Econ Test #2
A perfectly competitive firm is producing 50 units of output and selling at the market price of 23. the firms average total cost is 20. what is the firms total cost?
$1,000
The square of the percentage market share of each firm summed over the 50 largest firms in a market is the
Herfindahl-Hirschman Index
in a monopoly, produces ______ and consumers ______.
gain; lose
A perfectly competitive firm definitely earns an economic profit in the short run if price is
greater that average total cost
the good produced by a monopoly
has no close substitutes
in the long run, a firm in monopolistic competition ______ a markup of price over marginal cost and a firm in perfect competition ______ a markup of price over MC
has; does not have
In the short run, a perfectly competitive firm ______ earn an economic profit and _____ incur an economic loss
might; might
if the HHI for the widget industry is 1200, then the market structure is
monopolisitic competititon
If the Herfindahl - Hirschman Index in the market for single - use equals, 10,000, then single -- use camera industry is best characterized as
monopoly
Two types of barriers to entry are called ____ barriers to entry and _____ barriers to entry
natural; legal
if firms in a monopolistic competition are earning economic profits, eventually
new firms enter the industry
if perfectly competitive firms are making an economic profit then
new firms will enter the market
if firms in monopolistic competition are earning economic profits, then
new rivals enter the industry and the demand for any sellers good decreases
A ____ monopoly sells different units of its good or service for _____.
price--discriminating; different prices and single--price; the same price
each firm in a perfectly competitive industry ....
produces a good that is identical to that of the other firms
one of the major benefits to society of monopolistic competition
product differentiation
when new firms enter a perfectly competitive market, the market supply curve shifts _____ and the price _______.
rightwards; falls
Under earnings - sharing regulation , if a firms profits ___ above a certain level, they must be shared with the firm's _____
rise; customers
A natural monopoly exists when
one firm can supply an entire market at a lower average total cost than can two or more firms
Monopoly
one supplier
Under which of the following is consumer surplus zero
only perfectly price-- discriminating monopoly
If a perfectly competitive firm is maximizing its profit and is earning an economic profit, then....
price equals MR MR = MC price is greater than ATC
Suppose Pat's Paints is a perfectly competitive firm. If Pat's Paints' marginal revenue equals $5 per can and Pat decides to sell 100 cans of paint, Pat's total revenue is...
$500
A perfectly competitive firm is producing 50 units of output and selling at the market price of 23. the firm's average total cost is 20. what is the firms economic profit
150.00
when of the following four - firm concentration ratios would be the best indication of a perfectly competitive industry
2 percent
if there are four firms in an industry with market shares of 50 percent, 40 percent, 5 percent, and 5 percent, the Herfindahl - Hirschman index is
4150
TR =
P x Q sold
to eliminate losses in a perfectly competitive market, firms exit the industry. this exit results in
a decrease in market supply
In order to price discriminate,
a firm must sell a good or service that cannot be resold
Compared to a perfectly competitive market, a single -- price monopoly sets
a higher price
what does monopolistic competition have in common with perfect competition
a large number of firms and freedom of entry and exit
if we compare a perfectly competitive market to a single -- price monopoly with the same costs, the monopoly sells
a smaller quantity at a higher price
if it does not shut down, a perfectly competitive firm produces where marginal cost is equal to the marginal revenue
always to maximize its profit
if the four -- firm concentration ratio for the market for diapers in 73 percent, then this industry is best characterized as
an oligopoly
Natural barriers to entry arise when, over the relevant range of output, there
are economies of scale
patents
are legal barrier to entry
if perfectly firms are earning an economic profit, the economic profit
attracts entry by more firms, which lowers the price
for a firm in monopolistic competition, the efficient scale is the amount of output at which _____ is a maximum
average total cost
A perfectly competitive firm should shut down in the short -- run if price falls below the minimum of
average variable costs
To be able to price discriminate, a firm must
be able to identify and separate different types of buyers
why can a monopoly make an economic profit in the long run
because the firm protected by barriers to entry
a differentiated product has
close but not perfect substitutes
A single- price monopoly transfers
consumer surplus to producers
compared to a similar perfectly competitive industry, a single -- price monopoly
creates a deadweight loss and decreases consumer surplus
when firms in a perfectly competitive market incur economic losses, exit by some firms means the market supply will
decrease
Firms exit a competitive market when they incur an economic loss. in the long run, this exit means that the economic losses of the surviving firms
decrease until they equal zero
when firms in monopolistic competition incur an economic loss, some firms will
exit the industry, and demand will increase for the firms that remain
if firms in a perfectly competitive market have economic losses, then as time passes firms _____ and the market _______.
