ECO 251 Chapter 12 Pure Monopoly, ECO231 Chap 11, ECO231 Chapter 10, Chapter 9, ECon

question

How much will a profit-seeking monopolist produce if producing is preferable to shutting down?

answer

It will produce to the output at which marginal revenue equals marginal cost (MR=MC)

question

Government creates_____ barriers to entry.

answer

legal

question

Two legal ___ to entry are patents and licenses

answer

barriers

question

Which of the following is considered a barrier to entry into an industry?

answer

Ownership of essential property

question

Monopolists may create an entry barrier when confronted with a new entrant into the industry by _____

answer

-reducing product price
- taking other strategic and making entry difficult to rival
- incurring advertising cost

question

What is the term used to refer to charging different prices to different buyers of a specific product?

answer

price discrimination

question

Which of the following is a reason for a monopolist to use pirce discrimination?

answer

to increase its profits

question

Which of the following are conditions necessary for price discrimination?

answer

-monopoly power
-market segregation
-no resale

question

True or false: Price discrimination is not practiced very often in the US economy.

answer

False (price discrimination is widely practiced in the US economy)

question

Which of the following can increase profits by charging different prices to different buyers?

answer

A monopoly

question

True or false: Price discrimination is always legal in the US

answer

False

question

A monopolist can increase its profit by

answer

Charging different prices to different buyers

question

The change in total revenue is called ___ revenue

answer

marginal

question

Which of the following descries why marginal revenue is less than price in an imperfect market?

answer

because the lower price of the extra unit of output also applies to all prior units of output.

question

Whit a fixed downward-sloping demand curve, the pure monopolist can only increase sales by charging a ___ price

answer

lower

question

Marginal revenues (MR) for the monopolist compared to that of a pure competitor .......

answer

declines and is lower than product price

question

In a pure monopoly,____ is less than the price for every unit of output except the first.

answer

marginal revenue

question

True or false: For a pure monopolist, total revenue increases at an increasing rate

answer

False (total revenue increases at a diminishing rate)

question

When marginal revenues is _____ (positive/negative) total revenues is diminishing.

answer

negative

question

What happend to total revenue when marginal revenue is positive?

answer

it its increasing

question

______ competitors include pure monopolists, oligopolists, and monopolistic competitors.

answer

Imperfect

question

Firms with downward-sloping product____ curves are called price_____.

answer

demand; makers

question

Imperfect competitors, by changing market supply, cna influence product____.

answer

price

question

______ competitors can influence total supply through their won output decisions.

answer

Imperfect

question

A monopolist will never choose a price-quantity combination where price reductions cause:

answer

total revenues to decrease (marginal revenue to be negative)

question

The profit-maximizing monopolist will always want to avoid the _____ segment of tis demand curve

answer

inelastic

question

If a firm is found guilty of achieving a monopoly through anticompetitive actions, then the firm

answer

-may be bronkent into 2 or more cometing firms
-may be expressly prohibited from engaging in business activities.

question

Which of the following can cause X-inefficiency?

answer

-hiring incompetent relatives
-poorly motivated work force
-desire for easier work life

question

What is it called when a firm spends significant money to mantain a monopoly through government legistlation?

answer

rent-seeking expenditures

question

Economies of scale refer to ____ average total costs whit added firm size.

answer

declining

question

Barriers to ___reduce the likelihood or prohibits firms from entering an industry

answer

entry

question

Which of the following wxists when a single firm is the sole producer of a product for which there are no close substitutes?

answer

pure monopoly

question

X-inefficiency occurs when a firm operates at a cost, which is_____ than the lowest cost for a particluar level of output.

answer

higher

question

Which of the following steps are necessary to determine the profit-maximizing or loss-minimizing level of output, profit-maximizing or loss-minimizing price, and economic profit or loss in pure monopoly?

answer

-Employ the profit-maximizing or loss-minimizing ruel of MR=MC
Identify the profit-maximizing or loss-minimizing price and output by finding the price/output combination at MR=MC

question

Government licesing is a legal ___ to entry.

answer

barrier

question

What is the differnce in demand between a purely competitive seller and a monopolist?

answer

Demand for the purely competitive seller is perfectly elastic, and demand for the monopolist is not.

question

When comparing the demand curve for a perfectly competitive firm to demand curve of a monopolist, the monopolist's demand curve would be more______

answer

inelastic

question

What aspect of the market defines the crucial difference between a pure monopolist and a purely competitive seller?

answer

the demand curve

question

Which of the following are assumptions made in the model of pure monopoly?

answer

-no unit of government regulates the firm
-patentes, economies of scale, and resource ownership secure the firm's monopoly
-the firm is a single-price monopolist; it charges the same price for all units of output.

question

Comparing total revenue and total cost at each possible level of production and choosing the output with the greatest possible difference is another way to determine

answer

-the loss-minimizing output
-the profit-maximizing output

question

For the pure monopolist, there is no relationship between____ and quantity supply and therefore no supply curve

answer

priceWhich

question

Which of the following are reasons that a monopolist is consider a price maker?

answer

-the monopolist exerts control over the price
-the monopolist controls the total quantity supplied

question

The economic profict per unit is the amount that the product price ______the average total cost at the profit-maximizing output

answer

is grater than

question

Total ____ profit is found by multiplying per-unit profit by the profit-maximizing output.

answer

economic

question

Which of the following are characteristics of public utilities?

answer

-Government owned or regulated
-Monopolies or near monopolies

question

Entry is completely blocked to competitors in the case of pure______

answer

monopoly

question

_____ laws aim to protect an inventor from rivals who would use teh invention without having shared in the effort and expense of developing it.

answer

Patent

question

What is another name for deadweight loss?

answer

Efficiency loss

question

When productive efficiency and allocative efficiency are not achieved in the market, it is called

answer

Efficiency loss

question

Simultaneous_____ is a product's ability to satisfy a large number of consumers at the same time

answer

consumption

question

True or false: Network effects exist if the value of a product to each user decreases as teh total number of users increases.

answer

False (value of product increases as the number ot users increases)

question

Which of the following are potential solutions to the economic losses incurred by a regulated monopoly cuased by socially optimal pricing?

answer

-providing a public subsidy to cover the loss
-to condone price discrimination

question

True or false: In the Unitde States, most regulatory agencies do not establish a fair return price.

answer

False

question

Which of the following are the main characteristics of a pure monopoly?

answer

-Absolute control over the price
-Presence of a single seller
-Unavailability of close substitutes for its products
-Blocked entry for other firms

question

A monopolist is a price____ because it controls the total quantity produced and thus has control over the price

answer

maker

question

Which of the following are examples of a geographic monopolies?

answer

-A small town with one railroad
-A small town served by one airline
-A small town with one restaurant

question

A monopolist does not achieve productive efficiency because it produces a level of output that does not correspond to the minimum point of the ______ ______ cost curve

answer

average total

question

Monopoly yields neither productive nor _______ efficiency

answer

allocative

question

At the profit-maximizing output, a monopolist's _____ is higher than marginal cost; therefore, a monopolist has alloctive inefficiency

answer

price

question

Which of the following combine, in differing degrees, characteristics of pure competitions and pure monopoly?

answer

Monopolistic competition and oligopoly

question

A price _____ will use its power over product quantity and price whenever it is adventageous to do so.

answer

maker

question

The main characteristics of a pure_____ are a single seller, no close substitutes, a price maker, blocked entry, and non-price competition.

answer

monopoly

question

How close a monopolist charge the price of its products?

answer

By changing the quantity of the product it produces

question

Which of the following are reasons for a monopoly's loss of economic profit?

answer

-change in tastes reducing demand
-upward-shifting curves caused by escaliting resource price

question

Which of the following does the monopolist ot have?

answer

a supply curve

question

A monopolist uses the profit-maximizing rule of marginal revenue equals marginal cost to determine______ and ____

answer

price; quantity

question

If the objective of government is to achieve allocative efficiency, what kind of price should government establish for the monopolist?

answer

One that is equal to its marginal cost

question

The socially optimal price is where a monopoly's price is equal to :

answer

marginal cost

question

With a natural monopoly the demand curve intersects the long-run average total cost curve where the long run average total cost curve is still_____.

answer

falling

question

What may occur when only a single firm can achieve the economies of scale necessary to compete in an industry?

answer

Natural monopoly

question

Which of the following are entry barriers created by monopolists?

answer

-Increased advertising
-Price reductions

question

Slashing prices is an example of an entry barrier created by a (n)

answer

monopoly

question

A pure monopolist must face a downward-sloping product _______ curve

answer

demand

question

A _______ -monopoly is a single firm that has the bulk of sales in a specific market.

