UNL ECON 212 FINAL

If marginal cost is below average variable cost: Average variable cost is less than average fixed cost Both average total cost and average variable cost are increasing Average total cost is increasing but average variable cost is decreasing Both average total cost and average variable cost are decreasing

Both average total cost and average variable cost are decreasing

Marginal cost can be defined as the:

Change in total cost resulting from one more unit of production

The phrase "don't cry over spilt milk" could be rephrased in economic terms by saying:

"sunk costs are irrelevant to a decision"

At an output level of 50 units per day a firm has average total costs of $60 and average variable costs of $35. Its total fixed costs are:

$1,250 (50x60)-(50x35)

Refer to the above table for Nina. What is the change in total revenue if she lowers the price from $20 to $18?

$30 chug this

four characteristics that define a purely competitive market

1) A large # of independent sellers produce the product, so decisions of one firm have NO effect on competitors 2) Goods produced by all of the firms are identical, so consumers do NOT care which firm's product they buy 3) Perfectly competitive firms are PRICE TAKERS, meaning that they have NO control over the product price; they must accept the price set in the market 4) Firms can freely enter/exit the industry w/out significant barriers to entry

A monopolist sells 6 units of a product per day at a unit price of $15. If it lowers price to $14, its total revenue increases by $22. This implies that its sales quantity increases by: 1 unit per day 2 units per day 4 units per day 3 units per day

2 units / a day

Linda sells 100 bottles of homemade ketchup for $10 each. The cost of the ingredients, the bottles, and the labels was $700. In addition, it took her 20 hours to make the ketchup and to do so she took time off from a job that paid her $20 per hour. Linda's accounting profit is _____________ while her economic profit is ___________

300, -100

If the minimum efficient scale (MES) in an industry is 20 percent of the total consumption of a product, how many MES plants could be supported profitably in that industry?

5

uppose that the paper clip industry is perfectly competitive. Also assume that the market price for paper clips is 2 cents per paper clip. The demand curve faced by each firm in the industry is:

A horizontal line at 2 cents per paper clip.

If economic profits in an industry are zero and implicit costs are greater than zero, then:

Accounting profits are greater than zero

The resource cost falls in a purely competitive industry. This change will result in a(n): Decrease in marginal cost for firms in the industry and a decrease in the industry supply curve Decrease in marginal cost for firms in the industry and an increase in the industry supply curve Increase in marginal cost at each output level for firms in the industry and an increase in the industry supply curve Increase in marginal cost for firms in the industry and an increase in the industry supply curve

Decrease in marginal cost for firms in the industry and an increase in the industry supply curve

Many economists agree that government should deal with monopolists on a case-by-case basis. Policy options include the following, except: If the monopoly is maximizing economic profits, the government should subsidize new firms to enter the industry If the monopoly is attained and maintained through anticompetitive behavior, the government can file a suit based on antitrust laws If the firm is a natural monopoly, the government may decide to regulate its prices and operations If the monopoly is subject, and vulnerable, to potential competition, the government can decide to leave it alone

If the monopoly is maximizing economic profits, the government should subsidize new firms to enter the industry

Which of the following statements about a competitive firm is correct? A competitive firm will produce in the short run so long as total receipts are sufficient to cover total fixed costs A competitive firm will close down in the short run whenever price is less than the minimum attainable average total cost In long-run equilibrium a competitive firm will produce at the point of minimum average costs To maximize profits a competitive firm should produce at that output at which total revenue is greatest

In long-run equilibrium a competitive firm will produce at the point of minimum average costs

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4.00 and the market price is $4.50. What should the firm do? Increase output if the minimum possible average variable cost is below $4.50 Decrease output if the minimum possible average variable cost is below $4.50 Shut down if the minimum possible average variable cost is below $4.50 Decrease output if the minimum possible average variable cost is above $4.50

Increase output if the minimum possible average variable cost is below $4.50

When total revenue declines as output expands, demand is: Perfectly elastic Perfectly inelastic Inelastic Elastic

Inelastic

The socially optimal price (P = MC) is socially optimal because:

It achieves allocative efficiency

Suppose that TC = $550, TVC = $500, and MC = $100. If the firm produces 10 units of output, then: AVC = MC AVC > MC AFC = AVC MC > AVC

MC > AVC

If it is possible for a perfectly competitive firm to do better financially by producing rather than shutting down, then it should produce the amount of output at which:

MR = MC.

Which is necessarily true for a purely competitive firm in short-run equilibrium? Total revenue minus total cost equals zero Marginal revenue is zero Marginal revenue minus marginal cost equals zero Price minus average total cost equals zero

Marginal revenue minus marginal cost equals zero

In a purely competitive industry, an optimal allocation of scarce resources occurs when: MR = MC P = MC TR = TC P = AC

P=MC

n an oligopoly, each firm's share of the total market is typically determined by:

Product development and advertising.

