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The most important goal of the firm is to
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maximize its profits
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An implicit cost is an opportunity cost that
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requires no actual payment of cash
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The owner of a proprietorship might decide to incorporate the firm as a corporation in order to
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gain limited liability
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An example of a variable resource in the short run is
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an employee
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The law of diminishing marginal returns says that
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as the firm uses more of a variable, with a given quantity of fixed inputs, the marginal product of the variable input eventually dimishes
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When long-run average costs decrease as output increases, there are
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economies of scale
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In perfect competition, restrictions on entry into an industry
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do not exist
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In perfect competition, each individual firm faces
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a perfectly elastic demand curve
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In perfect competition, the marginal revenue of an individual firm
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equals the price of the product
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When Sidney's Sweaters Inc makes exactly zero economic profit, Sidney
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makes an income equal to his best alternative forgone income
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A firm will expand the amount of output it produces as long as its
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marginal revenue exceeds its marginal cost
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In the short run, a firm will produce and incur an economic loss if...
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its total revenue covers its total variable cost but not its total cost
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Monopolies...
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are the only producers of a good, have barriers to entry and exit, and have no close substitutes
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A single-price monopoly charges the same price
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to all its customers
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Selling a lower price to an on campus student than an off campus student is...
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price discrimination
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For a single-price monopoly, marginal revenue is ________ when demand is elastic and is ________ when demand is inelastic.
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positive; negative
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An unregulated monopoly will produce in...
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the elastic range of its demand curve
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A single price monopolist will find when it produces its profit-maximizing amount of output that the relationship between MR, MC, and price is...
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MR=MC and Price exceeds MR and MC
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A single-price monopoly creates a deadweight loss because it
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restricts output
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Profit maximizing perfectly competitive firm produces where
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P=MC
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Profit maximizing single price monopolist firm produces where
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MR=MC
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In comparison with a perfect competition, a single price monopolist with the same costs creates a
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smaller consumer surplus and earns a larger economic profit
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In monopolist competition, when firms make an economic profit, firms enter the market. As a result,
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the market price falls and economic profit increases
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In the long run, a monopolistically competitive firm's price equal
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its average total cost but not its marginal cost
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If a monopolistically competitive firm's marginal cost curve shifts upward (left), then the amount of output it produces
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decreases
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What is a characteristic of an oligopoly, but not of monopolistic competition
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The choices made by one firm have a significant effect on other firms
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