answer

near

question

Because Intel provides 80% of the central microprocessors used in persoanl computers, it is a:

answer

near-monopoly

question

Which of the following reasons explains why a professional sport team can be considered a monopoly?

answer

They are the sole suppliers of specific services in a large geographic area

question

_______ (one word) is/are worth studying because it provides insights into the market structures of monopolistic competition and oligopoly

answer

Monopoly

question

What is the term used to describe a single firm with the bulk of sales in a specific market<

answer

Near-monopoly

question

Which of the followings steps are necessary to determine the profit-maximizing or loss-minimizing level of output, profit-maximizing or loss-minimizing price, and economic profit or loss in pure monopoly?

answer

-Identify the profit-maximizing or loss-minimizing price and output by finding the price/output combination at MR=MC
-Employ the profit-maximizing or loss-minimizing rule of MR=MC

question

Which characteristics of pure monopoly requires a consumer to buy the monopolized product or do without it enterely?

answer

No close substitutes

question

A firms's long-run average total cost may decline over a wide range of output due to ______ of scale

answer

economies

question

Which of the following are reasons monopoly is not widespread in the United States

answer

-Patents eventually expire
-Barriers to entry are seldom completely successful

question

A(n)________ is able to mantain an economic profit in the long run because there are no new entrants to increase supply, dirve down price, and eliminate economic profit

answer

monopoly

question

All else equals, which is more likely to experience and economic profit in the long-run?

answer

A pure monopolist

question

A pure monopolist has no____ curve

answer

supply

question

Patents and patent laws aim to protect the inventor from

answer

rivals

question

What leads to most patentable inventions and products?

answer

Research and development

question

The exclusive right of an inventor to use, or to allow another to use her or his invention is called:

answer

patent

question

A natural monopoly occurs when he market demand curve crosses the long-run average total cost curve where average total costs (ATC) are still.....

answer

declining

question

Which of the following is a good example of network effects?

answer

_The Internet allows people to send and recieve emails
-People with similar software can share pictures

question

Which of the following is a reason for a monopolist to block entry in a market?

answer

-To restrict potential competitors from entering the market

question

When the demand for a good is price elastic, an increase in its price, will _______ total revenue

answer

decrease

question

Declines in long-run average total costs occur due to which of the following

answer

-spreding of product development costs
-simultaneous consumption
-network effects
-learning by doing
-greater use of specialized inputs

question

Monopolists use economies of scale to block the entry of new firms into an industry by reducing ______so that other firms cannot compete

answer

prices

question

All following are examples of barriers to entry except______.

answer

Income

question

A firm's manager is given the following information: To sell 4 units of output, a price of $ 132 must be charged; this level of output reflects marginal revenue of $102 and marginal cost of $60. If the firm wants to sell 5 units of output, a prie of $122 must be charged; this reflects marginal revenue of $82 and marginal costs of $70. To sell 6 units of output, a price of $122 must be charged; at this level of output, marginal revenue will be $62 and marginal costs $80. What should the manager do?

answer

Produce 5 units of output and charge $122

question

Monopolistic competition and ______ combine, in differing degrees, characteristics of pure competition and pure monopoly

answer

oligopoly

question

Monopolies that produce standardized products engage mainly in _______

answer

public relations advertising

question

A firm position itself in the best profit-maximizing(or loss-minimizing) level of production if that amount of output fleflects the point at which the last unit's marginal revenue is equal to its marginal cost because:

answer

each unit of output after the MR=MC amount will earn less revenue than its costs

question

Higher-than-competitive wages, nicer-than-typical office buildings, and more managers and staff than necessary are all examples of x-inefficiency found in ______ monopoly firms.

answer

regulated

question

Modern technology can be a cause of extensive____.

answer

economies of scale

question

The firm and ______ are synonymous in pure monopoly.

answer

industry

question

The highest barriers to entry can be found with pure_______. The lowest barriers to entry can be found with pure ________.

answer

monopoly; competition

question

A monopoly is likely to suffer loses when:

answer

- Price is set to marginal cost
-Price is set to achieve the most efficient allocation of resources

question

Which of the following contribute to the complexities incolve in fair-return pricing?`

answer

-Rate decisions that required extensive public input through letters and hearnings.
-Large, extensive rate
-Setting bureaucracies
-Maze-like sets of procedures
-Rate decisions that are subject to lengthly legal challenges

question

"Single-seller" refers to:

answer

-A sole producer of a specific good or service

question

The price discriminator's total profit is _____ than it would be with no discrimination .

answer

higher

question

In price discrimination, the price differences are not justified by _________ differences

answer

cost

question

The economic profit per unit is the amount that the product price ________ the average total cost ath the profit-maximizing output.

answer

is greater than

question

Which of the following types of firms have achieved economies of scale through information technologies?

answer

-Computer software
-Internet service
- Wireless communication

question

Monopolists that have________ products engage mainly in public relations advetising, while those with ______ products advertise their products' attributes

answer

standardized; differentiated

question

Economic, technological, legal, pricing and advertising strategies are all types of:

answer

Barriers of entry

question

Establishing a price ceiling for a mnopoly causes the monopoly's demand curve to become perfectly elastic out to:

answer

the quantity of demand that corresponds with the regulated price

question

Microsoft is a firm that benefits from _______ consumption.

answer

simultaneous

question

Which of the following are forms of price discrimination?

answer

-Charging differnt costumers differnt prices
-Charging each costumer the maximum price he/she is willing to pay.
-Charging each costumer one price for the first unit and a lower price for subsequent units

question

What allows a natural monopoly to produce efficiently?

answer

- A declining long-run average total cost curve
-Extensive economies of scale

question

The price-discrimination monopolist charges a higher price to costumers who have ________ elastic demand and a lower price to costumers who have ______ elastic demand.

answer

less; more

question

The entry and the exit of firms in an industry are considered to be -run adjustments.

answer

long

question

The long run, every purely competitive firm tends to operate at its ______.

answer

minimum ATC

question

profits in a competitive industry will attract new firms into the industry.

answer

Economic

question

Economic profit for a firm will result if:

answer

price exceeds average total cost

question

In this graph, the equilibrium price is $50 and is equal to a firm's average total cost. Therefore, the firm is earning ______ economic profits, or a(n) ______ profit.

answer

zero; normal

question

Which of the following occur only in the long-run?

answer

The expansion or contraction of plant capacity
The entry and exit of firms

question

After all long-run adjustments are completed in a perfectly competitive market, output will occur at each firm's minimum average ______.

answer

total cost where product price is equal to marginal revenue

question

Economists maintain that new firms are attracted into an industry due to:

answer

economic profits

question

If the market price exceeds the firm's minimum average total cost (ATC), then it will ______.

answer

incur an economic profit

question

There is no incentive for firms to enter or exit the industry in the long run when ______.

answer

firms earn a normal profit
price equals minimum average total cost
MR = MC

question

Economic profit will fall to zero and firms will choose not to enter an industry when price is equal to which of the following factors?

answer

Minimum average total cost
Marginal cost

question

Why will firms choose not to enter an industry when marginal revenue, marginal cost, price, and average total cost are equal?

answer

Existing firms are earning only normal profits.

question

An unfavorable shift or ______ in demand will upset the original industry equilibrium and produce ______.

answer

decrease; losses

question

As firms exit the industry in the long run, market price rises and the losses for the remaining firms begin to subside. Firms will continue to exit until which of the following happens?

answer

There are no economic losses.

question

An industry where expansion or contraction will not affect resource prices and production costs is known as a(n) ______.

answer

constant-cost industry

question

Which of the following best explains why the long-run supply curve of a constant-cost industry is perfectly elastic?

answer

The entry and exit of firms changes industry output bringing the price back to its original level, where it is equal to the constant minimum ATC

question

Which of the following does an increasing-cost industry experience?

answer

A downward shifting average total cost (ATC) curve as the industry contracts.
An upward shifting average total cost (ATC) curve as the industry expands.

question

If demand for the good decreases creating economic losses, firms will exit the industry in the long run. As firms exit in the long run, industry supply will ______ and market price will ______.

answer

decrease; rise

question

True or false: Higher resource prices create lower ATC and cause an upward shift of the long-run ATC curve.

answer

False

question

If there are losses in the long run, what adjustments will take place?

answer

Firms will exit the industry until losses are eliminated.

question

A constant-cost industry is one where ______ will not affect resource prices and production costs.