exit; supply curve shifts leftward
with perfect price discrimination, the quantity of output produced by a monopoly is ____ the quantity produced by a perfectly competitive industry
equal to by NOT greater than
for a perfectly competitive firm, marginal revenue is
equal to the price
The marginal revenue curve for a perfectly competitive firm is
horizontal
Price cap regulation is defined as regulation that
imposes a price ceiling on the regulated firm
if new firms enter a perfectly competitive industry, the market supply
increases
if a perfectly competitive firm finds that price is less than its ATC, then the firm
is incurring an economic loss
when a firm is able to engage in perfect price discrimination, its marginal revenue curve
is the same as its demand curve.
with perfect price discrimination the level of output
is the same as the amount produced in a perfectly competitive market
a perfectly competitive firm's short --- run supply curve is
its marginal cost curve above the AVC curve
compared to a perfectly competitive industry, a single -- price monopoly purchase
less output
in the long run, firms in monopolistic competition produce at a level that is _____ the efficient scale of output
less than
in the long run, perfectly competitive firms will exit the market if the price is
less than average total costs
excess capacity exists when a firm produces
less than the quantity that minimizes ATC
A market is considered competitive if the Herfindahl Hirschman Index (HHI) is ______ and its four - firm concentration ratio is ______
low; low
in the long run in monopolistic competition, firms
make zero economic profit
Monopolistic competition is defined as a type of market structure in which
many firms produce the good
A firm in perfect competition is a price taker because
many other firms produce identical products
A firm maximizes its profit by producing the amount of output such that
marginal revenue equals marginal cost
The maximum profit for a single -- price monopoly is found when the firm produces the level of output so that
marginal revenue equals marginal cost
in monopolistic competition, the entry of new firms
shifts existing firms, demand curves leftward
in monopolistic competition, the products of different sellers are
similar but slightly different
The Herfindahl - Hirschman Index is the _____ of the percentage market share of each firm summed over the largest 50 firms in a market
square
The Herfindahl-Hirschman Index measures market concentration in an industry by summing the square of the percentage market squares for
the 50 largest firms
For a monopoly, marginal revenue is equal to
the change in TR brought about by a one -- unit increase in quantity sold
Marginal Revenue
the change in total revenue from a one-unit increase in the quantity sold
with perfect price discrimination _____, and production is expanded until MR =
the firms demand curve become its marginal revenue curve; marginal cost
rent seeking is the act of obtaining special treatment by ____ to create ___
the government; economic profit
IF a producer wants a monopoly with a legal barrier to entry how can this be done
the producer can spend funds lobbying to attain passage of the legal barrier to entry the producer can purchase an existing monopoly the producer can make rent seeking expenditures
If a perfectly competitive firm raised the price of its product
the quantity of output it sells decreases to zero
The price charged by a perfectly competitive firm is
the same as the market price.
One requirement for an industry to be perfectly competitive is that...
there are no restrictions on entry into or exit from the market
To maximize its profits in the short run a perfectly competitive firm decides
what quantity of output to produce
If a firm in a perfectly competitive market faces an equilibrium price of $5.00 its marginal revenue
will also be $5.00
A monopoly produces a product ____ and there _____ barriers to entry into the market
with no close substitutes ; are
The deadweight loss with perfect price discrimination is
zero
In the long run, a perfectly competitive firm earns
zero economic profit
