Econ 2023 Ch.11,12,13
How are implicit costs different from explicit costs? A. An explicit cost is a cost that involves spending money, while an implicit cost is a nonmonetary cost. B. An explicit cost is not an opportunity cost, while an implicit cost is an opportunity cost. C. An explicit cost is a cost incurred in the short run, while an implicit cost is a cost incurred in the long run. D. An explicit cost is a cost incurred as output changes, while an implicit cost is a cost incurred holding output constant. E. Both a and b.
A. An explicit cost is a cost that involves spending money, while an implicit cost is a nonmonetary cost.
What is the difference between technology and technological change? A. Technology is the process of using inputs to make output, while technological change is when a firm is able to produce more output using the same inputs. B. Technology is the development of new products, while technological change is when a firm is able to produce more output with the same inputs. C. Technology is when a firm is able to produce more output using the same inputs, while technological change is the process of using inputs to make output. D. Technology is the development of new products, while technological change is when a firm is able to produce the same output with fewer inputs. E. Technology is the process of using inputs to make output, while technological change is when a firm is able to produce more output using more inputs.
A. Technology is the process of using inputs to make output, while technological change is when a firm is able to produce more output using the same inputs.
Which of the following is a characteristic of perfectly competitive markets? A. There will be many buyers and many firms, all of whom are small relative to the market. B. The barriers to new firms entering the market will be natural ones. C. There will be a few firms in the market selling an identical product. D. There will be many buyers but only a few firms, all of whom will charge the same price. E. There will be only a few buyers but many firms, all of whom are small relative to the market.
A. There will be many buyers and many firms, all of whom are small relative to the market.
Are perfectly competitive markets allocatively efficient in the long run? A. Yes, because firms produce where the marginal benefit to consumers equals the marginal cost of production. B. Yes, because firms produce at the lowest average cost possible. C. No, because firms earn zero economic profits. D. No, because firms will not shut down unless price is less than the average variable cost of production. E. Both a and b.
A. Yes, because firms produce where the marginal benefit to consumers equals the marginal cost of production.
Which of the following is an example of positive technological change? Positive technological change occurs when... A. a firm's workers go through a training program. B. a firm's managers rearrange the layout of a retail store to decrease sales. C. a firm uses inputs to produce output. D. a firm is able to hire cheaper labor. E. a firm becomes more profitable by increasing revenue.
A. a firm's workers go through a training program.
With a downward-sloping demand curve, marginal revenue is below price A. because the firm must lower its price to sell additional units. B. since the slope of the demand curve is marginal revenue, and the slope is negative. C. since P = TR/Q and MR = ΔTR/ΔQ. D. the marginal revenue firms receive is always less that the price they charge due to selling costs.
A. because the firm must lower its price to sell additional units.
How is the market supply curve derived from the supply curves of individual firms? The market supply curve is derived... A. by horizontally adding the individual firms' supply curves. B. by vertically adding the individual firms' supply curves. C. by adding the individual average variable cost curves. D. by adding the average total cost curves for the individual firms.
A. by horizontally adding the individual firms' supply curves.
How does the long-run equilibrium for a monopolistically competitive market differ from the long-run equilibrium for a perfectly competitive market? One way in which monopolistically competitive markets and perfectly competitive markets differ is that in long-run equilibrium, monopolistically competitive firms... A. charge a price greater than marginal cost. B. do not earn zero economic profits. C. charge a price less than marginal revenue. D. produce where marginal revenue is greater than marginal cost. E. produce at minimum marginal cost.
A. charge a price greater than marginal cost.
Which of the following is most likely to be a fixed cost for a farmer? A. insurance premiums on property B. cost of fertilizer C. wages paid to farm workers D. cost of seeds
A. insurance premiums on property
In economics, the best definition of technology is... A. the process a firm uses to turn inputs into outputs. B. the process a firm uses to price output. C. the sophistication of the equipment enjoyed by consumers. D. the development of new products. E. the speed of communication.
