Econ Module 20-23
Orville's Ocular Paradise produces 10 pais of sunglasses. Its average total cost is $35, and its average fixed cost is $5. The average variable cost of producing 10 pairs of sunglasses is:
$30
a monopoly will have a Herfindahl-Hirschman index equal to:
10,000
Which cost concept is CORRECTLY defined?
ATC = AVC + AFC
an example of monopolistic competition is the _____ industry
restaurant
The marginal product is the change in _____ output resulting from a one-unit change in _____, assuming that all other factors of production are help constant
total; a fixed input
A _____ is an organization that produces goods or services for sale
firm
in monopolistic competition
firms earn zero economic profits in the long run
In an oligopoly
firms recognize their interdependence
an assumption of the model of perfect competition is
identical goods
markets for new drugs are not usually perfectly competitive since the companies that manufacture these drugs are usually granted patents, restricting entry into the industry (T/F)
true
The total cost curve becomes steeper as output increases because of:
decreasing returns to the variable input
The total product curve indicates the relationship between _____ when all other inputs are fixed
a variable input and output
If all firms in an industry are price takers:
an individual firm cannot alter the market price even if it doubles its output
an industry that is dominated by a few firms, each of which recognizes that its own choices can affect the choices of its rivals and vice versa, is
an oligopoly
In oligopoly, a firm must realize that
another major firm may dominate choices in the industry, and it will have to behave accordingly
Diminishing returns to an input occur when:
at least one input is fixed
In the short run:
at least one input is fixed
The long-run average total cost curve is tangent to an infinite number of short-run _____ cost curve
average total
When marginal cost is rising
both average variable cost and average total cost may be rising or falling
The marginal product of labor is the:
change in total product divided by the change in labor
The term diminishing returns refers to a:
decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant
The long run is planning period:
during which all inputs are variable
entry barriers
exist in monopoly and oligopoly markets
monopolistic competition is different from monopoly because firms
face some competition
If a perfectly competitive firm reduces its output, the market price will increase (T/F)
false
In the short run, fixed costs will _____ when a firms adds physical capital
increase
an oligopoly may result from
increasing returns to scale
the assumptions of perfect competition imply that:
individuals in the market accept the market price as given.
A fixed cost:
is positive, even if the firm doesn't produce any output in the short run
The marginal cost curve intersects the average variable cost curve at
its lowest point
A monopolist is likely to produce ____ and charge ____ than is a comparable perfectly competitive firm
less; more
The market for dentists in most communities can be considered ______ because there are a large number of similar, but not identical, substitutes in the market.
monopolistic competition
an industry with a large number of relatively small firms producing differentiated products in a market with easy entry and exit of firms is
monopolistically competitive
An industry with a single firm producing a product for which there are no close substitutes and that is protected by barriers to entry is an example of
monopoly
_____ firms have the most market power
monopoly
an industry with a single producer that sells a single product with no substitutes is a(n)
monpoly
a monopoly is a market characterized by a
single seller
The total cost curve shows how ____ cost depends on the quantity of ____.
