MicroEcon 247 Practice Final Exam Part 3 (units 6 to 10)
When a single firm can supply a product to an entire market at a smaller cost than could two or more firms, what is the industry called?
A natural monopoly
What is the profit-maximizing price for monopoly firms?
A price that exceeds marginal cost.
What was discovered in the case study about Canada Goose, the Canadian maker of outdoor apparel?
Advertising helps differentiate a product from that of the competition.
The process of buying a good in one market at a low cost and selling the good in another market for a higher cost in order to profit from the price difference is called
Arbitrage
In an oligopoly market,
As the number of firms increases, the market approaches a competitive market equilibrium.
Variable cost divided by quantity produced equals
Average variable cost.
As a general rule, when accountants calculate profit, they account for explicit costs. What do they usually ignore?
Implicit costs
On what grounds is the practice of tying illegal?
It allows firms to expand their market power.
Why is the prisoner's dilemma an important game to study?
It identifies the fundamental difficulty in maintaining cooperative agreements.
What do we know about a monopoly's marginal cost?
It will be less than the price per unit of its product.
A profit-maximizing firm in a competitive market produces small rubber balls. When the market price for small rubber balls falls below the minimum of its average total cost but still lies above the minimum of average variable cost, what happens to the firm?
It will experience losses, but it will continue to produce rubber balls.
Why are labour markets different from most other markets?
Labour demand is derived.
A characterization that typically applies to monopolistically competitive firms?
Many firms selling products that are similar but not identical
Which expression is correct for a competitive firm?
Marginal revenue = change in total revenue divided by change in the quantity of output.
At the profit-maximizing level of output, which equation is correct?
Marginal revenue = marginal cost
What will happen if firms in a monopolistically competitive market are earning positive profits?
New firms will enter the market
Ignoring oligopoly and focusing on the other three types of market structure, in which of those market structures does a profit-maximizing firm experience a zero economic profit?
Perfect competition and monopolistic competition
When a market is monopolistically competitive, what is the typical firm in the market likely to experience in the short run and in the long run?
Positive or negative profit in the short run and a zero profit in the long run.
Which of the following situations is *least likely* to apply to a monopolistically competitive firm?
Profit is positive in the long run.
What may antitrust laws do?
Restrict the ability of firms to merge.
The value of the marginal product of labour is equal to
The change in total revenue caused by the addition of the last worker.
When a firm is making a profit-maximizing production decision, which principle of economics is relevant to the firm's decision?
The cost of something is what you give up to get it.
What is the marginal product of an input in the production process?
The increase in quantity of output obtained from an additional unit of that input.
What does a firm's labour-demand curve represent?
The number of workers that the firm is willing to hire at any given wage.
In a competitive market, a firm's supply curve dictates the amount it will supply. How does a monopoly market compare?
The supply curve does not exist.
Which of the following is most closely linked to a household member's decision on how much labour to supply?
The trade-off between leisure and work.
When we focus on the firm as a supplier of a good or service, we assume that the firm is a profit maximizer. When we focus on the firm as a demander of labour, what do we assume the firm's objective to be?
To maximize profit.
When some resources used in production are available only in limited quantities, what is the likely shape of the long-run supply curve in a competitive market?
Upward sloping
If marginal cost is rising,
marginal product must be falling
The efficient scale of a firm is the quantity of output that
minimizes average total cost
