econ unit 1

the local department store used to be _____ before technological change

a monopoly

the technology or knowledge necessary for the production process is called

business know-how

if june can earn $1500 in revenue from painting two houses, how much can she earn in revenue from painting three houses ( assume she is just one painter in a large market of house painters, and that she can easily find a third customer)

exactly $2,250

business will generally shut down if they lose money for or two years

false

cost is what a business receives after subtracting expenses from revenue

false

the average product is calculated by dividing input by the number of hours worked

false

______ is the added revenue from producing and selling one more unit of output

marginal revenue

______ is the amount of money a company receives for selling its product or service

revenue

marginal revenue is the additional revenue a business gets from producing or selling one more unit of input

true

revenue is the money that customers pay for the output of a business

true

which of the following is most likely to be sold in a perfectly competitive market?

wheat

the profit maximizing rule says that a seller will expand output up to th point

where marginal revenue equals marginal cost

does the stock market resemble a perfect competitive market?

yes, the stock market does resemble a perfectly competitive market

if sara can produce 25 muffins for a cost of $15 but her production process is subject to increasing marginal costs which of the following could e the total cost of producting 100 muffins

$80

Microsoft two main products, Windows and Office could be examples of

a natural monopoly

inputs to production do NOT include

average product

output derived by the number of hours worked or by the number of workers is called

average product

the easiest way to have a monopoly today is to

have the government protect you

when a business have market power, they are able to charge a price higher than the price charged by a business perfect competition. thus the market power equilibrium on a diagram will be

higher and to the left of the perfect competition equilibrium

an example of variable cost is

hourly labor

_______ collusion can occur even when oligopolistic business do not directly communicate with each other

implicit

one strategy for long term profit maximization is

innovation

in a simple grass mowing business, the lawn mower and labor would be

inputs

what word describes the goods and services that are used to produce outputs for businesses?

inputs

the goods or services purchased by a business for immediate use in the production process are know as

intermediate inputs

ATT is an example of a business that used market power to

invest in important research benefiting society

theodore can make 6 pizzas in one hour. if theodore's labor has a diminishing marginal product what must be true about the number of pizzas that theodore can make in three hours?

it must be less then 18

inputs used by a business in the production process include

labor

the hours of work supplied by various types of workers are referred to by economists as

labor

the price of labor per unit time the amount of labor used is called

labor cost

the total cost of production is determined by adding which of the following costs?

labor, capital and land, intermediate inputs,and accumulating business know-how

an example of a barrier entry is

lack of key resource

fixed costs are also known as ______ cost because they are much harder for a business to change

long-term

which of the following is NOT an example to a barrier to entry

lower costs

marginal revenue is vernally ____ of businesses that do to operate under conditions of prefect competition

lower than the price

____ is the added cost to produce one more unit of output

marginal cost

in perfect competition a profit- maximizing business will expand unit its ______ equal the market price

marginal cost

the added expenses of producing one more unit of output is called the

marginal cost

the extra amount of output a business can generate by adding one more hour of labor is called

marginal product

the additional money a business gets from producing and selling one more unit of output is

marginal revenue

as the market price of a good rises, businesses will respond by producing one more of that good because

marginal revenue exceeds marginal cost after the price increase

a profit maximizing business will increase production as long as

marginal revenue exceeds marginal costs

______ is the ability to raise prices above the level perfect competition would produce by restricting the quantity supplied

market power

form WW2 to the early 1970s, GM ford and Chrysler enjoyed

market power

in perfect competition all businesses in a market produce at the point where ______ equals ________

market price; marginal cost

economists generally assume that the main goal of most businesses in the economy is to

maximize profit

a market where there is only one seller and buyers have no other alternative is called a(n)

monopoly

what happens to the marginal product of labor if more capital is added to a production business?

more capital generally causes the marginal product of labor to rise

a profit maximizing monopolist will always charge ____ a perfect competitor would

more than

a ______ monopoly is an industry in which it makes economic sense to have only one provider

natural

a good example of monopolistic competition is

neighborhood

a profitable business will attract

new competitors

in a simple lawn mowing business where you have a push mower and labor as input by adding an additional imps in the form of a gas self-propelled mower (capital) what would be the impact on output?

