a large enterprise
The market demand curve in a perfectly competitive market is ________ and the demand curve for a perfectly competitive firm's output is ________.
downward sloping; horizontal
The short run is the time frame
during which the quantities of some resources are fixed
The long-run average cost curve is U-shaped because of which of the following?
economies and diseconomies of scale
For a perfectly competitive firm, marginal revenue is
equal to the price
Suppose a firm's total revenue is $1,000,000. The firm has incurred explicit costs of $750,000. There is also $50,000 of forgone wages by the owner, $10,000 of forgone interest by the owner, $3,000 worth of economic depreciation, and $20,000 worth of normal profit. What is the firm's economic profit?
$190,000
John fishes for a living. Last year, he sold $100,000 of fish. Bait, nets and other fishing supplies cost John $10,000 and he paid $40,000 in salaries to his helpers. Depreciation on his boat and other equipment, as calculated using IRS rules, was $15,000. What was John's profit as would be calculated by an accountant?
$35,000
Which of the following is a characteristic of monopoly?
There are barriers to enter the market
A price-discriminating monopoly charges
a different price to different types of buyers for the same product, even though there are no differences in costs.
For a perfectly competitive firm, the market price of a good is
a given which the firm cannot change. equal to the firm's marginal revenue
Compared to a perfectly competitive market, a single-price monopoly sets
a higher price
The main source of economies of scale is
greater specialization of both labor and capital
A perfectly competitive firm definitely makes an economic profit in the short run if price is
greater than average total cost.
The marginal revenue curve for a perfectly competitive firm is
horizontal.
When the average product is at its maximum,
it is equal to the marginal product
We know that a perfectly competitive firm is a price taker because
its demand curve is horizontal
In States where the government runs liquor stores, the monopoly results from
legal restrictions.
The demand curve facing a single-price monopoly
lies above the marginal revenue curve.
The firm's over-riding objective is to
maximize economic profit.
With perfect price discrimination, a monopoly can extract the ________ price each customer is willing to pay and thereby obtain the entire ________ surplus.
maximum; consumer
The above figure shows a perfectly competitive firm. If the market price is $5, the firm
might shut down but more information is needed about the AVC.
If perfectly competitive lawn care firms are making an economic profit, then
new firms will enter the industry.
A monopoly is a market with
one supplier
A market in which many firms sell identical products is
only perfectly competition
Because perfectly competitive firms are price takers, each firm faces a demand that is
perfectly elastic
A perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the
price is at least equal to the minimum average variable cost.
The long run is defined as
the period of time when all resources are variable
In a perfectly competitive market, the type of decision a firm has to make is different in the short run than in the long run. Which of the following is an example of a perfectly competitive firm's short-run decision?
the profit-maximizing level of output
The total product curve shows the relationship between total product and
the quantity of labor.
Normal profit is
the return to entrepreneurship.
Price discrimination is possible, in part, because
the willingness to pay can vary among groups of buyers
A firm's fundamental goal is
to maximize profit
The cost that does not change as output changes is
total fixed cost
Average variable cost equals
total variable cost divided by output.
