econ unit 1
the local department store used to be _____ before technological change
a monopoly
the technology or knowledge necessary for the production process is called
business know-how
if june can earn $1500 in revenue from painting two houses, how much can she earn in revenue from painting three houses ( assume she is just one painter in a large market of house painters, and that she can easily find a third customer)
exactly $2,250
business will generally shut down if they lose money for or two years
false
cost is what a business receives after subtracting expenses from revenue
false
the average product is calculated by dividing input by the number of hours worked
false
______ is the added revenue from producing and selling one more unit of output
marginal revenue
______ is the amount of money a company receives for selling its product or service
revenue
marginal revenue is the additional revenue a business gets from producing or selling one more unit of input
true
revenue is the money that customers pay for the output of a business
true
which of the following is most likely to be sold in a perfectly competitive market?
wheat
the profit maximizing rule says that a seller will expand output up to th point
where marginal revenue equals marginal cost
does the stock market resemble a perfect competitive market?
yes, the stock market does resemble a perfectly competitive market
if sara can produce 25 muffins for a cost of $15 but her production process is subject to increasing marginal costs which of the following could e the total cost of producting 100 muffins
$80
Microsoft two main products, Windows and Office could be examples of
a natural monopoly
inputs to production do NOT include
average product
output derived by the number of hours worked or by the number of workers is called
average product
the easiest way to have a monopoly today is to
have the government protect you
when a business have market power, they are able to charge a price higher than the price charged by a business perfect competition. thus the market power equilibrium on a diagram will be
higher and to the left of the perfect competition equilibrium
an example of variable cost is
hourly labor
_______ collusion can occur even when oligopolistic business do not directly communicate with each other
implicit
one strategy for long term profit maximization is
innovation
in a simple grass mowing business, the lawn mower and labor would be
inputs
what word describes the goods and services that are used to produce outputs for businesses?
inputs
the goods or services purchased by a business for immediate use in the production process are know as
intermediate inputs
ATT is an example of a business that used market power to
invest in important research benefiting society
theodore can make 6 pizzas in one hour. if theodore's labor has a diminishing marginal product what must be true about the number of pizzas that theodore can make in three hours?
it must be less then 18
inputs used by a business in the production process include
labor
the hours of work supplied by various types of workers are referred to by economists as
labor
the price of labor per unit time the amount of labor used is called
labor cost
the total cost of production is determined by adding which of the following costs?
labor, capital and land, intermediate inputs,and accumulating business know-how
an example of a barrier entry is
lack of key resource
fixed costs are also known as ______ cost because they are much harder for a business to change
long-term
which of the following is NOT an example to a barrier to entry
lower costs
marginal revenue is vernally ____ of businesses that do to operate under conditions of prefect competition
lower than the price
____ is the added cost to produce one more unit of output
marginal cost
in perfect competition a profit- maximizing business will expand unit its ______ equal the market price
marginal cost
the added expenses of producing one more unit of output is called the
marginal cost
the extra amount of output a business can generate by adding one more hour of labor is called
marginal product
the additional money a business gets from producing and selling one more unit of output is
marginal revenue
as the market price of a good rises, businesses will respond by producing one more of that good because
marginal revenue exceeds marginal cost after the price increase
a profit maximizing business will increase production as long as
marginal revenue exceeds marginal costs
______ is the ability to raise prices above the level perfect competition would produce by restricting the quantity supplied
market power
form WW2 to the early 1970s, GM ford and Chrysler enjoyed
market power
in perfect competition all businesses in a market produce at the point where ______ equals ________
market price; marginal cost
economists generally assume that the main goal of most businesses in the economy is to
maximize profit
a market where there is only one seller and buyers have no other alternative is called a(n)
monopoly
what happens to the marginal product of labor if more capital is added to a production business?
more capital generally causes the marginal product of labor to rise
a profit maximizing monopolist will always charge ____ a perfect competitor would
more than
a ______ monopoly is an industry in which it makes economic sense to have only one provider
natural
a good example of monopolistic competition is
neighborhood
a profitable business will attract
new competitors
in a simple lawn mowing business where you have a push mower and labor as input by adding an additional imps in the form of a gas self-propelled mower (capital) what would be the impact on output?