output would increase

average product is not as reliable an indicator of how a business is doing as it used to be because of

outsourcing labor

in the long run, monopolist competition starts to look like

perfect competition

the four main types of market structure are

perfect competition, monopolistic, oligopoly and monopoly

if music was perfectly competitive then all performers would

play the same music and charge the same price for concerts

in perfect competition P=MC means

price equals marginal cost

what is the economic process of turning inputs into outputs that a business will sell to customers?

production

economist think of a business as a machine, where you put inputs in one and get outputs from the other end. this metaphor is called the

production function

the ____ summarizes the output of the business given the level of inputs

production function

what is the difference between revenue and cost?

profit

the main objective of a business in a market economy is

profit maximisation

companies will often spend considerable amounts of money to create a ______ in regards to their brand name

reputation effect

what word describes the money that customers pay for the output of a business?

revenue

when a business expands production and increases sales, what generally happens to revenue?

revenus rises because the business is selling more output

marginal cost generally _____ quantity produced

rises with

in short run profit maximization business focus on the ____ holding fixed costs constant

short term cost function

variable cost are relevant for

short term everyday decision making

variable coast are also known as

short-term costs

if all of the restaurants in a small town collude and agreed to raise dinner prices this would lead to a loss of society because

some dinners that could be served are not

a business with market power may

sometimes use high profits to research new technologies

natural monopolies have been slowly eroded by

technological change

in perfect competition higher cost businesses

tend to go out of business if unable to adjust

market power is

the ability to raise prices about the prices that would exist under perfect competition

____ shows the potential cost for each level of output

the cost function

natural monopolies include

the local water company

a business can escape perfect competition by building a better more innovative product

true

a production function tells you, given the inputs, what the output will be

true

advertising a brand can help create a reputation effect

true

businesses have two types of costs: fixed and variable

true

in perfect competition a profit maximizing business will expand until its marginal equal the market price

true

in perfect competition if there are not berries to entry only the lowest cost businesses survive over the long run

true

in perfect competition, all buyers and sellers are price takers

true

marginal cost is the added expense of producing one more unit of output

true

the marginal product is the extra amount of output a firm can generate by adding one more hour r of labor ( or one more worker)

true

under the right circumstances competition could be a win-win proportions for companies and consumers

true

in a market with perfect competition give enough time and no barrier to entry profits will tend toward zero in the long run

ture

the difference between long term and short term profit maximization is that in the short term,

a business focus on achieving as much profit as they can, given the fact that fixed costs cannot be changed

monopolistic competition is characterized by

a larg number of sellers with a similar product

______ is paid communication with potential customers in a public medium such as newspapers and television

advertising

an example of an oligopoly is

airline industry

which of the following is an example of a profit maximizing business

an accountant who makes her living preparing tax returns for other people

an oligopoly occurs when there

are a few sellers in the market

monopolies are generally _____ technology and globilization

are reduced in number by

a _____ ia anything that might make it more difficult for a competitor to enter a market

barrier to entry

a ______ makes it more difficult for a competitor to enter a market

barrier to entry

the long lived physical equipment and structures that a business uses in its production process are called

capital

in the process of long term profit maximization the business makes decisions under the assumption that it can

cary all the inputs

if two drugstores in a market they will both sell fritos at a higher price and neither will undercut the other, this is called

collusion

if two or more oligopolistic companies work together to keep their prices hight and split the market between them, this is called

collusion

profit is the difference between reeve and

cost

what words describes the money that a business pays for its inputs?

cost

if you add too many inputs your business may experience

diminishing marginal product

many times, technology is ___ in the equipment a company buys

embodied

inputs for a business are the goods and services that it sells to its customers

false

marsha feilds and sterns departments stores are examples of low cost producers in a perfect competition market

false

outputs are always goods

false

perfect competition requires a nonstandard product

false

the short term cost function assumes that

fixed costs can't be changed