A. the process a firm uses to turn inputs into outputs.
What is meant by productive efficiency? Productive efficiency is... A. when a good or service is produced at lowest possible cost. B. when the average cost of production decreases with output. C. when a good or service is produced such that economic surplus is maximized. D. when a good or service is produced such that marginal cost is minimized. E. when labor, machinery, and other inputs are allocated to produce the goods and services that best satisfy consumer wants.
A. when a good or service is produced at lowest possible cost.
If marginal revenue slopes downward, which of the following is true? A. The firm must decrease its price if it wants to continue selling the same quantity. B. The firm must decrease its price to sell a larger quantity. C. The firm must increase its price to sell a larger quantity. D. The firm is unable to adjust price when the quantity sold changes.
B. The firm must decrease its price to sell a larger quantity.
What trade-offs do consumers face when buying a product from a monopolistically competitive firm? A. Consumers pay a lower price, but they also have fewer choices. B. Consumers pay a price greater than marginal cost, but they also have choices more suited to their tastes. C. Consumers pay a price as low as the competitive price, but they have difficulty finding and buying the product. D. Consumers pay a higher price, but they are happy knowing that the industry is highly efficient.
B. Consumers pay a price greater than marginal cost, but they also have choices more suited to their tastes.
What is the difference between zero accounting profit and zero economic profit? A. Zero accounting profit includes a firm's fixed costs but zero economic profit does not. B. Zero economic profit includes a firm's implicit costs but zero accounting profit does not. C. Zero economic profit and zero accounting profit for a firm are equal. D. Zero economic profit corresponds to negative accounting profit for a firm. E. Zero economic profit includes a firm's sunk costs but zero accounting profit does not.
B. Zero economic profit includes a firm's implicit costs but zero accounting profit does not.
All of the following cost measures reach their minimum points when they are equal to the value of marginal cost, except one. Which cost measure is the exception? A. average total cost B. average fixed cost C. average variable cost D. There is no exception; all three measures above reach their minimum values when they are equal to the value of marginal cost.
B. average fixed cost
What cost measure is equal to AFC +AVC? A. marginal cost B. average total cost C. total variable cost D. total cost
B. average total cost
The monopolistically competitive firm sells _________ product and faces _________ demand curve. A. a differentiated; a horizontal B. a differentiated; a downward-sloping C. a homogeneous; a horizontal D. a homogeneous; a downward-sloping
B. a differentiated; a downward-sloping
Which of the following is most likely to a variable cost for a business firm? A. rent on the office building B. cost of shipping products C. property taxes D. interest on long-term outstanding bonds
B. cost of shipping products
Suppose the market for cotton is perfectly competitive and that input prices decrease as the industry expands. Characterize the industry's long-run supply curve. The cotton industry's long-run supply curve will be... A. downward sloping because existing firms will exit as they experience losses. B. downward sloping because the long-run average cost of production will be decreasing. C. upward sloping because the total cost of production will be decreasing. D. horizontal and equal to the minimum point on the long-run average cost curve. E. upward sloping because new firms will enter as prices rise.
B. downward sloping because the long-run average cost of production will be decreasing.
When the marginal product of labor is greater than the average product of labor, then the average product of labor must be... A. constant. B. increasing. C. decreasing. D. Any of the above answers is possible.
B. increasing.
The late Nobel Prize-winning economist George Stigler once wrote, "the most common and most important criticism of perfect competition... [is] that it is unrealistic." Despite the fact that few firms sell identical products in markets where there are no barriers to entry, economists believe that the model of perfect competition is important because... A. this is the type of market that our business laws protect and promote. B. it is a benchmark—a market with the maximum possible competition—that economists use to evaluate actual markets that are not perfectly competitive. C. all markets eventually become perfectly competitive. D. economists prefer studying theoretical markets instead of actual markets.
B. it is a benchmark—a market with the maximum possible competition—that economists use to evaluate actual markets that are not perfectly competitive.
