Econ Quizlet (homework 5)
If it costs a firm $3,000 to produce 400 shirts and $6,500 to produce 900 shirts, then:
the firm is experiencing economies of scale
In a competitive market, if economic profits exist, then:
the market supply curve will shift rightward and the price will decrease.
The production function is:
the relationship between the quantity of inputs used and the quantity of outputs produced.
a firm with positive ___ profits might still choose to exit an industry, while a firm with positive ___ profits may not
-accounting -economics
For a firm, diseconomies of scale occur when the
ATC for the firm rises as the quantity produced increases
Hardware stores charge higher prices for snow shovels after a big snow storm. What role do prices play in the snow shovel market?
It would incentivize distributors to ship more snow shovels into the area to meet the increased demand.
The long-run supply curve is the portion of the MC curve:
above the ATC curve
A firm is producing goods in a market where the market price is less than the firm's average total cost but greater than its average variable cost. At this point the firm should:
continue to operate at a loss
A difficult problem for central planners is bringing together those economic agents whose interests coincide in order to trade. This is known as the ____________ problem.
coordination
A decreasing production pattern where successive increases in inputs lead to a decrease in marginal product is called the Law of:
diminishing returns
In a perfectly competitive market, a firm with multiple production plants will minimize total costs of production when
each plant produces where marginal revenue equals marginal cost.
In a perfectly competitive market, when firms enter and exit competitive markets:
it is a good sign the market is working.
Period of time when all of a firm's inputs can be varied.
long run
The change in total production associated with using one more unit of input.
marginal product
An outcome is Pareto efficient if
no individual can be made better off without making someone else worse off.
Which of the following equations measures price elasticity of supply?
percentage change in quantity supplied/percentage change in price
Machines and equipment that can be used for production.
physical capital
Producer surplus is the difference between the
price consumers pay and the supply curve
All firms in a perfectly competitive market are said to be __________.
price takers
Which of the following is true about how a firm in a competitive market decides what level of output to produce in order to maximize its profit?
produce until marginal revenue equals marginal cost
The process of transforming inputs into output.
production
The goal of a business in a perfectly competitive market is to maximize:
profits
Period of time when at least one of a firm's inputs is fixed.
short run
Social surplus is maximized when the ___________.
-buyers and sellers as distinct groups are doing as well as they possibly can -highest-value buyers are making a purchase and the lowest-cost sellers are selling -competitive market is in equilibrium
In a perfectly competitive market, a seller _____ choose to raise the price of its good since all the sellers in the market produce _____, so raising the price would result in ______
-cannot -identical goods -loosing all its customers
In a perfectly competitive market, an increase in market price shifts the marginal revenue (MR) curve ___,___ the quantity supplied
-up -increasing
A company pays each of its workers on a per diem basis. If another worker is hired, ____ costs will increase while ____ costs will remain the same
-variable -fixed
Which of the following is not one of the three conditions that characterizes a perfectly competitive market?
Firms have pricing power and can set their prices freely.
Assume that the market for chocolates is perfectly competitive. Which of the following statements would be true in this case?
Jill starts to produce chocolates today, but the addition of her supply into the market does not decrease the market price.
Increases in inputs eventually lead to less additional output.
Law of diminishing returns
Which of the following describes the long-run competitive market if demand were to increase?
Market price increases, economic profits increase, short-run market supply increases, long-run supply settles at minimum ATC
The market for economics textbooks is in equilibrium. The government decides to impose export restrictions on paper, leading to a decrease in the demand for paper. How does social surplus in the market for textbooks change? Why?
The social surplus increases, producer surplus may increase or decrease, and consumer surplus increases.
Which of the following equations calculates the profits of a firm?
Total revenues - Total costs
Assume there are two industries in our economy: the production of pizza and the production of calzones. Each of these products is produced in a similar way with similar ingredients and requires similar skills. If the market price of pizza in this competitive market is below the ATC curve and the price of calzones is above the ATC curve, ____________.
firms currently making pizza will switch to making calzones.
When comparing the accounting profit with economic profit, it must be true that the accounting profit is ______ economic profit
greater than or equal to
The difference between accounting profits and economic profits is:
implicit costs
Once planners have successfully brought economic agents together, a second problem of aligning the interests of the economic agents must be solved. This is known as the ___________ problem.
incentive
The price at which a seller is indifferent between making a sale and not doing so is known as his ____________.
reservation price and willingness-to-sell value
The result of workers developing a certain skill set in order to increase total productivity.
specialization
Social surplus is the ____________.
sum of consumer surplus and producer surplus
Which of the following would maximize social surplus?
trade at the competitive market equilibrium.
The long-run average total cost curve is __________ and is found by using the ___________.
U-shaped; minimum point across all possible ATC curves for a given quantity.
