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a measurement of utility (happiness)
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In terms of microeconomic analysis, what is the function of "utils"?
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Increase or decrease by one unit
'A change in'
Additional or incremental
'A change in'
Additional or incremental
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"Marginal" means
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utility of demand
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The term _________________ refers to the additional utility provided by one additional unit of consumption.
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diminishing marginal utility
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The term ___________________ is used to describe the common pattern whereby each marginal unit of a consumed good provides less of an addition to utility than the previous unit.
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False
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T or F: Janet and Miguel probably have identical utility for the consumption of iPhones.
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summing (adding) the marginal utilities of each unit consumed.
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Economists are able to determine total utility by:
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-Used to illustrate why individuals consume specific amounts of different products - based on marginal utility and price
-A state of affairs in which a consumer cannot increase the total utility gained from a given budget by spending less on one good and more on another
-(MU Good A/ Price Good A) = (MU Good B/ Price Good B) = ... = (MU Good Z/ Price Good Z)
-A state of affairs in which a consumer cannot increase the total utility gained from a given budget by spending less on one good and more on another
-(MU Good A/ Price Good A) = (MU Good B/ Price Good B) = ... = (MU Good Z/ Price Good Z)
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The theory of Consumer Equilibrium is
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the marginal utility per dollar is the same for both goods (or for all goods purchased)
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Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found? (we have reached consumer equilibrium)
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explicit cost
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The rent for the store is an __________.
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explicit cost
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The cost for the delivery truck is an __________.
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implicit cost
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The sacrificed $3,000 in interest that the business owner gave up when he removed $100K from his bank to start the business is an __________.
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explicit cost
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The amount spent on wages for the employees is an __________.
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implicit cost
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The sacrificed wage that the business owner cannot earn from their old job because they have started a new full-time business is an __________.
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-Economic profit incorporates implicit costs into the cost models when calculating profit
-Accounting profit = Total Revenue - Explicit cost
-Accounting profit can overstate the profits if the business owner has spent a lot of money on implicit costs for the business
-Accounting profit = Total Revenue - Explicit cost
-Accounting profit can overstate the profits if the business owner has spent a lot of money on implicit costs for the business
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The difference between Economic profit & Accounting profit is & Economic Profit = Total Revenue - Explicit cost - Implicit cost
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Inputs that cannot be increased or decreased in a short time in order to increase or decrease output
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Fixed inputs are
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Inputs that can be varied within a short time in order to increase or decrease output
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Variable inputs are
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fixed cost
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The mortgage on the factory is a ___________.
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fixed cost
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The payment for the input of raw materials is usually a ___________.
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A time horizon within which output can be adjusted only by changing the amounts of variable inputs used while fixed inputs remain unchanged; At least one cost is a fixed cost
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In Economics, the Short run is
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a monopoly
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In economics, a firm that faces no competitors is referred to as _________________.
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Monopolistic competition
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________________________ arises where many firms are competing in a market to sell differentiated products.
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fixed costs; do not change
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A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, ______________, regardless of the level of production.
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Diminishing marginal returns
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____________________________ occur when the marginal gain in output (quantity produced) diminishes as each additional unit of variable input is added.
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average total cost
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In order to determine ____________, the firm's total costs must be divided by the output.
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marginal cost
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The term _____________ is used to describe the additional cost of producing one more unit.
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economies of scale
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The term __________________ describes a situation where in the long-run, the quantity of output rises yet the average cost of production falls.
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Total revenue
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_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the price it was sold at.
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total revenue
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Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit.
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short run; cannot alter them
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Fixed costs are important because, at least in the ___________, the firm _______________.
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it allows all factors of production to change.
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The long-run average total cost curve is unique because
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Oligopoly
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A market in which there is more than one firm, but not very many (a few), is known as ______.
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Many small firms selling a homogeneous product
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Which of the following are in perfect competition?
-Many small firms selling a homogeneous product
-Few firms selling a homogeneous product.
-Few firms selling differentiated products.
-Many small firms selling differentiated products.
-Many small firms selling a homogeneous product
-Few firms selling a homogeneous product.
-Few firms selling differentiated products.
-Many small firms selling differentiated products.
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Firms exhaust economies of scale at a low level of output.
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Which of the following is an assumption regarding costs in perfect competition?
-Firms have significant sunk costs.
-Firms have unequal access to information about production costs and technology.
-Firms exhaust economies of scale at a low level of output.
-All of the above
-Firms have significant sunk costs.
-Firms have unequal access to information about production costs and technology.
-Firms exhaust economies of scale at a low level of output.
-All of the above
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True
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True or False: Oligopoly is characterized by a few large firms with some barriers to entry.
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False
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True or False: A market with only a few sellers is known as a monopoly.
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True
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True or False: Economists assume that under perfect competition all firms in the market have access to the same technology and know where to buy inputs at the same prices.
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True
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True or False: In long run equilibrium, a perfectly competitive firm earns no economic profit.
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True
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True or False: For a firm in perfect competition, an individual supply curve (the willingness and ability to supply a product at different prices) is formed by the upward sloping portion of the individual firm's marginal cost curve.
