Microeconomics ch.11-13

Which statement is TRUE

MR = MC is a profit-maximizing rule for any firm.

Which statement about the differences between monopoly and perfect competition is INCORRECT?

Monopoly profits can continue in the long run because the monopoly produces more and charges a higher price than does a comparable perfectly competitive industry.

The demand curve for a monopoly is

above the marginal revenue curve

If marginal cost is LESS than average total cost, then _____ cost is _____.

average total; decreasing

Variable cost divided by the quantity of output produced is _____ cost.

average variable

Conditions that keep new firms out of a monopoly market are

barriers to entry.

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.

Which factor is NOT a barrier to entry

diseconomies of scale

The demand curve facing a monopolist is

downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm

One of the major differences between a monopolist and a purely competitive firm is that the monopolist has a _____ demand curve, while the purely competitive firm has a _____ demand curve.

downward-sloping; perfectly elastic

Diminishing marginal returns occur when

each additional unit of a variable factor adds less to total output than the previous unit

The difference between total revenue and total cost is

economic profit or loss

The slope of the total revenue curve is

equal to marginal revenue and is constant under perfect competition

Marginal revenue

equals the market price in perfect competition

A natural monopoly exists whenever a single firm

has economies of scale over the entire range of production that is relevant to its market.

Price takers are individuals in a market who

have no ability to affect the price of a good in a market.

Because of monopoly, consumers experience _____ than they do with perfect competition.

higher prices

The fixed cost curve is

horizontal

Marginal cost is the

increase in total cost when one more unit of output is produced.

The assumptions of perfect competition imply that

individuals in the market accept the market price as given.

Price in a perfectly competitive industry

is always equal to marginal revenue for the firm

The marginal revenue received by a firm in a perfectly competitive market

is equal to its average revenue.

A monopolist is likely to produce _____ and charge _____ than is a comparable perfectly competitive firm.

less; more

A planning period during which all of a firm's resources are variable is the _____ run.

long

The curve that shows the additional cost of each additional unit of output is called the _____ curve.

marginal cost

The slope of the total cost curve is

marginal cost

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where _____ equals _____.

marginal cost; price

The _____ is the increase in output that is produced when a firm hires an additional worker.

marginal product

A perfectly competitive firm will maximize profits when the

marginal revenue equals marginal cost

For a firm in a perfectly competitive market, _____ revenue equals _____.

marginal; market price

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

In contrast with perfect competition, a monopolist

may have economic profits in the long run.

_____ firms have the MOST market power

monopoly

An increase in the fixed costs of a monopoly firm would _____ price and _____ quantity in the short run.

not change; not change

The long run is a planning period

over which a firm can consider all inputs as variable.

The total cost curve is

positively sloped.

In perfect competition

price and marginal revenue are the same

If the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will

produce at a profit

The equilibrium price of a guidebook is $35 in the perfectly competitive guidebook industry. Our firm produces 10,000 guidebooks for an average total cost of $38, marginal cost of $30, and average variable cost of $30. Our firm, in the short run, should:

produce more guidebooks because the next guidebook produced will increase profit by $5.

Marginal revenue is a firm's

ratio of the change in total revenue to the change in output.

If marginal cost is GREATER than average total cost, then average total cost is:

rising.

A monopoly is a market characterized by a

single seller

In the short run

some inputs are fixed and some inputs are variable.

Perfect competition is characterized by

the inability of any one firm to influence price.

The demand curve for a monopoly is

the industry demand curve

In economics, the short run is defined as:

the period in which some inputs are considered to be fixed in quantity.

The sum of fixed and variable costs is _____ cost

total

Average total cost is

total cost divided by the quantity of output

Total revenue is a firm's

total output times the price at which it sells that output.

Marginal cost is the change in _____ cost resulting from a one-unit change in _____.

total; output

Average variable cost is

variable cost divided by the quantity of output

Average variable cost is the ratio of

variable cost to the quantity of output

In the short run, the costs associated with variable inputs are _____, and the costs associated with _____ inputs are _____.

variable; fixed; fixed

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.

Which statement is NOT characteristic of perfect competition?

A) All firms produce the same standardized product. B) There are many producers, and each has only a small market share. *C) There are many producers; one firm has a 25% market share, and all of the remaining firms have a market share of less than 2% each. D) There are no obstacles to entry into or exit from the industry

In a perfectly competitive industry, the market demand curve is usually

Downward-sloping

If a perfectly competitive firm decreases production from 11 units to 10 units and the market price is $20 per unit, total revenue for 10 units is:

$200

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is:

$220

If a perfectly competitive firm sells 10 units of output at $30 per unit, its marginal revenue is:

$30.

If a firm in perfect competition sells 10 units of output at $5 per unit, its marginal revenue is:

$5

Which statement is TRUE?

The profit-maximizing solution occurs where MR = MC.

A firm's total output times the price at which it sells that output is _____ revenue.

Total

If a perfectly competitive firm sells 300 units of output at $1 per unit, its marginal revenue is

$1

Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is:

$19

In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if:

P = ATC

In the short run, a perfectly competitive firm produces output and earns an economic profit if

P > ATC

A downward-sloping demand curve will ensure that _____ is TRUE for a monopoly

P > MR