answer

expansion or contraction

question

The entry of new firms entering an increasing-cost industry increase resource prices particularly:

answer

in industries using specialized resources whose long-run supplies do not readily increase in response to increases in resource demand

question

The shape of the long-run supply curve for a constant-cost industry can best be described as:

answer

horizontal

question

In an increasing-cost industry, increases in resource prices and the minimum average total cost (ATC) are a result of ______.

answer

increases in product demand resulting in economic profits and industry expansion

question

An industry whose average total cost curve shifts upward as the industry expands and shifts downward as the industry contracts is known as a(n) ______ industry.

answer

increasing-cost

question

A decreasing-cost industry is one in which firms experience ______ costs as their industry ______.

answer

higher; contracts
lower; expands

question

Higher resource prices will result in ______ total costs.

answer

higher average

question

All firms in a(n) ______ industry share the same basic efficiency characteristics.

answer

purely competitive

question

In the long run, a purely competitive firm will only earn a ______ profit.

answer

Normal

question

New firms entering an increasing-cost industry will usually (increase/decrease) resource prices.

answer

Increase

question

Competitive market economies generate ______.

answer

productive efficiency
allocative efficiency

question

In an increasing-cost industry, which of the following occur when an increase in product demand results in economic profits and attracts new firms to the industry?

answer

Increased resource demand drives up resource prices.
Each firm's ATC curve shifts upward.

question

Which of the following does a decreasing-cost industry experience?

answer

Lower costs as industry output expands.

question

Which type of market produces the most efficient use of society's resources?

answer

Pure competition

question

Whether a purely competitive industry is a constant-cost industry or an increasing-cost industry, the final long-run equilibrium position of all competitive firms share which of the following characteristics?

answer

In the long run, an equality occurs where price equals marginal revenue, which equals minimum average total cost.
Price or marginal revenue will settle where it is equal to minimum average total cost.
In the long run, a multiple equality occurs where price equals marginal cost which equals the minimum average total cost.

question

A competitive firm may realize an economic profit or loss in the run but will earn only a normal profit in the run.

answer

Blank 1: short
Blank 2: long or longer

question

(Allocative/Productive) efficiency means that goods are produced in the least costly way.

answer

Productive

question

A competitive market generates efficiency and efficiency. (Enter one word for each blank.)

answer

Blank 1: productive
Blank 2: allocative

question

_ (one word) efficiency means that resources are distributed among firms and industries to yield a mix of goods and services that is most wanted by society.

answer

allocative

question

A purely competitive market leads to the efficient use of:

answer

society's scarce resources

question

The difference between the maximum price a consumer is willing to pay for a product and the actual price that they do pay is known as _____.

answer

consumer surplus

question

Productive efficiency requires that goods be produced ___.

answer

in the least costly way

question

Which of the following statements are true about allocative efficiency?

answer

It is impossible to produce net gains for society by altering the mix of goods and services produced.
The goods and services produced are those that society most wants to consume.
The marginal cost and marginal benefit of producing each unit of output is equal.

question

How does a purely competitive market restore allocative efficiency when an increase in demand disrupts efficiency?

answer

New firms enter and increase industry output until price and marginal cost are equal.

question

Which of the following describes consumer surplus?

answer

It is the difference between the maximum price that consumers are willing to pay for a product and the market price for that product.

question

In purely competitive markets, efficiency can be temporarily disrupted and then restored by changes in:

answer

consumer tastes.
technological changes.
resource supplies.

question

When efficiency is disrupted in pure competition, producers will reallocate resources until product supply is such that price will again _____ marginal cost.

answer

equal

question

What must be eliminated or avoided if the "invisible hand" is to produce socially optimal outcomes in purely competitive markets?

answer

Externalities

question

True or false: Efficiency within pure competition can be temporarily disrupted by a change in consumer tastes.

answer

True

question

What will happen to a firm that finds a way to lower production costs through better technology or improved organization?

answer

Its profits will increase.

question

The transformative effects of competition are often referred to as:

answer

creative destruction

question

What are the effects of the "invisible hand" in a purely competitive economy?

answer

Maximum profits for individual producers
Resource allocation that maximizes consumer satisfaction

question

Strategies attempted by firms for increasing their profits include:

answer

developing a new product that is popular with consumers.
lowering production costs through improved business organization.
lowering production costs through better technology.

question

Creative captures the idea that the creation of new products and new production methods erodes the market positions of firms committed to existing products and old ways of doing business

answer

destruction

question

Match the market models based on the number of firms present in each model.

answer

Pure competition = Very large number
Monopolistic competition = relatively large number
oligopoly = few
Monopoly = One

question

Match each market structure with the description that best describes the conditions for exit and entry into that industry.

answer

Very easy, no obstacles = purely competitive
Relatively easy = monopolistically competitive
Significant obstacles = oligopoly
Blocked = monopoly

question

Which of the following are considered to be the four basic market structures?

answer

Pure competition
Pure monopoly
Oligopoly
Monopolistic competition

question

Which of the following best describes pure competition?

answer

An industry involving a very large number of firms producing identical products and in which new firms can enter or exit the industry very easily.

question

Which market structure has the fewest obstacles to entry or exit?

answer

Pure competition

question

A purely competitive industry has a very ______ number of sellers, whereas the other three market structures reflect a progressively ______ or ______ number of sellers.

answer

large; smaller; decreasing

question

Which of the following best describes a pure monopoly?

answer

One firm selling a single unique product, where entry of additional firms is blocked and there is considerable control over price

question

Economists group industries into distinct market structures.

answer

question

Pure ___ involves a very large number of firms.

answer

competition

question

Which of the following is a characteristic of a monopolistically competitive market?

answer

A relatively large number of sellers producing differentiated products

question

Which of the following best describes oligopoly?

answer

Involves only a few sellers of a standardized or differentiated product, so each firm is affected by the decisions of its rivals.

question

competition is considered to be rare in the real world.

answer

Pure or perfect

question

True or false: A pure monopoly involves a very large number of firms producing a single unique product.

answer

False

question

Firms within pure competition are considered to be price .

answer

takers or taker

question

Which of the following features occur in a purely competitive market?

answer

Sales in both national and international markets.
Many independently acting sellers

question

In which market model do firms rely on product differentiation to distinguish themselves from the competition?

answer

monopolistic competition

question

True or false: Firms within pure competition will produce standardized products.

answer

True

question

An oligopoly has ___ sellers and must consider the decisions of its rivals in determining its own ___ and output.

answer

few; price

question

Firms that operate in a purely competitive industry:

answer

do not differentiate their products

question

______ is relatively rare in the real world, although this market model is highly ______ to several industries.

answer

Pure competition; relevant

question

Which of the following are conditions necessary to have pure competition?

answer

very large number of firms or sellers
free entry and exit
standardized product

question

A basic feature of the purely competitive market is the presence of ______.

answer

a large number of sellers

question

In a purely competitive industry, buyers view the products of firms B, C, D and E as ______ for the product of firm A.

answer

perfect substitutes

question

Which of the following market structures produces only a standardized product?

answer

A purely competitive market

question

A firm operating in a purely competitive market is a price taker because it ______.

answer

cannot change the market price, it can only adjust to it

question

Which of the following best summarizes why firms in purely competitive industries do not differentiate their products?

answer

Because there are so many of them selling a standardized product

question

Because there are so many of them selling a standardized product

answer

A purely competitive firm offers only a negligible fraction of total market supply and therefore must accept the price determined by the market

question

In a purely competitive industry, an increase in the price of the product produced by firm A will cause buyers to ______.

answer

substitute with products of firms B, C, or D

question

Which factors illustrate that the demand curve for a purely competitive firm is perfectly elastic?

answer

The firm does not need to lower its price to increase its sales volume.
The firm cannot obtain a higher price by restricting its output.

question

Which of the following best describes the situation of a price-taking firm?
A price-taking firm is one of a ______ number of firms producing a product that is identical to that of every other firm in the industry and providing ______ of total market supply.

answer

large; only a fraction

question

In a purely competitive market, price per unit to the purchaser is synonymous with per unit or revenue to a seller. (Enter one word per blank.)

answer

Blank 1: revenue or cost
Blank 2: average or marginal

question

A purely competitive firm is a price (Enter one word).

answer

taker

question

The price, multiplied by the firm's output or goods produced, equals ______.

answer

total revenue

question

In pure competition, if the first unit of output sold increases total revenue from $0 to $131, marginal revenue for that unit is $131. If the second unit sold increases total revenue from $131 to $262, marginal revenue is again $131. The third unit sold increases total revenue to $______ and marginal revenue is now $______.

answer

393; 131

question

In a purely competitive market, marginal revenue is a constant that is equal to which of the following?

answer

price

question

In a perfectly competitive market, the demand curve for an individual firm is perfectly at the market price.