Suppose a local McDonald's hamburger restaurant raises the price of its cheeseburgers from $2.00 to $2.50. What will happen to the quantity of McDonald's cheeseburgers demanded? If McDonald's raises the price of it's cheeseburgers, then... A. none of McDonald's customers will continue to demand McDonald's cheeseburgers because they can buy comparable cheeseburgers from other fast-food restaurants. B. some of McDonald's customers, but not all of them, will still demand McDonald's cheeseburgers because they may prefer McDonald's cheeseburgers to cheeseburgers at other fast−food restaurants. C. all of McDonald's customers will continue to demand McDonald's cheeseburgers because cheeseburgers from other fast-food restaurants are at least slightly differentiated. D. some of McDonald's customers, but not all of them, will still demand McDonald's cheeseburgers because cheeseburgers from fast-food restaurants are identical. E. all of McDonald's customers will continue to demand McDonald's cheeseburgers because McDonald's faces no competition.
B. some of McDonald's customers, but not all of them, will still demand McDonald's cheeseburgers because they may prefer McDonald's cheeseburgers to cheeseburgers at other fast−food restaurants.
What is the production function? The production function is the relationship between... A. economies of scale and returns to scale. B. the inputs employed by a firm and the maximum output it can produce with those inputs. C. the output produced by a firm in the short run and in the long run. D. the inputs employed by a firm and its cost of production. E. the output produced by a firm and the minimum long-run average cost of production.
B. the inputs employed by a firm and the maximum output it can produce with those inputs.
Economies of scale occur... A. when a firm's long-run average costs increase with output. B. when a firm's long-run average costs decrease with output. C. when the marginal cost of production decreases with output. D. when the marginal product of labor increases with output.
B. when a firm's long-run average costs decrease with output.
What are diseconomies of scale? Diseconomies of scale is... A. when a firm's long-run average costs decrease with output. B. when a firm's long-run average costs increase with output. C. when the marginal product of labor is increasing with output. D. when the marginal cost of production is decreasing with output.
B. when a firm's long-run average costs increase with output.
Would a firm earning zero economic profit continue to produce, even in the long run? In long-run competitive equilibrium, a firm earning zero economic profit... A. will not continue to produce because it could earn a better return in another industry. B. will continue to produce because such profit corresponds with positive accounting profit. C. will not continue to produce because this return is not covering its opportunity costs. D. will not continue to produce because it would be better off shutting down. E. will not continue to produce because such profit corresponds with negative accounting profit.
B. will continue to produce because such profit corresponds with positive accounting profit.
How does the entry of new coffeehouses affect the profits of existing coffeehouses? A. Entry will increase the profits of existing coffeehouses by shifting the market demand curve for coffee to the right. B. Entry will not affect the profits of existing coffeehouses. C. Entry will decrease the profits of existing coffeehouses by shifting each of their individual demand curves to the left and making the demand curves more elastic. D. Entry will increase the profits of existing coffeehouses by shifting each of their individual demand curves to the right.
C. Entry will decrease the profits of existing coffeehouses by shifting each of their individual demand curves to the left and making the demand curves more elastic.
A monopolistically competitive firm doesn't produce where P = MC like a perfectly competitive firm because... A. the approach to profit maximization used by monopolistically competitive firms is fundamentally different from the approach used by firms in other markets. B. perfectly competitive firms face downsloping demand curves and monopolistically competitive firms do not. C. P exceeds MR for a monopolistically competitive firm, and it's MR that must equal MC for profit maximization. D. perfectly competitive firms know the price with certainty while monopolistically competitive firms do not.
C. P exceeds MR for a monopolistically competitive firm, and it's MR that must equal MC for profit maximization.
The law of diminishing returns applies... A. in the long run. B. either in the short run or the long run. C. in the short run. D. None of the above.
