Econ Exam 4

If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to

a decrease in the firm's supply

One problem with government ownership of natural monopolies is that

government-owned firms have weaker incentives to cut costs than do privately-owned firms

An imperfectly competitive firm is one that

has at least some influence over the market price

A price setter is a firm that

has some degree of control over its price.

A price-taker faces a demand curve that is

horizontal at the market price

The most important challenge facing a firm in a perfectly competitive market is deciding

how much to produce

A rational seller will sell another unit of output

if the cost of making another unit is less than the revenue gained from selling another unit

Both a perfectly competitive firm and a monopolist find that

it is best to expand production until the benefit and the cost of the last unit produced are equal

A pure monopoly exists when

a single firm produces a good with no close substitutes

Which of the following is a defining characteristic of all perfectly competitive markets?

All firms sell the same standardized product

Which of the following is NOT a characteristic of a perfectly competitive market?

Each firm in the market sells a somewhat different variant of the good

For all firms, the additional revenue collected from the sale of one additional unit of output is termed

marginal revenue

The primary objective of an imperfectly competitive firm is to

maximize profit

The primary objective of most private firms is to

maximize profit

One problem with antitrust laws is that they

may prevent companies from achieving economies of scale

A monopoly that results from economies of scale is called a(n)

natural monopoly

A monopolistically competitive firm is one

of many firms that sell products that are close but not perfect substitutes

If a firm operates in an oligopoly, it is

one of a small number of firms that produce goods that are either close or perfect substitutes

The difference between the price a seller actually receives for a good and the seller's reservation price is

producer surplus

Total revenue minus both explicit and implicit costs defines a firm's

profit

"Market power" refers to a firm's ability to

raise its price without losing all of its sales

Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will

shift into producing good Y

Economies of scale exist when

the average cost of production falls as output rises

For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. If the market consists of 50 identical sellers, each with the same opportunity cost as the seller depicted in the figure, then how many units would be supplied in the market at a price of $14 per unit?

17,500

A technological innovation that reduces a firm's cost of producing additional units of output will lead to

an increase in the firm's supply

As price increases, firms in a perfectly competitive market find that it is

beneficial to produce more units of output.

Price discrimination means charging

different prices to different buyers for essentially the same good or service

According to the textbook, the most important and enduring sources of market power are

economies of scale

Patents, which confer market power, are intended to

encourage innovation by helping firms recoup the costs of research and development

A perfectly price discriminating monopolist charges each buyer

exactly his or her reservation price

Individual supply curves generally slope ______ because ______.

upward; of increasing opportunity costs