answer

Blank 1: elastic, horizontal, flat, constant, or fixed

question

In a purely competitive market, price per unit to a buyer equals:

answer

average revenue to a seller

question

A purely competitive firm's total revenue (TR) is a straight line that slopes (upward/downward) and to the (left/right).

answer

Blank 1: upward, up, or upwards
Blank 2: right

question

A firm's total revenue is calculated as (Enter one word) times quantity produced.

answer

Price

question

The change in total revenue that results from selling one more unit of output is called revenue.

answer

marginal

question

In pure competition, marginal revenue and are equal. (Remember to type only one word per blank.)

answer

price

question

A purely competitive firm's demand schedule is equal to which of the following?

answer

marginal revenue
average revenue

question

A purely competitive firm's total revenue curve will

answer

have a constant slope because each extra unit of sales increases total revenue by a constant amount

question

In the short run, a purely competitive firm can maximize its economic profit (or minimize its loss) by adjusting its .

answer

Blank 1: output, production, supply, or quantity

question

What are two ways that a purely competitive firm can determine the level of output at which it will realize maximum profit or minimum losses?

answer

By comparing marginal revenue to marginal costs
By comparing total revenue to total costs

question

A(n) competitive firm's average-revenue schedule is also known as its demand schedule.

answer

Blank 1: pure, perfectly, or purely

question

After a company has determined that it should produce a product and the amount of the product to produce, what basic question should it ask?

answer

What economic profit (or loss) will we realize?

question

A purely competitive firm can maximize its economic profit (or minimize its loss) by adjusting only its output because it ______.

answer

is a price taker

question

The equation for determining economic profit or loss is ______ minus ______.

answer

total revenue; total cost

question

The two ways to determine the level of output at which a firm will realize maximum profit or minimum loss are to compare total revenue to ______ and to compare marginal revenue to ______.

answer

total cost; marginal cost

question

From an economic standpoint, the break-even point is the level of output at which a firm makes a(n) ______ profit.

answer

normal

question

Which of the following best describes marginal revenue?

answer

The revenue that an additional unit of output contributes to total revenue.

question

Confronted with the market price of its product, a purely competitive producer will ask which three questions?

answer

What economic profit or loss will we realize if we produce this product?
Should we produce this product?
If we produce this product, in what amount?

question

In the table, total economic profits at the profit-maximizing level of output are calculated as a total revenue of $______ minus approximate total costs of $______.

answer

1179; 880

question

Which of the following best describes the economic break-even point?

answer

The point where total revenue covers all costs, but there is no economic profit.

question

revenue is the additional revenue that an additional unit of would add to total revenue.

answer

Blank 1: Marginal
Blank 2: output or production

question

Which of the following explains why a firm would not produce a unit of output where MC exceeds MR?

answer

Producing it would add more to costs than to revenue, and profit would decline or loss would increase

question

When the marginal cost of an additional unit of output exceeds the marginal revenue, what should the firm do?

answer

Not produce that additional unit of output

question

Which of the following are scenarios in which a firm should continue to produce?

answer

Marginal revenue is $0.25 and marginal cost is $0.20.
Marginal revenue is $5 and marginal cost is $4.75.
Marginal revenue is $1.50 and marginal cost is $1.45.

question

A firm would not produce a unit of output where ______.

answer

marginal cost exceeds marginal revenue

question

A firm should not produce a unit of output when the marginal cost is (greater/lesser) than its marginal revenue.

answer

Blank 1: greater, bigger, larger, more, or higher

question

The profit-maximizing rule of MR=MC states that in the short run, the firm will maximize profit or minimize loss by producing the output for which marginal revenue ______ marginal cost.

answer

equals

question

In this table, at a price of $131, the profit-maximizing level of output is _____ units of output.

answer

question

In pure competition, to calculate economic profit, we first calculate the difference between and average total cost and then multiply it by output. (Type only one word in blank.)

answer

Price

question

A firm should produce any unit of output whose ______.

answer

marginal revenue is greater than marginal cost

question

In a purely competitive industry, at the profit-maximizing or loss-minimizing level of output, marginal ______ is equal to ______.

answer

revenue; marginal cost
revenue; price
cost; price

question

Based on the information given in the table, which of the following statements are true?

answer

Every unit of output up to and including the ninth unit represents greater marginal revenue than marginal cost.
The ninth unit of output is the profit-maximizing level of output.

question

Which of the following is a method of calculating economic profit in pure competition?

answer

Price minus average total cost multiplied by quantity

question

In this table, at a price of $81.00, the loss-minimizing level of output is _____.

answer

6 units

question

Which of the following improves as production increases?

answer

Price-marginal cost relationship

question

In this graph, a firm incurs a loss but continues to operate because price is ______ than the lowest average total cost but above the lowest average ______ cost.

answer

less; variable

question

This graph illustrates that a firm can minimize its losses by producing where ______.

answer

price exceeds minimum average variable cost but is less than average total cost

question

In this table, at a price of $71, the profit-maximizing or loss-minimizing level of output is ______.

answer

0 units

question

Which of the following best explains why the price-marginal cost relationship improves as production increases?

answer

At the very early stages of production, marginal product is low, making marginal cost unusually high.

question

Based on the information in this chart, at which price will a firm shut down?

answer

question

At which point will a firm be indifferent whether to shut down or continue to produce?

answer

Point b

question

Which of the following statements is true of the firm represented by this graph?

answer

The firm incurs a loss but should continue to operate because price exceeds the lowest average variable cost.

question

A firm should always stop producing if its average ______ cost is ______ price.

answer

variable; greater than

question

Between P2 and P4, the firm will minimize its losses by producing and supplying the quantity at which:

answer

MR=P=MC

question

True or false: Quantity supplied increases as price decreases, and economic profit is usually higher at lower product prices and output.

answer

False

question

If price is below a firm's minimum average cost, the firm will not operate. (Insert only one word in the blank.)

answer

variable

question

What is the firm's most likely response if price is exactly equal to minimum average variable cost?

answer

Indifference to producing or shutting down

question

Based on the chart, what happens at a price P3 and an output of Q3?

answer

The firm incurs a loss but covers part of its fixed cost.

question

The quantity of a product supplied by a firm in pure competition should _____ as long as price rises.

answer

increase

question

A firm will break even where ______ will just cover ______ because the revenue per unit and the average total cost per unit are equal.

answer

total revenue; total cost

question

When will a firm earn an economic profit?

answer

When price is greater than average total cost.

question

In this graph, which curve represents the firm's short-run supply curve?

answer

The marginal-cost curve

question

Given an output of Q4, at which price will the firm break even or earn a normal profit?

answer

question

Which of the following factors will alter costs and shift the marginal cost or short-run supply curve to a new location?

answer

Technology
Prices of variable inputs

question

Total revenue equals ______ times ______.

answer

price; quantity

question

Which of the following reasons explains why the purely competitive firm's demand curve is perfectly elastic?

answer

Because the individual firm is a price taker, the marginal revenue curve coincides with the firm's equilibrium price.

question

At any price above ______, the firm will obtain economic profit by producing to the point where MR=P=MC.

answer

question

The portion of a firm's marginal cost curve that lies above its average variable cost is the firm's short-run curve.

answer

Supply

question

Changes in (Enter one word) and changes in prices of variable inputs alter costs and shift the marginal cost or short run supply curve.

answer

technology

question

Multiplying product price by output reveals which of the following?

answer

Total revenue

question

Each purely competitive firm's demand curve is perfectly at the equilibrium price.

answer

Blank 1: elastic, flat, or horizontal

question

What is the primary difference between the individual firm's supply curve and the industry supply curve?

answer

The individual supply curve has no effect on price, whereas the industry supply curve has an important bearing on price.

question

Which of the following describes the individual competitive firm's supply curve?

answer

The individual firm's supply curve represents a negligible fraction of total supply and therefore cannot affect price.

question

The ______ cost of any resource used to produce a good is the value or worth the resource would have in its best alternative use.

answer

economic

question

A firm's costs are the explicit and implicit costs of the resources it has used.

answer

economic

question

Total costs equal explicit costs plus implicit costs.

answer

economic

question

A firm's monetary payments to those who supply transportation services is an example of ______.

answer

explicit costs

question

costs are the monetary payments a firm makes to purchase resources from others..

answer

explicit

question

Which best describes economic costs?

answer

Payments that must be made to obtain a resource

question

True or false: Implicit costs are the firm's opportunity costs of using its self-owned, self-employed resources.

answer

True

question

When a firm considers its economic costs, it considers which of the following?