total: output
Average total cost is
total cost divided by output
If the Herfindahl-Hirschman index (HHI) for an industry is 300, the industry is considered
unconcentrated
An input whose quantity can be changed in the short run is a(n) ______ input
variable
In the long run, all costs are:
variable
A fixed input is one:
whose quantity cannot be changed in the short run
The total product curve:
will become flatter as output increases if there are diminishing returns to the variable input
large barriers to entry in the gas station business explain why the two only gas stations in a small town
can earn economic profit in the long run
monopolistic competition is similar to perfect competition because firms in both market structures
do not face any barriers to entry to the industry in the long run
suppose that hiring one, two, three, or four workers at a glass factory generates a total output of 200, 350, 450, and 500 fancy glasses, respectively. The marginal product of the second worker is:
150
In economics, the short run is defined as:
a period in which at least one input is fixed
to be called an oligopoly, an industry must have
a small number of interdependent firms
In perfect competition, ______ are _____, and _____ are price takers
all goods; standardized; all market participants
an industry with a few interdependent firms is BEST described as being
an oligopoly
if marginal cost is GREATER than average total cost:
average total cost increasing
The idea of diminishing returns to input in production suggests that if a local university adds more service workers (for maintenance), the marginal product of labor for the service staff will:
decrease
diamond rings are relatively scarce because
diamond producers limit the quantity supplied to the market
In the short run, the average total cost curve slopes upward because of:
diminishing returns
Diminishing marginal returns occur when:
each additional unit of a variable factor adds less to total output than the previous unit
the most important source of oligopoly in an industry is
economies of scale
a natural monopoly exists when:
economies of scale provide large cost advantages to having one firm produce the industry's output
In economics, the short run is:
enough time to vary output but not plant capacity
In the U.S. economy, oligopoly is rare (T/F)
false
Of the four market structures, the only one that is characterized by product differentiation is oligopoly (T/F)
false
the hamburger industry has some differentiation and many firms, suggesting that the hamburger industry is more oligopolistic than it is monopolistically competitive (T/F)
false
a common example of monopolistic competition is the market for
gasoline for cars
In monopolistic competition, each firm
has some ability to set the price of its differentiated good
price takers are individuals in a market who:
have no ability to affect the price of a good in a market
An assumption if the model of perfect competition is:
identical goods
a monopolistically competitive industry is characterized by a ____ number of firms producing ____ products with ____ entry
large; similar; relatively easy
One characteristic of a perfectly competitive market is that there are ____ sellers of the good or service
many
an assumption of the model of perfect competition is
many buyers and sellers
The _____ is the increase in output that is produced when a firm hires an additional worker
marginal product
The shape of the marginal cost curve is the mirror image of the shape of the ____ curve
marginal product
When a firm has diminishing marginal returns, its:
marginal product is falling but is likely still positive
The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as:
market power
individuals in a market who must take the market price as given are:
price takers
A _____ actions have no effect on the market price of the good or service that they sell
price-taking producer's
a monopoly
produces a product with no close substitutes
In perfect competitive industry, each firm
produces a standardized product
A _____ function is a relationship between the quantity of inputs a firm uses and the quantity of output it produces
production
When marginal cost is ABOVE average variable cost, average variable cost must be:
rising
A firm's marginal cost is the:
slope of the total cost curve
oligopoly is a market structure that is characterized by a _____ number of _____ firms that produce _____ products
small; interdependent; identical or differentiated
If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a _____ share of the market, and consumers will consider her strawberries and her competitors' strawberries to be _____. Therefore, ____ advertising will take place in this market
small; standardized; little or no
The average total cost curve has a U shape because the ____ effect dominates al low levels of output, and the ____ effect dominates at high levels of output
spreading; diminishing returns
The wedding dress industry is monopolistically competitive. As a result:
tend to be differentiated among the many sellers serving this market
The perfect competitive model does not assume
that firms attempt to maximize their total revenue
perfect competition is characterized by:
the inability of any one firm to influence price
market structures are categorized by:
the number of firms and weather products are differentiated
A monopoly competitive industry, such as corn snack chips, and a perfectly competitive industry, like wheat farming, are alike in that
there any many firms in each industry
The _____ curve shows how the quantity of output depends on the quality of the variable input, for a given quantity of the fixed input
total product
Average variable cost is:
total variable cost divided by quantity
For Hillary, the marginal cost of producing one additional painting equals the change in ____ cost divided by the change in the ____ of paintings
total; number
A producer is a monopoly if it is the sole supplier of a good that has no close substitutes (T/F)
true
To maintain profits in the long run, a monopoly must be protected by barriers to the entry of other firms into the industry (T/F)
true
In contrast with perfect competition, a monopolist
may have economic profits in the long run
The market structure that is characterized by only a small number of producers is
oligopoly