exam two

Economics 1023 with Nene at University of Minnesota - Duluth

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By: Marissa Aasgaard
Created: 2011-11-14
Size: 95 flashcards
Views: 104

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a firm will maximize profits at the point where

marginal revenue is zero

Which is necessarily true for a purely competitive firm in short-run equilibrium?

Marginal revenue less marginal cost equals zero

A purely competitive firm's output is currently such that its marginal cost is $4 and marginal revenue is $5. Assuming profit maximization, the firm should:

leave price unchanged and raise output

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1,000 units is $2.50. The minimum possible average variable cost is $2.00. The market price of the product is $2.50. To maximize profit or minimize losses, the firm should:

continue producing 1000 units

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 800 units is $3.50. The minimum possible average variable cost is $3.00. The market price of the product is $4.00. To maximize profit or minimize losses, the firm should:

produce more than 800 units

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 500 units is $1.50. The minimum possible average variable cost is $1.00. The market price of the product is $1.25. To maximize profit or minimize losses, the firm should:

produce less than 500 units

In the short run the individual competitive firm's supply curve is the segment of the:

marginal cost curve lying above the average variable cost curve.

If a purely competitive firm shuts down in the short run:

it will realize a loss equal to its total fixed costs.

The representative firm in a purely competitive industry:

Will earn an economic profit of zero in the long run

If firms enter a purely competitive industry, then in the long run this change will shift the industry:

Supply curve to the right, and the market price will decrease

The long-run supply curve under pure competition will be

Downsloping in a decreasing-cost industry and upsloping in an increasing-cost industry

Productive efficiency refers to:

Cost minimization, where P = minimum ATC

Allocative efficiency occurs when the:

Marginal cost equals the marginal benefit to society

Along the purely competitive firm's demand curve, average revenue is equal to marginal revenue.

true

Market failure occurs when

the competitive market system under-or overallocates resources to production of goods

From the economist's perspective, "market failures" basically arise when

demand and supply do not accurately reflect all the benefits and all the costs of production

Which of the following is most likely to be a private good

bike

If an economy is being "productively efficient," then that means the economy is:

using the least costly production techniques.

What are the two characteristics that differentiate public goods from private goods?

nonrivalry and nonexcludability

Once a government has provided a public good, everyone

can obtain the benefit

Because of free riders, the demand for a public good:

does not get expressed in the market, and the good does not get produced by private sellers.

a public good

can't be provided to one person without making it available to others as well

Which of the following statements is correct about measuring collective demand for public and private goods

Private good demand is found by horizontally adding individual demand curves; public good demand is found by vertically adding individual demand curves.

When the production of a product creates external costs greater than external benefits, a market is:

allocating too many resources to production of the product.

In a free-market economy, a product which entails a spillover benefit will be:

underprotected

If some activity creates positive externalities as well as private benefits, then economic theory suggests that the activity ought to be

subsidized

When external or spillover benefits occur in the production of a particular product, the private market tends to provide

too little of the product

One condition for individual bargaining to occur, according to the Coase theorem, is that there must be:

clearly defined property rights.

To internalize the external costs of pollution is to

make the polluter pay all of the costs associated with the polluting activity.

An emission fee levied against polluters will tend to:

internalize the external cost of pollution.

A market for pollution rights can be expected to

provide potential polluters with a monetary incentive to reduce emissions.

From an economist's point of view, costs:

may or may not involve monetary outlays.

Implicit and explicit costs are different in that

the former refer to non-expenditure costs and the latter to out-of-pocket costs

implicit costs are

non-expenditure costs.

Accounting profits are typically:

greater than economic profits because the former do not take implicit costs into account.

Economic profits are calculated by subtracting:

explicit and implicit costs from total revenue.

Which of the following definitions is correct?

Economic profit = accounting profit - implicit costs

The basic characteristic of the short run is that:

the firm does not have sufficient time to change the size of its plant.

To economists, the main difference between the short run and the long run is that:

in the long run all resources are variable, while in the short run at least one resource is fixed

The long run is characterized by:

the ability of the firm to change its plant size.

marginal product is

the increase in total output attributable to the employment of one more worker.

The law of diminishing returns indicates that:

as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

marginal product

may initially increase, then diminish, and ultimately become negative.

The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product respectively. Therefore, the:

marginal product of the third worker is 9

When total product is increasing at an increasing rate, marginal product is:

prositve and increasing

fixed cost is

any cost which does not change when the firm changes its output.