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True
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True or False: For perfectly competitive firm to be in long run equilibrium, the firm will produce at the minimum of the long run average total cost curve.
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True
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True or False: The market supply curve is based on the sum of the marginal cost curves for the individual perfect competitors.
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True
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True or False: A perfect competitor will have an incentive to shut down in the short run if its average variable costs exceed its marginal revenue.
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True
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True or False: A perfect competitor may sometimes continue to operate in the short run even if its total costs exceed its total revenue.
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True
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True or False: Perfectly competitive firms are price takers?
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marginal revenue is equal to the price of the product.
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When the market structure is one of perfect competition,
-the demand curve faced by an individual firm is perfectly inelastic.
-marginal revenue is equal to the price of the product.
-marginal revenue is equal to total revenue.
-All of the above
-the demand curve faced by an individual firm is perfectly inelastic.
-marginal revenue is equal to the price of the product.
-marginal revenue is equal to total revenue.
-All of the above
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marginal revenue equals marginal cost.
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In the short run, the perfectly competitive firm maximizes profits by producing the quantity for which
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Is horizontal; slopes downward and to the right
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Within a perfectly competitive market structure: The demand curve for an individual firm ___________ & the demand curve for a the market as a whole ___________ .
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All of the above
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In the market structure of perfect competition, if firms are making profits within an industry, in the long-run we would expect to see
-More firms enter the industry
-The market price of the product will decrease until it reaches long-run equilibrium
-The quantity produced by each individual firm will decrease and the total amount produced in the market increases
-All of the above
-More firms enter the industry
-The market price of the product will decrease until it reaches long-run equilibrium
-The quantity produced by each individual firm will decrease and the total amount produced in the market increases
-All of the above
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local electricity distributor
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Which of the following is most likely to be a monopoly?
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a price maker
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A firm that holds a monopoly position in the market place is
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producing output where MR = MC; and charging a price where optimal quantity intersects the demand curve.
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A monopolist can maximize its profits by
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lowest when a single firm generates the entire output of the industry.
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When a natural monopoly exists in a given industry, the per-unit costs of production will be
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output will be too small and its price too high.
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Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market of perfect competition?
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downward sloping
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The slope of the demand curve for a monopoly firm is
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always lies beneath
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For a monopolist, the marginal revenue curve ____________________ the demand curve.
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there is one single seller in that industry
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For a pure monopoly to exist,
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An oligopoly
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_____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.
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Collusion
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_________ arises when firms act together to reduce output and keep prices high.
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match price cuts, but not price increases.
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The perceived demand curve for a group of competing oligopoly firms will appear kinked because of their commitment to
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cartel
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A _________ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price.
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opposite ends
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Perfect competition and monopoly stand at _____________ of the spectrum of market structure.
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monopolistic competition
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Shopping malls typically lease retail space to many clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call ________________________.
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they will be unable to earn higher-than-normal profits in the long run.
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If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms,
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downward-sloping
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The demand curve as perceived by a monopolistic competitor is ______________.
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select the profit maximizing quantity to produce
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The first step to be taken by a profit-maximizing monopolistic competitor trying to decide what price to charge is to...
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the firm should keep expanding production until MR = MC.
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If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then
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are no longer earning losses - they are earning zero economic profit.
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Through the process of exit, in the long run, monopolistically competitive firms remaining in the market
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the demand and marginal revenue curves for all other firms will shift to the left.
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When entry occurs in a monopolistically competitive industry,
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they will simply neutralize one another's efforts.
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If each of two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, the total result is
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monopolistic competition among firms with differentiated products.
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The single most common form of competition in the U.S. is
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MU= change in total utility/ change in quantity
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Marginal Utility Equation
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MU1/P1=MU2/P2
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Consumer Equilibrium when..
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Perfect Competition
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Many buyers and sellers
Ex: Ag-corn/tomato farmers
Ex: Ag-corn/tomato farmers
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Accounting Profit
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Total Revenue-Explicit Cost
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Economic Profit
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Total Revenue-Explicit Cost-Implicit Cost
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Market Structure
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When industries differ from one another in terms of how many sellers there are in a specific market, how easy it is for new firms to win, types of products sold
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Perfect Competition
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Firms can enter and leave market without restriction
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Then firm earns economic profit
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If price > ATC
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Then firm earns zero economic profit
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If price = ATC
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Then firm earns a loss
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If price < ATC
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Step 1: Find Q* (MR=MC)
Step 2: Find price (where does Q* intersect the demand curve)
Step 3: Find cost per unit (where does Q* interest the ATC curve)
Step 4: Did the firm earn profits, break even, suffer losses, or decide to shut down (in short run)?
Step 2: Find price (where does Q* intersect the demand curve)
Step 3: Find cost per unit (where does Q* interest the ATC curve)
Step 4: Did the firm earn profits, break even, suffer losses, or decide to shut down (in short run)?
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Steps for Perfect Competition
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Mutual Interdependence
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Oligopoly has
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