answer

Explicit and implicit costs
All opportunity costs of resources used

question

True or false: Economic costs equal explicit costs minus implicit costs.

answer

False

question

Accounting profit is what remains after a firm has paid its _______ costs.

answer

explicit

question

Which of the following would incur an explicit cost?

answer

Raw materials
Labor services
Utility usage

question

A(n) ______ profit is equal to total revenue less explicit costs.

answer

accounting

question

Which of the following explains the concept of explicit costs?

answer

A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services.
A firm's monetary payments made for the use of resources owned by others.

question

Which of the following are examples of implicit costs?

answer

Forgone wages
Forgone rent

question

What type of opportunity cost does a firm incur when it uses resources that it already possesses instead of selling them for cash?

answer

Implicit

question

Your company's total sales revenue for the month is $150,000; the costs to produce your products are $12,000 for rent, $6,000 for utilities, and $42,000 for employee wages. What is your accounting profit?

answer

Reason:
$150,000 - $60,000 (explicit costs) = $90,000.

question

Generally speaking, there are two types of calculable profits. Of these, profit is what remains after a firm has paid itsexplicit costs.

answer

accounting

question

Forgone entrepreneurial income is an example of a(n) ______.

answer

implicit cost

question

Subtracting implicit costs from accounting profit yields which of the following?

answer

Economic profit

question

What is the total revenue if the economic profit is $24,000 and the economic costs are $96,000?

answer

$120,000
Reason:
Rearrange the profit formula to solve for total revenue: economic profit equals total revenue minus total economic cost.

question

profit is the firm's total revenue less its explicit costs, whereas profit is the firm's total revenue less economic costs (explicit and implicit).

answer

Blank 1: Accounting
Blank 2: economic

question

What does it mean to the entrepreneur when economic profit is zero?

answer

The entrepreneur is covering all explicit and implicit costs, including a normal profit.

question

Determining normal profit involves estimating which of the following?

answer

Forgone entrepreneurial income

question

Subtracting explicit and implicit costs from total revenue yields which of the following?

answer

Economic profit

question

If economic cost is $96,000 and total revenue is $120,000, what is the economic profit?

answer

$24,000
Reason:
Economic profit equals total revenue minus economic cost.

question

The size of the factory, the amount of machinery and equipment, and other capital resources define

answer

Blank 1: plant, operational, or operation
Blank 2: capacity or size

question

What is the difference between accounting profit and economic profit?

answer

Accounting profit equals total revenue less explicit costs. Economic profit equals total revenue less economic costs (explicit and implicit).

question

When total revenue earned by an entrepreneur is equal to the sum of explicit and implicit costs, then the entrepreneur earns a(n) ______.

answer

zero economic profit
Reason:
An economic profit is earned if revenues exceed the sum of all explicit and implicit costs.

question

Which industry requires the most time for its firms to alter plant capacity?

answer

Aircraft manufacturing

question

What is the definition of economic profit?

answer

Total revenue minus economic costs (explicit and implicit)

question

Which of the following resources can a firm easily and quickly adjust?

answer

Raw materials
Fuel
Hourly labor

question

What are the components of plant capacity?

answer

Amount of machinery and equipment
Size of the factory building

question

In the short run, if a firm wants to vary its output, what resources can it adjust?

answer

Labor
Materials

question

Which resource requires the most time for a firm to adjust, given a change in demand?

answer

Plant capacity

question

In microeconomics, the long run is also known as which of the following?

answer

Variable-plant period

question

True or false: Hourly labor, raw materials, and fuel are examples of resources a firm can easily adjust.

answer

True

question

Which of the following are long-run adjustments?

answer

Boeing installs more robotic welding equipment.
Boeing adds a new production facility.

question

Which of the following is true regarding a firm's plant capacity?

answer

It is fixed in the short run.

question

True or false: The short run and the long run are conceptual periods rather than calendar time periods.

answer

True

question

A time period during which a firm can adjust the quantities of all the resources that it employs, including plant capacity, is known as which of the following?

answer

Long run

question

What is the term for the total quantity of a specific good produced?

answer

Total product

question

Which of the following illustrate the concept of a short-run adjustment?

answer

Boeing adds an entire shift of workers.
Boeing hires 100 extra workers for one of its commercial airline plants.

question

If the change in total product is 10 units and the change in labor input is 1, what is marginal product?

answer

question

How is marginal product (MP) defined?

answer

The extra output or added product associated with adding a unit of a variable resource

question

Which of the following are examples of a long-run adjustment period?Which of the following are examples of a long-run adjustment period?

answer

The two days it takes a t-shirt maker to add sewing machines and silk-screen printers
The three years it takes an oil refining company to build a new plant

question

What is the average product If total product is 30 and there are 3 units of labor?

answer

question

From the industry's viewpoint, the run includes enough time for existing firms to dissolve and leave the industry or for new firms to be created and enter the industry.

answer

long

question

What is the definition of total product (TP)?

answer

The total quantity, or total output, of a particular good or service produced

question

Which best describes average product (AP)?

answer

The output per unit of labor input

question

A company has three workers. It adds an additional laborer and its total product increases by 21. What is the company's marginal product?

answer

question

Assuming technology and production techniques are fixed and cannot change, if beyond some point of production a firm experiences declining units of additional output with each additional unit of labor input, then the firm is experiencing the effects of the law of ______.

answer

diminishing returns

question

product is the change in total product divided by the change in labor input.

answer

Marginal

question

In a manufacturing plant with no labor, adding labor increases output and marginal product. However, at some point increasing labor will no longer increase output at the same rate. Adding even more labor eventually causes marginal product to decline, because there will simply not be enough space for so many workers to work. This is an example of the law of returns.

answer

diminishing

question

If total product is 50 and the units of labor used is 10, then the average product is .

answer

question

The law of diminishing returns assumes that ______.

answer

all units of labor input are of equal quality

question

Which is another term for average product?

answer

Labor productivity

question

The law of ______ returns states that as successive units of a variable resource are added to a fixed resource, beyond some point, the marginal product will decline.

answer

diminishing

question

A farmer cultivates a cornfield by fertilizing and increases the farm's yield to 50 bushels per acre. Additional cultivation increases the yield but at a decreasing rate. At some point, additional cultivation will not lead to any additional output per acre. This is an example of the law of ______.

answer

diminishing returns

question

Total product goes through three phases: It initially at an increasing rate; then it increases but at a diminishing rate; finally, after reaching a maximum, it .

answer

Blank 1: rises, increases, grows, or expands
Blank 2: declines, decreases, falls, diminishes, or drops

question

What is the average product If total product is 30 and there are 3 units of labor?

answer

question

Why does marginal product eventually diminish as units of labor are added?

answer

Because the number of workers increases relative to the amount of capital equipment

question

Marginal product is the slope of the ______ curve.

answer

total product

question

When total product declines, marginal product ______.

answer

is negative

question

What happens to marginal product when total product is increasing but at a decreasing rate?

answer

Marginal product is positive but falling.

question

What happens to average product when marginal product exceeds it?

answer

Average product continues to rise.

question

Which of the following is true where the marginal product curve intersects the average product curve?

answer

Average product is at its maximum.

question

When total product is at its maximum, marginal product is ______.

answer

zero

question

What happens to marginal product when total product is increasing at an increasing rate?

answer

Marginal product is rising.

question

costs are part of the simple existence of a firm's plant and must be paid even when output is zero.

answer

Fixed

question

Why does marginal product eventually diminish as units of labor are added?

answer

Because the number of workers increases relative to the amount of capital equipment

question

What happens to average product as additional units of labor are added to a fixed plant?

answer

It increases, reaches a maximum, and then decreases.

question

Average product declines when ______.

answer

marginal product is less than average product

question

Which costs do not vary with changes in output?

answer

Fixed

question

Which of the following are examples of fixed costs?

answer

Rental payments
Interest on a firm's debts

question

What happens to fixed costs when the level of production output reaches zero?

answer

They remain unchanged.

question

Which of the following are examples of variable costs?

answer

Materials costs
Fuel costs
Transportation services payments

question

A firm's insurance premiums are generally considered costs.

answer

Fixed

question

A firm cannot avoid paying fixed costs in the run.

answer

short

question

Which best characterizes variable costs?

answer

Costs that change with the level of output

question

Later in a production cycle, as diminishing returns are encountered, variable costs ______ for each additional unit of output.

answer

increase by increasing amounts

question

Which group of costs is the most accurate example of variable cost?

answer

Payments for materials, fuel, power, and transportation services

question

If at 10 units of output, total fixed cost is $10 and total variable cost is $16, what is total cost?

answer

question

Variable costs change with the level of .