C. in the short run.
Compare the efficiency of monopolistic competition and perfect competition in long-run equilibrium. A. Monopolistically competitive firms and perfectly competitive firms both produce at lowest possible average total cost and are therefore productively efficient. B. Monopolistically competitive firms produce where marginal revenue equals marginal cost and are therefore productively efficient, but perfectly competitive firms produce where price equals marginal cost and are therefore not productively efficient. C. Perfectly competitive firms produce where price equals marginal cost and are therefore allocatively efficient, but monopolistically competitive firms produce where price is greater than marginal cost and are therefore not allocatively efficient. D. Monopolistically competitive firms and perfectly competitive firms both produce with no excess capacity and are therefore not productively efficient. E. Perfectly competitive firms and monopolistically competitive firms both charge a price that is greater than marginal cost and are therefore not allocatively efficient.
C. Perfectly competitive firms produce where price equals marginal cost and are therefore allocatively efficient, but monopolistically competitive firms produce where price is greater than marginal cost and are therefore not allocatively efficient.
A startup firm in a perfectly competitive market finds that its average total cost is higher than the market price. Since the firm is incurring short-run losses, the management is debating whether to continue operations. Alex Ferguson, a senior manager, feels that this is a temporary phase and the firm should continue operations. Which of the following, if true, would support Alex's argument? A. The price of the product is expected to remain stable over the coming months. B. Economic activity in recent months has been sluggish. C. The current price of the product covers the variable cost of production. D. The managers of the firm have worked for other firms that produced products with an even greater difference between average total cost and market price. E. Other firms in the same industry have higher labor costs but lower raw material costs.
C. The current price of the product covers the variable cost of production.
The marginal cost of production shows the change in a firm's total cost from producing one more unit of a good or service. What is the shape of the marginal cost curve? Graphically, the marginal cost curve is... A. a U shape, initially falling when the marginal product of labor is below marginal cost and then eventually rising when the marginal product of labor is above marginal cost. B. shaped like a hill, initially rising when the marginal product of labor is falling and then eventually falling when the marginal product of labor is rising. C. a U shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling. D. shaped like a hill, rising when the average cost of production is rising and then eventually falling when the average cost of production is falling. E. a U shape, initially falling due to diminishing returns and then eventually rising due to division of labor.
C. a U shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling.
What is a price taker? A price taker is... A. a firm with a downward-sloping demand curve. B. a firm that does not seek to maximize profits. C. a firm that is unable to affect the market price. D. a firm with a perfectly inelastic demand curve. E. a firm that has the ability to charge a price greater than marginal cost.
C. a firm that is unable to affect the market price.
How do specialization and division of labor typically affect the marginal product of labor? In the initial stages of production, specialization and division of labor lead to an increasing marginal product for workers,... A. giving workers the opportunity to learn each other's tasks. B. letting workers use new technology more effectively. C. allowing workers to concentrate on a few tasks so that they become more skilled at doing them quickly and efficiently. D. allowing workers to use additional capital equipment more effectively.
C. allowing workers to concentrate on a few tasks so that they become more skilled at doing them quickly and efficiently.
What is the difference between a firm's shutdown point in the short run and its exit point in the long run? In the short run, a firm's shutdown point is the minimum point on the... A. marginal cost curve and and in the long run, a firm's exit point is the minimum point on the marginal cost curve. B. average variable cost curve, while in the long run, a firm cannot exit. C. average variable cost curve, while in the long run, a firm's exit point is the minimum point on the average total cost curve. D. average total cost curve and in the long run, a firm's exit point is the minimum point on the average total cost curve. E. average variable cost curve, while in the long run, a firm's exit point is the minimum point on the average fixed cost curve.
C. average variable cost curve, while in the long run, a firm's exit point is the minimum point on the average total cost curve.
There are about 400 wineries in California's Napa Valley. Suppose the owner of one of the wineries—Jerry's Wine Emporium—raises the price of his wine by $5.00 per bottle. If the industry is perfectly competitive, the reaction of consumers would be to... A. stop drinking wine. B. buy more of Jerry's wine. C. buy wine from another winery. D. buy some, but less of, Jerry's wine. If the industry is monopolistically competitive, the reaction of consumers... A. would be to buy none of Jerry's wine. B. could be to remain loyal to Jerry's and pay the higher price. C. would be to stop drinking wine. D. would be to switch to a lower-priced wine.