In which industry is monopolistic competition most likely to be found? Retail trade Agriculture Utilities Mining

retail trade

Suppose that the corn market is purely competitive. If the corn farmers are currently earning negative economic profits, then we would expect that in the long run the market's: Supply curve will shift to the left Demand curve will shift to the right Demand curve will shift to the left Supply curve will shift to the right

Supply curve will shift to the left

A purely competitive firm whose goal is to maximize profit will choose to produce the amount of output at which:

TR exceeds TC by as much as possible

Suppose a firm sells its product at a price lower than the opportunity cost of the inputs used to produce it. Which of the following statements is definitely true? The firm may earn positive accounting profits, but will face economic losses The firm will face an accounting loss, but earn positive economic profits The firm will earn positive accounting and economic profits The firm will face accounting and economic losses

The firm may earn positive accounting profits, but will face economic losses

Which of the following statements is false? In the long run, all inputs can vary In the long run, firms would not continue operating at a loss The short run refers to a period of less than one year Firms may continue operating at a loss in the short run

The short run refers to a period of less than one year

The law of diminishing returns explains why: Total cost eventually rises more and more slowly Total cost eventually reaches a maximum point Total cost eventually falls Total cost eventually rises faster and faster

Total cost eventually rises faster and faster

One feature of pure monopoly is that the firm is: A price taker A producer of products with close substitutes One of several producers of a product A price maker

a price maker

A profit-maximizing firm in the short run will expand output: As long as marginal revenue is greater than marginal cost Until marginal cost begins to rise Until marginal cost equals average variable cost Until total revenue equals total cost

as long as the marginal revenue is greater than marginal cost

Monopolistic competitive firms are productively inefficient because production occurs where: Price is greater than marginal revenue Average total cost is not at its lowest Marginal cost is less than price Marginal cost is not at its lowest

average total cost is not at its lowest

A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than: Marginal cost Average variable cost Average fixed cost Average total cos

average variable cost

In long-run equilibrium under pure competition, all firms will produce at minimum:' Marginal cost Average variable cost Average total cost Total cost

average variable cost

Collusion among oligopolistic firms: Becomes easier during a recession when sales are falling Becomes more difficult if the firms all have different cost and demand curves Becomes more difficult if there were fewer firms in the group Is common in world markets, but does not happen in the U.S.

becomes more difficult if the firms all have different cost and demand curves

Possible reasons for X-inefficiency include the following, except: Costs of materials may be rising due to tight supply conditions Workers may be poorly motivated or poorly supervised The firm may be lethargic due to the absence of competition Managers may have other goals besides maximizing profits

costs of materials may be rising due to tight supply conditions

a technology improvement in an industry shifts the supply curve

down

An industry that has increasing returns to scale and fixed factor prices will have a long-run supply curve that is: Horizontal Downward-sloping Vertical Upward-sloping

downward sloping

Suppose that as the output of mobile phones increases, the cost of touch screens and other component parts decreases. If the mobile phone industry features pure competition, we would expect the long-run supply curve for mobile phones to be:

downward sloping

The long-run supply curve under pure competition will be: Downward-sloping in a decreasing-cost industry and upward-sloping in an increasing-cost industry Upward-sloping in an increasing-cost industry and vertical in a constant-cost industry Vertical in a constant-cost industry and upward-sloping in a decreasing-cost industry Horizontal in a constant-cost industry and downward-sloping in an increasing-cost industry

downward sloping in a decreasing-cost industry and upward -sloping m in an increasing cost industry

The long-run supply curve under pure competition will be: Downward-sloping in a decreasing-cost industry and upward-sloping in an increasing-cost industry Upward-sloping in an increasing-cost industry and vertical in a constant-cost industry Vertical in a constant-cost industry and upward-sloping in a decreasing-cost industry Horizontal in a constant-cost industry and downward-sloping in an increasing-cost industry

downward-sloping in a decreasing-cost industry and upward-sloping in an increasing cost industry

When there is allocative efficiency in a purely competitive market for a product, the minimum price producers are willing to accept is: Equal to the maximum price consumers are willing to pay Less than marginal benefit Equal to the amount of efficiency or deadweight losses greater than marginal cost

equal to the maximum price consumers are willing to pay

implicit or explicit? salary payments, lease payments

explicit

implicit or explicit? foregone rent on offices used, value of business owners time

implicit

The increased use of plastic bags instead of paper bags in grocery stores and retail shops is an example of: Covert collusion Import competition Overt collusion Interindustry competition

interindustry competition

A patent gives a firm the power to charge a price that: Is higher than marginal cost Is below equilibrium Increases the consumer surplus Results in overproduction of a product

is higher than marginal cost

Which is true of pure competition but not of monopolistic competition? Long-run economic profits are zero There are no significant barriers to entry There are a large number of firms in the market Long-run equilibrium occurs at the minimum point on the ATC curve

long-run equilibrium occurs at the minimum point on the ATC curve

A perfectly competitive firm that makes car batteries has a fixed cost of $10,000 per month. The market price at which it can sell its output is $100 per battery. The firm's minimum AVC is $105 per battery. The firm is currently producing 500 batteries a month (the output level at which MR = MC). This firm is making a _____________ and should _______________ production.