answer

Blank 1: output or production

question

What happens to variable costs during the onset of production when marginal product is increasing?

answer

They decrease with successive units of output.

question

How is total cost calculated?

answer

By adding total fixed cost and total variable cost

question

When output is 10, what is the total cost if total fixed cost is $50 and total variable cost is $75?

answer

125

question

At the point on a graph where total product (Q) is zero, total cost is equal to ______.

answer

total fixed cost

question

Which of the following enables firms to make per-unit comparisons with product price?

answer

Average-cost data

question

cost is the sum of fixed cost and variable cost at each level of output.

answer

Total

question

Which of the following is true of average fixed cost when output increases?

answer

Average fixed cost declines as output increases.

question

When viewed on a graph, total variable cost is measured ______ at each level of output from the X axis.

answer

vertically

question

Average fixed cost equals total fixed cost divided by the ______

answer

Amount if output

question

How can a business manager control variable costs in the short run?

answer

By altering levels of production

question

Per-unit costs are also referred to as ______ costs.

answer

Average

question

What is meant by the phrase "spreading the overhead"?

answer

As production increases, average fixed cost declines.

question

How is average fixed cost determined?

answer

Total fixed cost divided by output

question

Suppose the total fixed cost of a firm is $500, the total variable cost is $200, and the output produced is 5 units. The average fixed cost of the firm is ______.

answer

$100

question

In the short run, a business manager is unable to alter which of the following?

answer

Fixed Costs

question

If total variable cost is $100, total fixed cost is $100, and output is 10, what is average variable cost?

answer

$10

question

Which of the following enables firms to make per-unit comparisons with product price?

answer

Average-cost data

question

Which curve first falls and then rises?

answer

Average variable cost curve

question

What is the average fixed cost if total fixed cost is $100, total variable cost is $50, and output is 20?

answer

question

What is average variable cost if total variable cost is $500, total fixed cost is $100, and output is 50?

answer

question

Which of the following statements explain why the average variable cost curve is U-shaped?

answer

As output rises from the initial very low levels, greater specialization occurs, and average variable cost declines.
At low levels of output, production is relatively inefficient and costly.

question

Suppose at an output level of 150 units a firm's average fixed cost is $25 and average variable cost is $50. Then the average total cost of the firm is ______.

answer

question

What is the definition of average variable cost?

answer

Total variable cost divided by output (Q)

question

Which of the following sets of values are necessary to compute average total cost (ATC)?

answer

Total cost and output
Average fixed cost and average variable cost
Total variable cost, total fixed cost, and output

question

Which of the following best describes the average variable cost curve?

answer

It is U-shaped.

question

What methods can be used to calculate average total cost?

answer

Total cost divided by output (Q)
Average fixed cost plus average variable cost

question

One explanation for the U-shaped average variable cost curve is that greater ______ yields more efficiency and variable cost per unit of output declines

answer

specialization

question

What is the average fixed cost if the average total cost is $100 and the average variable cost is $75?

answer

question

What is average total cost if total cost is $100, variable costs are $75, fixed costs are $25, and output is 25?

answer

question

What does the vertical distance between the average total cost and average variable cost curves measure?

answer

Average fixed cost at any level of output

question

Total fixed cost divided by output plus total variable cost divided by the output yields which of the following?

answer

Average total cost

question

How is marginal cost (MC) calculated?

answer

By dividing the change in total cost by the change in output

question

If total cost rises from $300 to $700 when one additional unit of output is produced, what is the marginal cost?

answer

400

question

Marginal cost includes which of the following?

answer

All the cost associated with producing the last unit of output
The cost savings resulting from not producing the last unit of output

question

How is the average total cost curve determined from graphical information?

answer

By adding vertically the average fixed cost and average variable cost curves.

question

A firm's decision about what output level to produce is typically a ______ decision.

answer

marginal

question

What is the term for the extra cost of producing one more unit of output?

answer

Marginal cost

question

What is the marginal cost when output changes from 300 to 301 units and total cost rises from $400 to $500?

answer

100

question

Which best describes the graphical portrayal of marginal cost?

answer

The marginal cost curve declines sharply at first, reaches a minimum, and then rises abruptly.

question

What type of cost can be saved by not producing the last unit?

answer

Marginal

question

A firm's decision whether to produce a few more or a few less units of output is a decision based on which of the following?

answer

Marginal data

question

The marginal cost curve's shape is a consequence of the law of returns.

answer

diminishing

question

When is marginal cost at its minimum?

answer

When marginal product product is at its maximum

question

Where does the marginal-cost curve intersect the average-total-cost curve?

answer

At the minimum point of average total cost

question

The shape of the marginal cost curve reflects which of the following?

answer

Total variable cost first increases by decreasing amounts then by increasing amounts.

question

If all workers are hired at the same price, the marginal cost of producing each extra unit of output falls provided the ______ of each additional worker is rising.

answer

marginal product

question

The marginal-cost curve intersects with the average-variable-cost curve at the ______.

answer

average-variable-cost curve's minimum

question

The marginal-product curve is a mirror image of the ______ curve.

answer

marginal-cost

question

Average total cost goes up when marginal cost is greater than ______.

answer

average total cost

question

Which of the following are likely to cause cost curves to shift?

answer

Changes in resource prices
Changes in technology

question

Which of the following costs can a firm control directly and immediately?

answer

Marginal cost

question

What is the effect of an increase in the price of labor on the ATC, AVC, and MC curves?

answer

The average-variable-cost, average-total-cost, and marginal-cost curves shift upward.
The average-fixed-cost curve remains the same.

question

How are marginal costs and average fixed costs related?

answer

They are not related.

question

When is marginal cost at its minimum?

answer

When marginal product product is at its maximum

question

Which of the following occur when fixed costs increase?

answer

The average total cost curve shifts upward.
The average fixed cost curve shifts upward.

question

More efficient technology has what effect on the productivity of all inputs?

answer

It increases the productivity of all inputs.

question

An increase in the price of labor has no effect on which cost curve?

answer

Average-fixed-cost

question

Over what period of time can an industry and firms in that industry adjust all resource inputs used?

answer

The long run

question

Under the definition of long run, all resources and inputs are ______.

answer

variable

question

What is the relationship between productivity (MP & AP) and cost (MC & AVC) curves?

answer

They are mirror reflections of each other.
As productivity curves are rising, cost curves are falling.
As productivity curves are falling, cost curves are rising.

question

The long-run average-total-cost curve is derived from the many short-run average-total-cost curves, each of which represents a different ______.

answer

Plant size

question

In the run, firms are able to adjust all resources.

answer

Long

question

A planning curve is another term for which of the following?

answer

Long run average-total-cost curve

question

Economically speaking, what period of time is sufficient for new firms to enter or for existing firms to exit an industry?

answer

Long run

question

How is the long-run average-total-cost curve derived?

answer

From all points of tangency of the short-run average-total-cost curves

question

An increase in the price of labor has no effect on which cost curve?

answer

Average-fixed-cost

question

If a firm estimates that its level of output will be 40 units, it will most likely select the plant size depicted by which short-run cost curve in the accompanying figure?

answer

ATC -3

question

What does the long-run average-total-cost curve show?

answer

The lowest average total cost at which any chosen output level can be produced after the firm has had time to make adjustments in plant size

question

Why does the law of diminishing returns not account for the U-shape of the long-run average-total-cost curve?

answer

In the long run all resources and inputs are variable.

question

The smoothness of a long-run average-total-cost curve results from which of the following?

answer

The virtually unlimited number of available plant sizes

question

Economies of scale explain the downward-sloping part of the ______ curve.

answer

long-run average-total-cost

question

Increased labor ______ becomes more achievable as a plant increases in size.

answer

specialization

question

How does labor specialization allow a worker to become more proficient?

answer

It allows a worker to focus on fewer tasks and become more skilled in performing those tasks.

question

The U-shape of the long-run average-total-cost curve results from which of the following?

answer

Economies of scale
Diseconomies of scale

question

What is another term for economies of scale?

answer

Economies of mass production

question

Which businesses would allow for the greatest use of management specialization?

answer

An international airline
An automobile manufacturer

question

Which of the following is an example of labor specialization?

answer

Assigning each worker one task instead of five or six
Hiring more workers in order to subdivide tasks

question

Which of the following result from managerial specialization?

answer

Greater efficiency
Lower unit costs

question

Greater labor specialization has which of the following effects?

answer

It eliminates the loss of time that occurs whenever a worker shifts from one task to another.

question

What are reasons that it difficult for small firms to make use of efficient capital?