C. buy wine from another winery. B. could be to remain loyal to Jerry's and pay the higher price.
A monopolistically competitive firm in a long-run equilibrium produces where A. its demand curve is above its average total cost curve. B. its demand curve is below its average total cost curve. C. its demand curve is tangent to its average total cost curve. D. None of the above is true.
C. its demand curve is tangent to its average total cost curve.
Panera Bread restaurants have been a very popular "fast-casual" dining option—with better food choices than fast-food restaurants like McDonald's, and faster service and lower prices than traditional restaurants. Panera's profit per restaurant is much greater than McDonald's. Looking forward to ten years from now, you would expect Panera's economic profit per restaurant to be... A. the same because the market Panera serves will remain stable. B. higher because Panera will become more productive. C. lower because more firms will imitate Panera. D. the same because Panera's product is so unique.
C. lower because more firms will imitate Panera.
Which type of efficiency does a monopolistically competitive firm achieve in the long run? A. only allocative efficiency B. both allocative and productive efficiency C. neither allocative nor productive efficiency D. only productive efficiency
C. neither allocative nor productive efficiency
What determines entry and exit of firms in a perfectly competitive industry in the long run? Part 2 In a perfectly competitive industry in the long run,... A. new firms will enter if existing firms are making a profit and existing firms will exit if they are breaking even or experiencing losses. B. new firms cannot enter the market due to barriers but existing firms will exit if they are experiencing losses. C. new firms will enter if existing firms are making a profit and existing firms will exit if they are experiencing losses. D. new firms will enter if price is above the shutdown point and existing firms will exit if price is below the shutdown point. E. new firms will enter if market demand exceeds market supply and existing firms will exit if market supply exceeds market demand.
C. new firms will enter if existing firms are making a profit and existing firms will exit if they are experiencing losses.
Which of the following terms refers to the lowest cost at which a firm is able to produce a given level of output in the long run, when no inputs are fixed? A. the long-run marginal cost curve B. the variable inputs curve C. the long-run average cost curve D. economies of scale
C. the long-run average cost curve
For which of the following reason(s) may firms experience economies of scale? A. Large firms may be able to purchase inputs at lower costs than smaller competitors; they can also borrow money at a lower interest rate. B. Both managers and workers may become more specialized and hence more productive as output expands. C. Firm's production may increase with a smaller proportional increase in at least one input. D. All of the above.
D. All of the above.
What is the relationship between a perfectly competitive firm's marginal cost curve and its supply curve? A. A firm's marginal cost and supply curves are horizontal lines equal to the market price. B. A firm's marginal cost curve is equal to its supply curve for all prices. C. A firm's marginal cost curve is equal to its supply curve for prices above average total cost. D. A firm's marginal cost curve is equal to its supply curve for prices above average variable cost. E. A firm's marginal cost curve is upward sloping with twice the slope of its supply curve.
D. A firm's marginal cost curve is equal to its supply curve for prices above average variable cost.
What is the difference between the short run and the long run? A. In the short run, a firm can vary all inputs, but technology is fixed, while in the long run, a firm can adopt new technology, but all inputs are fixed. B. In the short run, all of a firm's inputs are fixed, while in the long run, a firm is able to vary all inputs but not adopt new technology. C. In the short run, all of a firm's inputs are fixed, while in the long run, a firm is able to vary all its inputs and adopt new technology. D. In the short run, at least one of a firm's inputs is fixed, while in the long run, a firm is able to vary all its inputs and adopt new technology. E. In the short run, a firm can vary all inputs, but technology is fixed, while in the long run, a firm can vary all inputs and adopt new technology. Is the amount of time that separates the short run from the long run the same for every firm?