loss; shut down correct

Over the range of output where the slope of the short-run total cost curve becomes steeper:

marginal cost is increasing

For which market model can we not assume a homogeneous product? Pure competition Pure monopoly Oligopoly Monopolistic competition

monopolistic competition

a firm Is a ________ when it is the only firm in the industry

monopoly

These include holding patents that legally prevent any other firm from duplicating its products, having economies of scale that allow the firm to produce at a lower cost than potential rivals, and enjoying government licenses that make it the sole legal producer of a product in a given area.

monopolys

how often do perfectly competitive firms engage in price discrimination?

never

The supply curve for a monopoly is: The portion of the marginal cost curve that lies above the average total cost curve The portion of the marginal cost curve that lies above the average variable cost curve The portion of the marginal cost curve that lies above the average fixed cost curve Not clearly defined

not clearly defined

The data below relate to a pure monopolist and the product it produces. What is the profit-maximizing output and price for this monopolist? chegg this

ok

________ industries feature markets dominated by a FEW LARGE PRODUCERS that engage in STRATEGIC BEWHAVIORr. These firms may sell homogeneous or differentiated products.

oligopoly

implicit cost is also known as ______ cost

opportunity

In pure competition, if the market price of the product is initially higher than the minimum average cost of the firms, then: Other firms will enter the industry and the industry supply will increase Other firms will enter the industry and the industry supply will decrease Some firms will exit the industry and the industry supply will decrease Some firms will exit the industry and the industry supply will increase

other firms will enter the industry and the industry supply will increase

If a purely competitive firm is facing a situation where the price of its product is lower than the average cost, then all of the following applies, except: The firm may be earning some accounting profits, but less than what it could earn elsewhere The firm is suffering losses, and if things are not expected to improve, the firm will leave the industry Other firms will want to enter the industry because of the positive economic profits The firm may earn economic profits in the long run if it expands its plant in order to exploit economies of scale.

other firms will want to enter the industry because of the positive economic profits

supply will shift ________ if costs decrease and will shift _______ if they increase.

outward, inward

Which of the following is a barrier to entry? Diminishing marginal returns Buyers' incomes Close substitutes Patents and licenses

patents and licenses

In an oligopoly, producers' agreements to restrict output tend to be unstable because each firm has an incentive to: Establish competitive price and output levels Lower both its price and its output Produce more than its output quota Raise its price above the cooperative price

produce more than its output quota

At equilibrium, the profit-maximizing monopolist facing the situation shown in the graph will face a negative: Total revenue Profit Average revenue Marginal revenue

profit

Which of the following is not a barrier to entry in an industry? Government licensing Profit maximization Economies of scale Strategic pricing

profit maximizing

If a firm has at least some control over the price of its product, then the firm cannot be in which market model: Pure competition Monopolistic competition Pure monopoly Oligopoly

pure competition

What are these characteristics of? (1) a large number of small firms, (2) identical products sold by all firms, (3) perfect resource mobility or the freedom of entry into and exit out of the industry 4) perfect knowledge of prices and technology.

pure competition

what are the four market models?

pure competition, monopolistic competition, oligopoly, and pure monopoly

Consider an oligopoly industry whose firms have identical demand and cost conditions. If the firms decide to collude, then they will want to collectively produce the amount of output that would be produced by:

pure monopolist

Which of the following is a characteristic of monopolistic competition? Absence of nonprice competition Relatively easy entry Standardized product A relatively small number of firms

relatively easy entry

explicit costs are payments made to _______ (land, labor, capital)

resources

A long-run supply curve that is downward-sloping indicates that the firms' ATC curves: Shift up when the industry expands Shift down when the industry contracts Do not shift when the industry contracts Shift down when the industry expands

shift down when the industry expands

What are the 3 assumptions of monopoly market?

single firm, unique product, and barriers to entry

T/f monopoly demand=industry demand

t

t/f A constant cost industry is one whose long run supply curve is horizontal at the constant (average) cost of production

t

what is the demand from the pure competitors viewpoint?

the individual firm will view its demand as perfectly elastic - the demand curve is not perfectly elastic for the industry; it only appears that way to the individual firm, since they must take the market price no matter what quantity they produce. -a perfectly elastic demand curve is horizontal line at the price - average revenue is the price per unit for each firm in pure competition -total revenue is the price multiplied by the quantity sold -marginal revenue is the change in total revenue and will also equal the unit price in conditions of pure competition.

In the context of analyzing economic efficiency, we can interpret the market demand curve to be showing: The average variable cost of producing the product The average cost of producing the product at each output level The marginal revenue from extra each unit of the product The marginal benefit that consumers place on each unit of the product

the marginal b benefit that consumers place o each unit of the product

All of the following statements apply to a purely competitive market in the long run, except: Total fixed costs remain constant even when output expands in the long run In the long run, all inputs are variable in quantity Firms can expand their plant capacities in the long run Firms may enter or leave the industry in the long run

total fixed costs remain constant even when output expands in the long run

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if: Average cost is greater than average revenue Marginal cost is greater than average revenue Average fixed cost is greater than average revenue Total revenue is less than total variable cost

total revenue is less than total variable cost

Average revenue is conceptually equivalent to the: Unit price of the product Marginal cost of the product Average cost of the product Marginal revenue of the product

unit price of the product