ECON 2020
In the pharmaceutical industry, patents and copyrights can
create strong incentives to develop new drugs.
To maximize profits, a monopolist chooses the quantity where
marginal revenue equals marginal cost.
In the short run, the cost of ________ is variable, whereas the cost of ________ is fixed.
labor; capital
In 1911, the U.S. government sued Standard Oil, a U.S. company, for violation of antitrust laws. The company broke up into 34 smaller companies. This is an example of
promoting competition
In a perfectly competitive market, the price of the product is
set by the forces of market supply and demand
The price of a competitive firm's product is $50 per unit. The firm currently has marginal cost equal to $40. To maximize profits this firm
should increase its output
Converse, an apparel company, has been fairly successful selling denim-colored college sportswear. Lydia sees an opportunity for profit and enters the market. After producing her profit maximizing level of output, she finds that her average total cost per unit is $40, her average variable cost per unit is $30, and the market price is $35. In the short run, Lydia should
stay in business even though she is suffering a loss
What would cause a firm's production function to change?
the adoption of new technology
Which of the following is true with regard to monopoly?
A monopolist charges a price where marginal cost is equal to marginal revenue.
A competitive firm maximizes profit at an output level of 500 units. The market price is $24, and the firm's ATC is $24.50. At what range of AVC values for an output level of 500 would the firm choose not to shut down?
AVC < $24
To maximize profits, firms expand output until
MR = MC
Profits when a competitive firm shuts down are -$7,250 and profits are -$250 when the firm continues to produce. This firm will minimize losses by
continuing to produce
Ash is the preferred wood to be used in the production of baseball bats. If a company were to buy the rights to harvesting the ash trees out of all the forests in North America, which of the following barriers of entry has this company created?
control of resources
A firm's accounting profit is always greater than its economic profit because
economic profit considers implicit costs, which accounting profit does not.
If a firm's long-run average total costs decrease as it increases its scale of production, the firm is experiencing
economies of scale.
For a perfectly competitive firm, marginal revenue is
equal to price
The demand curve for the product of a firm in a competitive market is _______________, and the demand curve for the product of a monopolist is ___________________.
horizontal; downward-sloping
If a firm hires another worker and her marginal product of labor is positive, we know that the firm's total output is
increasing