D. In the short run, at least one of a firm's inputs is fixed, while in the long run, a firm is able to vary all its inputs and adopt new technology. No
Briefly discuss the difference between these two concepts. A. Economic surplus is maximized with productive efficiency but not necessarily with allocative efficiency. B. Productive efficiency results in zero economic profits but allocative efficiency does not. C. Perfect competition results in allocative efficiency but not necessarily productive efficiency. D. Productive efficiency pertains to production within an industry while allocative efficiency pertains to production across all industries. E. Perfect competition results in productive efficiency but not necessarily allocative efficiency.
D. Productive efficiency pertains to production within an industry while allocative efficiency pertains to production across all industries.
Why are firms willing to accept losses in the short run but not in the long run? A. It is always profitable to incur losses in the short run because profits will always arise in the long run. B. Firms cannot shut down in the short run. C. Firms are price takers in the short run but not in the long run. D. There are fixed costs in the short run but not in the long run. E. Sunk costs are larger in the long run than in the short run.
D. There are fixed costs in the short run but not in the long run.
What is the law of diminishing returns? The law of diminishing returns states that... A. dividing the tasks to be performed through division of labor will increase the marginal product of labor. B. producing more output by adding more of a variable input will eventually cause the marginal cost of production to decline. C. the long-run average cost of production falls as output increases. D. adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline. E. adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the fixed input to decline. Does it apply in the long-run?
D. adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline. No
A monopolistically competitive firm is not productively efficient because it produces a level of output where... A. price exceeds marginal cost. B. marginal revenue is less than price. C. average variable cost is not at a minimum. D. average total cost is not at a minimum. A monopolistically competitive firm has excess capacity in the sense that if it increased output beyond the quantity associated with profit maximization, it could produce at a lower___________cost.
D. average total cost is not at a minimum. average
Further, positive technological change is defined as... A. being able to produce more output using the same inputs. B. being able to produce the same output using fewer inputs. C. being able to sell more output at higher prices. D. both a and b. E. all of the above.
D. both a and b.
Economies of scale happen when the firm's long run average total cost ________ as output increases. A. is zero B. remains constant C. increases D. decreases
D. decreases
Economists have debated the effects of monopolistically competitive market structures on the well-being of society. How do monopolistically competitive market structures affect consumers? Compared to perfect competition, consumer welfare with monopolistic competition is... A. enhanced by lower product prices. B. enhanced by products being produced at lower average cost. C. reduced by products not particularly suited to consumer tastes. D. enhanced by greater product variety. E. reduced by lower product quality.
D. enhanced by greater product variety.
Any cost that remains unchanged as output changes represents a firm's... A. opportunity cost. B. marginal cost. C. variable cost. D. fixed cost.
D. fixed cost.
Does the market system result in allocative efficiency? In the long run, perfect competition... A. does not result in allocative efficiency because firms produce an identical product that offers consumers no variety. B. results in allocative efficiency because firms produce where the marginal benefit consumers receive from consuming the last unit of the good sold is greater than marginal cost. C. does not result in allocative efficiency because firms enter and exit until they break even where price equals minimum average cost. D. results in allocative efficiency because firms produce where price equals marginal cost. E. does not result in allocative efficiency because price does not equal the marginal benefit consumers receive from consuming the last unit of the good sold.
D. results in allocative efficiency because firms produce where price equals marginal cost.
As output increases, the vertical distance between average total cost and average variable cost curves gets _______ and equals _______. A. smaller; total fixed cost B. larger; marginal cost C. larger; average fixed cost D. smaller; average fixed cost
D. smaller; average fixed cost
Any cost that changes as output changes represents a firm's A. sunk cost. B. fixed cost. C. overhead cost. D. variable cost.
D. variable cost.
With a downward-sloping demand curve, average revenue is equal to price... A. because the firm must lower its price to sell additional units. B. since average revenue is the slope of the demand curve. C. because the downward slope is constant. D. actually, average revenue is always equal to price, whether demand is downward sloping or not.