answer

The high price of production equipment is often prohibitive.
The efficient use of large-scale production equipment requires a high production volume.

question

Learning by doing contributes to a firm's ______.

answer

economies of scale

question

Which of the following best describes the relationship between a firm's size and its ability to use managerial specialization to its best advantage?

answer

Small firms cannot use management specialists to their best advantage.

question

A marketing supervisor works in a small plant where she performs a range of duties. As the company grows and hires additional supervisors, she is able to spend the bulk of her time in her area of expertise. In this example, the company has increased its ______.

answer

managerial specialization

question

In general, what production characteristic and plant size scale are required for efficient capital usage to be effective?

answer

Large-scale producers
High production volume

question

A firm grows from one to three plants. As a result, the firm's sales increase, leading to greater marketing expertise. This is an example of which of the following?

answer

Learning by doing

question

Less coordinated decision making by executives and supervisors leads to of scale.

answer

Diseconomies

question

Which of the following illustrates constant returns to scale?

answer

A firm's 10% increase in given inputs, causing a proportionate 10% increase in output

question

Learning by doing contributes to a firm's ______.

answer

economies of scale

question

With economies of scale, a 10% increase in all resources that causes a 20% increase in output results in which of the following?

answer

A decline in average total cost (ATC)

question

What is the primary cause of diseconomies of scale?

answer

The difficulty of efficiently controlling and coordinating a firm's operations as it becomes a large-scale producer

question

Which of the following worker productivity factors often lead to diseconomies of scale?

answer

Worker alienation from the employer
Increased opportunities to shirk and avoid work

question

Which of the following sections of a long-run average total cost curve depicts constant returns to scale?

answer

The flat section

question

True or false: In an industry with an extended range of constant returns to scale, firms of varying sizes can coexist and be equally profitable.

answer

True

question

By expanding the size of its operations, a growing firm is able to experience economies of scale to do which of the following?

answer

Lower its average total costs

question

Which of the following best illustrates diseconomies of scale?

answer

The increase in average total costs as a firm expands the size of its plant in the long run

question

True or false: Important determinants of an industry's structure are economies of scale and revenue.

answer

False

question

The figure illustrates that in an industry with an extended range of returns to scale, firms of varying sizes can coexist and be equally profitable.

answer

constant

question

Which of the following industries highlight the pattern of declining long-run average total costs?

answer

Computer microchip
Automobile
Aluminum

question

A ______ is a relatively rare market situation in which average total cost is minimized when only one firm produces the good.

answer

natural monopoly

question

When minimum efficient scale occurs at a low level of output, consumer ______ may support a large number of relatively ______ producers.

answer

demand; small

question

True or false: Heavy industries, such as aluminum and steel, exhibit the pattern of declining long-run average total costs.

answer

True

question

The shape of a long-run average-total-cost curve will determine ______.

answer

the number and size of firms in the industry

question

In heavy industries, small firms are unlikely to realize ______ and will be unable to compete with large-scale producers.

answer

minimum efficient scale

question

Start-up firms achieve of scale from learning by doing and through increased specialization of labor, management, and equipment.

answer

economies

question

True or false: Important determinants of an industry's structure are economies of scale and revenue.

answer

False

question

Which of the following occurs at a low level of output for small businesses such as those in retail trades and light manufacturing industries?

answer

Minimum efficient scale

question

What determines the shape of the long-run average-total-cost curve?

answer

Technology

question

By using economies of scale, successful start-up firms are able to shift their short-run cost curves in which directions?

answer

Downward and to the right

question

The lowest level of output at which a firm can minimize long-run average costs is called ______.

answer

Mimimum effect scale

question

What determines the shape of the long-run average-total-cost curve?

answer

...

question

What determines the shape of the long-run average-total-cost curve?

answer

...

question

Which of the following worker productivity factors often lead to diseconomies of scale?

answer

...

question

Average total cost equals total cost _______ by output.

answer

divided

question

What is the definition of economies of scale?

answer

Reductions in the average total cost of producing a product as the firm expands the size of its plant (its output) in the long run.

question

When cost curves shift, it is die to changes in which of the following?

answer

b) Technology
c) Resource prices

question

In time, the growth of a firm's plant size and output may lead to ________ and ________.

answer

higher average total costs; diseconomies of scale

question

________ cost is the sum of fixed cost and variable cost at each level of output.

answer

total

question

Which is the definition of explicit costs?

answer

b) A firm's monetary payments made for the use of resources owned by others.

d) A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services.

question

An ___________ cost is the value or worth the resource would have in its best alternative use.

answer

opportunity

question

Which of the following are examples of an opportunity cost?

answer

b) The opportunity cost of the paper used in printing textbooks is the value it would have in printing encyclopedias or romance novels.

c) The opportunity cost of steel used in constructing office buildings is the value it would have in manufacturing automobiles or refrigerators.

question

What is the best definition of constant returns to scale?

answer

d) The unchanging average total cost of producing a product as the firm expands the size of its plant (its output) in the long run.

question

A firm's decision about what output level to produce at is based on ________ decisions.

answer

a) marginal

question

________ costs are the firm's opportunity costs of using its self-owned, self-employed resources.

answer

implicit

question

________ costs equals the change or difference in total cost divided by the change or difference in output.

answer

marginal

question

Which of the following are types of costs that do not vary with changes in output (i.e., fixed costs)?

answer

a) Interest on a firm's debts
b) Rental payments
c) Insurance premiums

question

Total costs, including _______ (one word) and marginal costs change with the level of output.

answer

variable

question

Which of the following resources can a firm easily and quickly adjust?

answer

c) Raw materials
d) Fuel
e) Hourly labor

question

Assuming technology and production techniques are fixed and cannot change, if beyond some point of production, a firm experiences declining units of additional output with each additional unit of labor input, then the firm is experiencing the law of

answer

a) diminishing marginal returns

question

The _________ of any resource used to produce a good is the value or worth the resource would have in its best alternative use.

answer

economic cost

question

What methods can be used to calculate average total cost?

answer

a) Total fixed cost divided by output (Q) plus total variable cost divided by output (Q)

b) Total cost divided by output (Q)

c) Average fixed cost plus average variable cost

question

What type of costs in total do not vary with changes in output?

answer

b)Fixed

question

What is the definition of explicit costs?

answer

a) A firm's monetary payments made for the use of resources owned by others.

c) A firm's monetary payments for those who supply labor services, materials, fuel, and transportation services.

question

Economic costs are defined as

answer

a) the value or worth a resource would have in its best alternative use.

question

The formula for marginal costs is

answer

b) the change or difference in total variable cost divided by the change or difference in output
c) the change or difference in total cost divided by the change or difference in output

question

____________ costs are the monetary payments a firm makes to those who provide the factors or inputs to production.

answer

Explicit

question

When a firm chooses to produce the appropriate level of output, it has made:

answer

b) a decision in the margin

question

If a firm's total revenue is equal to its implicit and explicit costs, then the firm is said to earn a(n)

answer

a) normal profit
b) accounting profit
d) zero economic profit

question

A firm's costs of producing a specific output depend on which of the following?

answer

a) The prices of the needed resources required to produce a given output.

d) The quantities of resources required to produce a given output.

question

Which of the following are types of resources that require more time for a firm to adjust, given a change in demand?

answer

a) Amount of machinery

c) Size of the factory

question

Average product of labor is also referred to as labor _________.

answer

productivity

question

What is another term for economies of scale?

answer

Economies of mass production

question

Which of the following are examples of implicit costs?

answer

b) Foregone wages
c) Foregone rent

question

Average ________ cost always declines as output increases.

answer

fixed

question

Economically speaking, what period of time is sufficient for new firms to enter or for existing firms to exit an industry?

answer

b) The long run

question

_________ costs are payments made by firms to attract the resources they need away from alternate production opportunities.

answer

a) Economic
e) Opportunity

question

From an existing firm's perspective, the ________ ________ is a time period during which it can adjust the quantities of all the inputs that it employs, including plant capacity.

answer

long run

question

What is the total revenue if economic profit is $24,000 and economic costs are $96,000?

answer

$120,000

question

Which of the following are ways that industries and firms can change the amounts of inputs used in the long-run?

answer

a) An industry can change its overall capacity.

c) A firm can build a larger plant.

d) An industry can make major complex technological production advances.

question

When marginal product at its maximum, marginal costs:

answer

a) begin rising with additional output produced.

c) are at a minimum at the same output level

question

The long run average total cost curve is made up of:

answer

d) all points of tangency of the short run average total cost curves

question

If at 10 units of output, total fixed cost is $10 and total variable cost is $16, what is total cost?

