Microeconomics test 2
C
Average fixed cost is: A. Constant at all levels of output B. Less than marginal cost when marginal cost if falling and greater than marginal cost when marginal cost is rising C. The difference between average variable cost and average total cost D. Is the difference between average variable cost and marginal cost
The average variable cost is minimized
When marginal cost equals average variable cost then _________
Marginal cost is less
When the average total costs is falling, the ________ than the average total cost.
D
Which of the following is not a characteristic of pure competition? A. Each firm is a price taker whose demand is infinitely elastic B. There are a large number of firms in the industry C. New firms are free to enter the market D. Each firm's product is differentiated from the other firm's product
A
Which of the following is not equal to price for a purely competitive firm in the long run equilibrium? A. Average variable cost B. Average total cost C. Marginal cost D. Marginal revenue
Economies of scale
If average total costs are falling the firm is experiencing __________
C
1. When marginal cost is equal to average total cost: A. Marginal revenue equals marginal cost B. Profits are equal to zero C. Average total cost is minimized D. Demand is infinitely elastic
MR=MC
If we define profit maximization as the output level that produces the greatest difference between total revenue and total cost, the profit will be maximized where?
C
A purely competitive firm's supply curve follows the upward sloping portion of its marginal cost curve: A. For all levels of output B. So long as marginal cost is above average total cost C. So long as marginal cost is above average variable cost D. So long as marginal cost is above average fixed cost
price
For a firm in a purely competitive labor market, marginal revenue always equals ________
C
If a firm wishes to know whether it should increase or decrease production, it should look only at its: A. Overhead cost and total revenue B. Marginal cost and price C. Marginal cost and marginal revenue D. Marginal revenue and price
E
If a purely competitive firm faces a price that is above average total cost where MR=MC, then A. New firms will enter the market B. They will be making an economic profit C. Marginal revenue will be greater than average total cost D. Price is above average variable cost E. All of the above
A
If a purely competitive firm is currently producing at a level of output where marginal revenue is greater than marginal cost, in order to maximize profits the firm should: A. Increase production B. Decrease production C. Lower the price in order to sell more units of output D. Raise the price in order to cover variable costs
Long run equilibrium
If a purely competitive firm is producing at a level of output where MR=MC= ATC then firms are at the _________
B
In the long run equilibrium, a monopolistically competitive firm is likely to produce the output A. Where price equals marginal revenue B. Where price equals average total cost C. Where price equals marginal cost D. Where price equals average variable cost
C
In the long run equilibrium, all firms in pure competition will produce at the point where A. Marginal cost is minimized B. Marginal cost equals average variable cost C. Marginal cost equal marginal revenue D. Marginal cost equals average fixed cost
D
Pure competition and monopolistic competition are similar in that: A. It is easy to get in and out of the market B. They both produce where MR=MC C. They both can minimize their loss by producing where MR=MC D. All of the above are true
MR=MC
New firms will enter a market when _______
That it does not provide an incentive for the monopolist to reduce it cost
One problem with regulating a monopolist on the basis of cost is_____
Supply curve
That section of the marginal cost curve above average variable cost is the firms _______
A
The average total cost curve: A. Shows the cost per unit of output B. Rises first then diminishes C. Shows the change in total cost that results from producing one more unit of output D. Falls when marginal product falls and rises then marginal product rises
Marginal cost
The cost to produce an additional unit of output is the firm's________
Perfectly elastic
The demand curve for an individual firm in a purely competitive market is ______
C
The difference between the average variable cost curve and the average total cost curve is A. Marginal cost B. Marginal revenue C. Average fixed costs D. Profit E. None of the above
B
The marginal revenue curve of a pure monopolist will A. Increase at a faster rate than price because marginal revenue is always greater than the price B. Decrease at a faster rate than price because and reduction in price applies to all units sold C. Increase at a faster rate than price because any reduction in price applies to all units sold D. Lie above the demand curve
A
Which of the following is not true for a monopolistically competitive firm? A. The firm will minimize losses by producing the output where MR=MC when the price falls below average variable cost B. The firms MC curve above the average variable cost curve is its supply curve C. It will maximize profits by producing where MR=MC D. If the price of the product is above average total cost the the firm will be making and economic profit
D
Which of the following is true for monopolistically competitive firms in the long run equilibrium? A. P = MR B. P = MC C. MC = ATC D. ATC = P