D. actually, average revenue is always equal to price, whether demand is downward sloping or not.
What is the main reason that firms eventually encounter diseconomies of scale as they keep increasing the size of their store or factory? A. Higher output levels result in lower market prices. B. Fixed costs become too large. C. Firms exhaust the benefits of specialization. D. The marginal product of labor begins to decrease according to the law of diminishing returns. E. Firms have difficulty coordinating production.
E. Firms have difficulty coordinating production.
What are implicit costs? An implicit cost is... A. a cost incurred in the short run. B. the highest-valued alternative that must be given up to engage in an activity. C. a cost that remains constant as output changes. D. a cost that changes as output changes. E. a nonmonetary opportunity cost.
E. a nonmonetary opportunity cost.
Why does a local McDonald's face a downward-sloping demand curve for its Quarter Pounder? In monopolistically competitive markets,... A. changing the price affects the quantity sold because firms are price takers. B. changing the price does not affect the quantity sold because firms have market power. C. changing the price does not affect the quantity sold because firms sell differentiated products. D. changing the price affects the quantity sold because there are only a few sellers. E. changing the price affects the quantity sold because firms sell differentiated products. If McDonald's raises the price it charges for Quarter Pounders above the prices charged by other fast-food restaurants, won't it lose all its customers?
E. changing the price affects the quantity sold because firms sell differentiated products. No
What characterizes perfectly competitive markets? Perfectly competitive markets have... A. firms that are price makers. B. a few sellers. C. barriers to new firms entering. D. a few buyers. E. identical products sold by all firms.
E. identical products sold by all firms.
What is meant by allocative efficiency? Allocative efficiency is when every good or service... A. is produced up to the point where the difference between price and marginal cost is maximized. B. is produced up to the point where price equals marginal revenue. C. produced generates an equal amount of consumer surplus and producer surplus. D. is produced at lowest possible cost. E. is produced up to the point where the marginal benefit for consumers equals the marginal cost of producing it.
E. is produced up to the point where the marginal benefit for consumers equals the marginal cost of producing it.
When are firms likely to be price takers? A firm is likely to be a price taker when... A. firms in the industry collude. B. it has market power. C. barriers to entry are substantial. D. it sells a differentiated product. E. it represents a small fraction of the total market.
E. it represents a small fraction of the total market.
What are the three conditions for a market to be perfectly competitive? For a market to be perfectly competitive, there must be... A. many buyers and a few sellers, with all firms selling identical products, and no barriers to new firms entering the market. B. many buyers and sellers, with firms selling similar but not identical products, with low barriers to new firms entering the market. C. many buyers and one seller, with the firm producing a product that has no close substitutes, and barriers to new firms entering the market. D. many buyers and a small number of firms that compete, selling differentiated products, and barriers to new firms entering the market. E. many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market.
E. many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market.
What is the difference between total cost and variable cost in the long run? In the long run,... A. the total cost of production minus the variable cost of production is the marginal cost of production. B. the total cost of production minus the variable cost of production is the fixed cost of production. C. the variable cost of production minus the total cost of production is the fixed cost of production. D. the total cost of production equals the fixed cost of production and the variable cost of production equals zero. E. the total cost of production equals the variable cost of production.
E. the total cost of production equals the variable cost of production.
What effect does the entry of new firms have on the economic profits of existing firms? When new firms enter a monopolistically competitive market, the economic firms... A. will remain unchanged because they sell differentiated products. B. will increase because their demand curves will become more elastic. C. will increase because their average cost of production will decrease. D. will decrease because their demand curves will shift to the right. E. will decrease because their demand curves will shift to the left.
E. will decrease because their demand curves will shift to the left.
Is it possible for marginal revenue for a firm operating in a perfectly competitive industry to be negative? Would a firm selling in a monopolistically competitiveLOADING... market ever produce where marginal revenue is negative? A. No because marginal revenue cannot be negative. B. No because marginal cost cannot be negative. C. Yes because profit can be maximized when marginal revenue is negative. D. Yes because revenue is maximized when marginal revenue is negative.
No B. No because marginal cost cannot be negative.