output would increase
average product is not as reliable an indicator of how a business is doing as it used to be because of
outsourcing labor
in the long run, monopolist competition starts to look like
perfect competition
the four main types of market structure are
perfect competition, monopolistic, oligopoly and monopoly
if music was perfectly competitive then all performers would
play the same music and charge the same price for concerts
in perfect competition P=MC means
price equals marginal cost
what is the economic process of turning inputs into outputs that a business will sell to customers?
production
economist think of a business as a machine, where you put inputs in one and get outputs from the other end. this metaphor is called the
production function
the ____ summarizes the output of the business given the level of inputs
production function
what is the difference between revenue and cost?
profit
the main objective of a business in a market economy is
profit maximisation
companies will often spend considerable amounts of money to create a ______ in regards to their brand name
reputation effect
what word describes the money that customers pay for the output of a business?
revenue
when a business expands production and increases sales, what generally happens to revenue?
revenus rises because the business is selling more output
marginal cost generally _____ quantity produced
rises with
in short run profit maximization business focus on the ____ holding fixed costs constant
short term cost function
variable cost are relevant for
short term everyday decision making
variable coast are also known as
short-term costs
if all of the restaurants in a small town collude and agreed to raise dinner prices this would lead to a loss of society because
some dinners that could be served are not
a business with market power may
sometimes use high profits to research new technologies
natural monopolies have been slowly eroded by
technological change
in perfect competition higher cost businesses
tend to go out of business if unable to adjust
market power is
the ability to raise prices about the prices that would exist under perfect competition
____ shows the potential cost for each level of output
the cost function
natural monopolies include
the local water company
a business can escape perfect competition by building a better more innovative product
true
a production function tells you, given the inputs, what the output will be
true
advertising a brand can help create a reputation effect
true
businesses have two types of costs: fixed and variable
true
in perfect competition a profit maximizing business will expand until its marginal equal the market price
true
in perfect competition if there are not berries to entry only the lowest cost businesses survive over the long run
true
in perfect competition, all buyers and sellers are price takers
true
marginal cost is the added expense of producing one more unit of output
true
the marginal product is the extra amount of output a firm can generate by adding one more hour r of labor ( or one more worker)
true
under the right circumstances competition could be a win-win proportions for companies and consumers
true
in a market with perfect competition give enough time and no barrier to entry profits will tend toward zero in the long run
ture
the difference between long term and short term profit maximization is that in the short term,
a business focus on achieving as much profit as they can, given the fact that fixed costs cannot be changed
monopolistic competition is characterized by
a larg number of sellers with a similar product
______ is paid communication with potential customers in a public medium such as newspapers and television
advertising
an example of an oligopoly is
airline industry
which of the following is an example of a profit maximizing business
an accountant who makes her living preparing tax returns for other people
an oligopoly occurs when there
are a few sellers in the market
monopolies are generally _____ technology and globilization
are reduced in number by
a _____ ia anything that might make it more difficult for a competitor to enter a market
barrier to entry
a ______ makes it more difficult for a competitor to enter a market
barrier to entry
the long lived physical equipment and structures that a business uses in its production process are called
capital
in the process of long term profit maximization the business makes decisions under the assumption that it can
cary all the inputs
if two drugstores in a market they will both sell fritos at a higher price and neither will undercut the other, this is called
collusion
if two or more oligopolistic companies work together to keep their prices hight and split the market between them, this is called
collusion
profit is the difference between reeve and
cost
what words describes the money that a business pays for its inputs?
cost
if you add too many inputs your business may experience
diminishing marginal product
many times, technology is ___ in the equipment a company buys
embodied
inputs for a business are the goods and services that it sells to its customers
false
marsha feilds and sterns departments stores are examples of low cost producers in a perfect competition market
false
outputs are always goods
false
perfect competition requires a nonstandard product
false
the short term cost function assumes that
fixed costs can't be changed