unit 4 pre/post

___ is the total quantity of a good that sellers are willing and able to sell at alternative prices in a given time period.

b. market supply

When external costs exist, __ demand overstates ___ demand.

b. market; social

The costs of an economic activity directly borne by the immediate producer or consumer are known as:

b. private costs.

A ___ is a good or service whose consumption by one person does not preclude consumption by others.

b. public good,

An individual who reaps direct benefits from someone else's purchase (consumption) of a ___ good is a ___.

b. public; free rider

The production decision refers to the decision regarding:

b. the rate of output in the short run. -the production decision is the selection of the short-run rate of output, with existing plant and equipment.

In long-run competitive market equilibrium, price ___ minimum average total cost.

c. equals

In a competitive industry, price ___ marginal cost, while in a monopoly industry price ___ marginal cost.

c. equals; is greater than

The price the monopolist charges in order to maximize profit is:

c. found from the demand curve

Government intervention that does not succeed in improving economic outcome is referred to as:

c. government failure

Which of the following is true of a perfectly competitive firm?

c. it is a price taker. -a perfectly competitive firm cannot affect market prices.

A monopolist produces ___ output and charges a ___ price than does a competitive industry.

c. less; higher

Which term is defined as the increase in total costs associated with a one-unit increase in production?

c. marginal costs.

The ___ mechanism is the use of market prices and sales to signal desired output (or resource allocation).

c. market

Total revenue equals price:

c. times quantity

The profit-maximizing rule that a firm should produce at a rate of output where marginal revenue equals marginal cost applies:

c. to all firms

The market tends to ___ public goods and ___ private goods.

c. under produce; overproduce

The market will ___ goods that yield external benefits and ___ goods that yield external costs.

c. under produce; overproduce

In the long run there will be a tendency toward ___ profits in perfectly competitive industries.

c. zero economic

A monopoly exists when ___ firm(s) produce(s) the entire market supply of a particular good or service.

d. one

Monopolies are able to maintain profits by:

d. all of the above (a. engaging in legal harassment; b. making use of exclusive licensing; c. bundling products)

Which of the following is an example of a public good?

d. all of the above are examples of public goods (a. national defense; b. flood control dams; c. a lighthouse)

If total revenue is ___ total cost, the firm is experiencing a ___.

b. greater than; profit -Profit occurs if total revenue is greater than total cost.

If price is greater than marginal cost, the firm should:

b. increase its rate of output.

The market supply curve:

b. is the sum of the marginal costs curves of all the firms in the market.

___ power is the ability to alter the market price of a good or service.

b. market

For a competitive firm, a marginal revenue is always ___ price.

a. equal to

If a monopolist is maximizing its profit, then it must be producing at a rate of output where marginal revenue ___ marginal cost.

a. equals

In perfect competition, if profit is maximized then price:

a. equals marginal cost

The existence of profits in a competitive industry:

a. induces entry. -profits will encourage more firms to enter the industry, which will reduce profits to zero in the long-run, even though profits may exist in the short-run.

Market failure:

a. is an imperfection in the market mechanism that prevents optimal outcomes.

Compared to the competitive outcome, a monopoly produces ___ output.

a. less -monopolies restrict output to increase profits.

A(n) ___ is a firm that produces the entire market supply of a particular good or service.

a. monopoly

In perfect competition, the producer has ___ control over the price of the product.

a. no

A business firm that is a "price taker" is characteristic of:

a. perfect competition

Marginal revenue (MR) is:

a. the change in total revenue that results from a one-unit increase in quantity sold.

The optimal mix of output is:

a. the most desirable combination of output attainable. -markets and government intervention may not always reach the optimal mix of output.

Profit maximizing firms seek to maximize:

a. total revenue minus total cost. -competitive firm seeks to maximize total profit, never profit per unit.

In order for a monopolist to sell another unit of output, it must decrease the price it charges, so marginal revenue will:

b. decrease -marginal revenue will decrease for a monopolist as it sells more goods.

The demand curve facing a monopolist is:

b. downward-sloping

When profits are being earned in an industry, firms will ___ the industry and the price will ___.

b. enter; decrease

In a monopoly, price is __ marginal revenue.

b. greater than

Which of the following is an important influence on marginal cost (and supply behavior)?

d. all of the above are influences on marginal cost.

Which of the following is a source of microeconomic market failure?

d. all of the above are sources of microeconomic market failure (a. public goods; b. externalities; c. market power)

The market structure of an industry refers to:

d. all of the above are true (a. the number of firms in the industry; b. the relative size of firms in the industry; c. the amount of market power each firm in the industry has) -market structure describes the number and relative sizes of firms in an industry, which reveal the market has power each firm has.

Externalities:

d. all of the above are true (a. are costs (or benefits) of a market activity borne by a third party; b. are the difference between social and private costs (or benefits) of a market activity; c. affect people outside of the immediate transaction)

Which of the following are redeeming qualities of monopoly?

d. all of the above are true (a. they conduct research and development; b. their profits provide entrepreneurial incentives; c. they are well suited to accommodate economies of scale).

The market supply of a competitive industry is determines by which of the following?

d. all of the above. (a. the number of firms in the industry; b. the current state of technology; c. firm's expectations)

Economics of scale:

d. both A & B are true (a. are reductions in minimum average costs that come about through increases in the size (scale) of plant and equipment; b. are achieved by a natural monopoly)

A natural monopoly achieves ___ over the entire range of market supply.

d. both A & B are true. (a. economies of scale; b falling average costs)

For a monopolist, total profit equals:

d. both A and B are true (a. total revenue minus total cost; b. profit per unit times quantity)

Income transfers:

d. both A and B are true (a. are payments to individuals for which no current goods or services are exchanged; b. include Social Security, welfare, and unemployment benefits.)

The demand curve facing a perfectly competitive firm is:

d. horizontal -a perfectly competitive firm has a HORIZONTAL demand curve, even though the market demand curve is downward-sloping.

What is the term for an industry in which one firm can achieve economies of scale over the entire range of market supply?

d. natural monopoly

Market power is defined as:

d. none of the above is true **all firms can alter their individual output, but only monopolistic firms can alter the market price of a good.