If you operated a small bakery, which of the following would be a variable cost in the short run?

baking supplies. (flour, salt)

marginal cost is

change in total cost that results from producing one more unit of output.

average fixed cost

declines continually as output increases.

If a firm decides to produce no output in the short run, its costs will be:

its fixed costs

In comparing the changes in TVC and TC associated with an additional unit of output, we find that:

the changes in TC and TVC are equal.

Average fixed costs can be determined graphically by

the vertical distance between ATC and AVC.

The vertical distance between the total cost and the total variable cost curves differs by an amount which:

is constant as output changes.

If a profitable firm's fixed costs somehow were zero:

AVC and ATC would coincide.

Total cost minus total variable cost equals:

total fixed cost

Suppose that, when producing 10 units of output, a firm's AVC is $22, its AFC is $5, and its MC is $30. This:

firms total cost is $270

If a technological advance increases a firm's labor productivity, we would expect its:

average total cost to fall

Economies and diseconomies of scale explain:

why the firm's long-run average total cost curve is U-shaped.

The ability of Intel to spread product development costs over a larger number of units of output arises from:

economies of sale

Which of the following is not a source of economies of scale?

inelastic resource supply curves

When a firm does more of something, it gets better at it. This learning-by-doing is:

a source of economies of sale

Economies of scale are indicated by:

the declining segment of the long-run average total cost curve

The minimum efficient scale of a firm:

is the smallest level of output at which long-run average total cost is minimized.

Diseconomies of scale arise primarily because:

the difficulties involved in managing and coordinating a large business enterprise.

The long-run average total cost curve:

indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size

Diseconomies of scale mean that:

a firm's long-run average total cost curve is rising.

Which is most characteristic of a pure monopoly?

The firm produces a good or a service for which there are no close substitutes

Under conditions of pure monopoly

entry is blocked

which is a barrier to entry

patents

The demand curve confronting a nondiscriminating pure monopolist is

The same as the industry's demand curve

Under pure monopoly, a profit-maximizing firm will produce:

In the elastic range of its demand curve

If a monopolist is operating at an output level where marginal revenue is positive, the firm:

Is operating on the elastic portion of its demand curve

Which is true with respect to the demand data confronting a monopolist?

Marginal revenue is less than price

Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by:

marginal cost=marginal revenue

pure monopolists

Sell where P > MC

Allocative inefficiency due to unregulated monopoly is characterized by the condition:

P> MC

When compared with the purely competitive industry with identical costs of production, a monopolist will produce:

Less output and charge a higher price

At an equilibrium level of output in a pure monopoly:

P > MC and P > minimum ATC

Assume the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures as:

rent seeking

Which would be evidence of price discrimination at a local bar called the Stabilizer?

Charging lower prices to customers wearing Stabilizer T-shirts

Which would definitely not be an example of price discrimination?

An electric power company charges less for electricity used during off-peak hours when production costs are lower

Which of the following conditions is not required for price discrimination?

Buyer with different elasticities must be physically separate from each other.

The practice of price discrimination is associated with pure monopoly because:

monopolists have considerable ability to control output and price.

A monopolist will always charge the highest price it can get.

false

A monopolist seeks maximum unit profits.

flase

In a monopoly, price is greater than marginal cost.

true

In a monopoly, price is less than minimum average total cost.

false

One of the economic effects of monopoly is income inequality.

true

Rent-seeking behavior refers to activities designed to transfer income or wealth to a particular firm or resource supplier at someone else's or society's expense.

true

Price discrimination is not viable if consumers can resell the products they purchase.

true

Without regulations, monopolists will produce at an output level where marginal benefit is greater than marginal social cost.

true

Which is not a required characteristic of a purely competitive industry?

industry demand is highly elastic

The demand curve faced by a purely competitive firm:

Is one where average revenue equals marginal revenue

Total revenue for producing 8 units of output is $48. Total revenue for producing 9 units of output is $63. Given this information, the:

Marginal revenue for producing the ninth unit is $15

A profit-maximizing firm in the short run will expand output:

As long as marginal revenue is greater than marginal cost

About this deck

By: Marissa Aasgaard
Created: 2011-11-14
Size: 95 flashcards
Views: 104

About StudyBlue

“Simply amazing. The flash cards are smooth, there are many different types of studying tools, and there is a great search engine. I praise you on the awesomeness.”
Dennis