Midterm Exam 2

A price-taking firm makes air conditioners. The market price of one of its new air conditioners is $120. The firm's total cost information is given in the table below 1-100 2-150 3-220 4-310 5-405 6-510 7-650 How man air conditioners should the firm produce per day if its goal is to maximize its profit?

6 units

Which of the following is a characteristic of a monopoly but not a characteristic of a competitive market?

A producer in a monopoly may earn long-run economic profits

The combination of Good X and Good Y that will maximize your utility will have which of the following properties?

MU MU _____x_ = ______y_ P P x y

The profit-maximizing rule for a monopolist is

Marginal revenue = marginal cost.

At the current level of output, the following data exists: price=$20 marginal cost=$6 average variable cost=$10 average total cost=$13 What must be true at this level of output for a perfectly competitive firm?

The firm should shut down

In the figure, which region represents the consumer surplus?

area B

In the figure which are represents the producer surplus?

area C

A firm's economic profit is always less than its accounting profit because

economic profit considers implicit costs, which accounting profit does not

A firm characterized as a price-taker

has no control over the price it pays, or receives, in the market.

Diminishing marginal utility

occurs when the additional utility for each good declines as consumption increases

In the short run, under what conditions should the firm shut down?

price less than average variable cost

Maximizing utility

requires that consumers get the most satisfaction out of every dollar they spend

Like a pure monopoly, an oligopoly is characterized by

significant barriers to entry