question
incidence of a tax
answer
inelastic pays more
paid by the consumers is higher if demand for the good is inelastic and supply is elastic
question
profit maximizing rule
answer
MR=MC
question
elastic
answer
opposite effect
increase price, decrease TR
question
inelastic
answer
same way
increase price, increase TR
question
zero economic profit if
answer
ATC = demand
(in monopolisitic competition)
question
monopolies are inefficient because
answer
price > MC
question
shut down rule (short run only)
answer
price or MR < AVC
question
shut down rule (long run)
answer
keep operating only if price covers at least average total cost
question
TR maximizing quantity
answer
MR crosses x-axis
question
socially optimal quantity
answer
MC = D
question
quantity with NO economic profit
answer
ATC = D
question
per unit tax makes
answer
MC go up
question
lump sum tax
answer
profits decrease, ATC moves UP along MC
question
MR > MC
answer
increase Q
question
MC > MR
answer
decrease Q
question
allocative efficiency test
answer
P=MC
question
productive efficiency test
answer
P= minimum ATC
question
lump sum subsidy
answer
only profit increases
question
in a monopoly, P >
answer
P > MR and MC
question
in a monopoly, if MR is positive
answer
TR increases if you increase price
demand is elastic
question
opportunity cost (input)
answer
same over other
question
opportunity cost (output)
answer
other over same
question
MC and MP (short run)
answer
if MC increases, MP decreased
question
monopolistic competitive firm in long run equilibrium
answer
zero economic profits, P> MC
question
short run supply curve in perfect competition
answer
MC > AVC
question
midpt elasticity
answer
change in quantity/ change in price )( price average/ quantity average
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