ECON Exam #3
Technological improvements cause:
ATC to shift down
If the products of two firms are homogeneous then they:
are perfect subsitutes
If a perfectly competitive firm is producing a rate of output at which MC exceeds price, then the firm:
can increase its profit by decreasing output
Entrepreneurship:
can result in economic losses
A firm that makes zero economic profits:
covers all its costs as variable
In a competitive market if the market price is equal to the minimum point of the firms ATC curve the firm may seek to earn economic profits by:
decreasing production costs through tech improvements
When the short run marginal cost curve is upward sloping:
diminishing returns occurs with greater output
Suppose a perfectly competitive firm is experiencing zero economic profits. In an effort to increase profits the firm decides to initiate an advertising campaign for its product. The most likely short run result of this campaign ceteris paribus would be:
economic losses for the firm
The demand curve confronting a competitive firm:
equals the marginal revenue curve
In the long run perfectly competitive equilibrium marginal cost:
equals the minimum of the ATC
The maximum amount a firm can lose in the short run is:
fixed cost
When a producer can control the market price fo the good it sells the producer:
has market power
In a competitive market where firms are earning economic losses, which of the following should be expected as the industry moves to long run equilibrium, ceteris paribus? A. higher price and more firms B. higher price and fewer firms C. lower price and more firms D. lower price and fewer firms
higher price and fewer firms
The demand curve for each perfectly competitive firm is:
horizontal
The short run is the time period:
in which some costs are fixed
Suppose the cost of insecticide decreases for broccoli farmers. In order to maximize profits ceteris paribus broccoli farmers should:
increase output
Which of the following is true about a competitive market supply curve? A. it is horizontal B. it is downward sloping to the right C. it is the sum of the marginal cost curves of all firms D. it is vertical
it is the sum of the marginal cost curves of all firms
Economic profit is:
less than accounting profit by the amount of implicit cost
Short run profits are maximized at the rate of output where:
marginal revenue is equal to marginal cost
Which of the following is not a barrier to entry? A. government regulation B. control of essential factors of production C. economies of scale D. perfect information
perfect information
To maximize profits a competitive firm will seek to expand output until:
price equals marginal cost
Profit per unit is equal to
price minus average total cost
A firms total revenue can be determined by:
price times quantity
The market price for t-shirts sold in a perfectly competitive market is determined by:
supply and demand
If the price of ricotta cheese an ingredient in lasagna increases then:
the market supply curve for lasagna will shift to the left
A perfectly competitive firm is a price taker because:
the price of the product is determined by many buyers and sellers
When firms in a competitive market are experiencing zero economic profits this in an indication that:
there is currently no better way to use societys scarce resources
A firm maximizes total profit when:
total revenue exceeds total cost by the greatest amount
Marginal revenue is the change in:
total revenue when output is changed by 1 unit
In making an investment decision an entrepreneur:
treats all costs as variable
Which of the following is characteristic of a perfectly competitive market? A. a small number of firms B. exit of small firms when profits are high for large firms C. zero economic profit in the long run D. marginal revenue lower than price for each firm
zero economic profit in the long run