answer

c) $26

question

What is the effect of an increase in the price of labor on the ATC, AVC, AFC, and MC curves?

answer

a) The average variable cost, average total cost, and marginal cost curves shift upward.

c) The average fixed cost curve remains the same.

question

Total variable costs _______ with increases in output

answer

rise

question

What is average fixed cost if average total cost is $100 and average variable cost is $75?

answer

$25

question

What type of costs do firms incur when producing products?

answer

a) Implicit
d) Explicit

question

Labor _______ allows workers to become even more proficient in their tasks as they work at fewer tasks.

answer

specialization

question

Which of the following is an example of labor specialization?

answer

b) Each worker may now have just one task instead of five or six.

d) Workers can work full-time on the tasks for which they have unique skills.

e) Hiring more workers means jobs can be divided and subdivided.

question

What is the definition of efficient capital?

answer

c) The purchase and effective use of efficient capital equipment to achieve large scale production economies of scale

question

The size of the factory, the amount of machinery and equipment, and other capital resources make up __________ __________.

answer

plant capacity

question

Marginal cost designates the cost that:

answer

a) can be incurred by producing an additional unit

c) can be saved by not producing the last unit

question

As a firm grows, decision making may slow, impairing efficiency and _______ average total cost.

answer

raising

question

Which of the following is not covered when an entrepreneur's economic profit is zero?

answer

b) Pure profit

question

When a firm considers its economic costs, it considers

answer

a) all opportunity costs of resources used

d) explicit and implicit costs

question

The shape of a long-run average total cost curve will determine:

answer

c) the number and size of firms in the industry

question

If you quit your job to start your own business, your forgone wages are:

answer

a) an opportunity cost

c) an implicit cost

question

A natural monopoly is a relatively rare market situation where average total cost is

answer

b) minimized when only one firm produces the particular good.

question

Which group of costs is the most accurate example of variable cost?

answer

b) Payments for materials, fuel, power, and transportation services

question

Increased fixed costs shift the average fixed cost and the average total cost curves _________.

answer

upward

question

When a firm's total revenue exceeds all its economic costs

answer

a) the residual goes to the entrepreneur

d) the residual is called economic or pure profit

question

If total variable cost is $100, total fixed cost is $100, and output is 10, what is average variable cost?

answer

b) $10

question

An _________ profit is equal to total revenue less explicit costs.

answer

accounting

question

Greater ________ specialization eliminates the loss of time that occurs whenever a worker shifts from one task to another.

answer

b) resource

question

Heavy industries, such as aluminum and steel, exhibit the pattern of _______ long-run average total costs.

answer

declining

question

A firm can most easily increase its output in the short run by

answer

c) adding units of labor to its fixed plant.

question

What is one reason for economies of scale?

answer

c) Labor specialization

question

Average total costs are pulled upward when _________ rises above average total costs.

answer

d) marginal cost

question

A firm's _________ costs are the explicit and implicit costs of the resources it has used.

answer

economic

question

Total variable cost reflects the law of _________ _________ as more and more variable resources are added.

answer

diminishing returns

question

An industry and the firms in that industry can adjust all resource ________ in the long run.

answer

inputs

question

__________ product of labor is total product divided by units of labor.

answer

Average

question

What is the definition of accounting profit?

answer

Accounting profit is what remains after a firm has paid its explicit costs.

question

The average variable cost curve is

answer

u-shaped

question

The long run exists when all inputs costs are _________.

answer

variable

question

__________ costs are part of the simple existence of a firm's plant and must be paid even when output is zero.

answer

fixed

question

_________ product is the change in total product divided by the change in labor input.

answer

Marginal

question

High-volume production and being a large-scale producer are economic justifications for:

answer

c) the purchase of efficient capital

question

Average total cost ________ when economies of scale exist and a firm is expanding production.

answer

declines

question

A firm can directly and immediately control its marginal costs by its controlling its ________ costs.

answer

variable

question

Total _________ costs equal explicit costs plus implicit costs.

answer

economic

question

________ product is zero when total product is at a maximum.

answer

marginal

question

A firm cannot avoid paying fixed costs in the _______ run.

answer

short

question

What is the definition of economic profit?

answer

c) Total revenue less economic costs (explicit and implicit)

question

All competitive markets involve which of the following?

answer

-demand
-quantity
-supply
-price

question

Which of the following specifically refers to demand?

answer

The buyer side of any market

question

The relationship between the price of a good or service and the quantity demanded of that good or service described by the law of demand is

answer

negative

question

The inverse relationship between price and quantity demanded can be graphically illustrated by ______.

answer

a downward sloping curve

question

All the following are the determinants of demand except ______.

answer

price of substitutes in production

question

Which of the following are the characteristics of a competitive market?

answer

-Standardized products
-A large number of buyers and sellers

question

The concept of demand can be summarized by a schedule or curve showing the quantity of a product that would be ______.

answer

consumed at various possible prices

question

A favorable change in consumer tastes and preferences for a product will _______ demand, shifting the demand curve to the

answer

increase, right

question

According to the law of demand, which of the following statements are true, all other things being equal?

answer

-As price decreases, quantity demanded increases.
-As price increases, quantity demanded decreases.

question

A demand curve shows the ______.

answer

inverse relationship between price and quantity demanded for a product

question

The demand for a normal good would likely increase in which of the following cases?

answer

-A decrease in the price of complementary goods
-An increase in the number of buyers

question

Which of the following are determinants of demand?

answer

-Consumer income
-Consumer expectations
-Consumer tastes
-Number of buyers
-Prices of related goods

question

An unfavorable change in consumer tastes and preferences for a product will ______ demand, which is illustrated as a shift of the demand curve to the ______.

answer

decrease; left

question

A change in the number of buyers is a determinant of market ________.

answer

demand

question

Which of the following is likely to cause an increase in the demand for a good or service?

answer

An increase in the number of buyers

question

The willingness and ability of a consumer to buy a normal product falls because of ______.

answer

a fall in income

question

The price of ______ goods is a determinant of demand.

answer

question

In the marketplace, what is a good that can be used in place of another good called?

answer

A substitute good

question

A ______ good is one that is used together with another good.

answer

complementary

question

Which of the following is a determinant of demand?

answer

Income

question

What are two goods called when a change in the price of one good has little or no effect on the demand for the other?

answer

Independent goods

question

One of the determinants of demand is ______ expectations.

answer

consumer

question

Which of the following types of goods affect the demand for another product due to a change in their price?

answer

-Complementary goods
-Substitute goods

question

A change in demand is represented by a ______ the demand curve while a change in quantity demanded is represented by a _______ the demand curve.

answer

shift of; movement along

question

Which of the following has the greatest effect on the quantity supplied?

answer

Price

question

In general, a firm will _______ the output of a good or service if the price of the good is rising.

answer

increase

question

The vast majority of goods that are not related to one another are called ______ goods.

answer

independent

question

The supply curve illustrates the relationship between ______.

answer

price and quantity supplied

question

Consumer expectations are a determinant of _______.

answer

demand

question

When drawing a supply curve, _____ is labeled on the vertical axis.

answer

price

question

A ______ the demand curve represents a change in demand while a ______ the demand curve represents a change in the quantity demanded.

answer

shift of; movement along

question

Which of the following are determinants of supply?

answer

-Resource prices
-Taxes and subsidies
-Technology

question

Market _______ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.

answer

supply

question

According to the law of supply, price and quantity supplied have a(n) ______ relationship.

answer

direct/positive

question

The supply curve is ______ sloping curve.

answer

an upward

question

If costs of production rise, the producer has an incentive to produce ______ output.

answer

less

question

The supply curve measures quantity ______ on the horizontal axis and ______ on the vertical axis.

answer

supplied; price

question

______ resource prices raise production costs and, assuming a fixed product price, ______ profits.

answer

Higher; reduce

question

The determinants of the supply of a good are any factors other than the product's ______ that cause the supply curve of the good to shift.

answer

price

question

Choose all of the following that will cause a change in supply, not quantity supplied.

answer

-Technology
-Producer expectations
-Number of sellers

question

What determines market price and equilibrium output in a market?

answer

The interaction of buyers and sellers

question

True or false: Resource costs or changes in these costs to production are responsible for shifts in the supply curve.

answer

True

question

Greater resource prices _______ the costs of production, thereby, ______ the incentive for firms to produce the good at each price.

answer

increases; reducing

question

What is the price where the intentions of buyers and sellers match?

answer

The equilibrium price

question

On a simple supply model, a change in quantity supplied is illustrated by a ______ and a change in supply is illustrated by a ______.

answer

movement along the supply curve; shift of the supply curve

question

The rationing function of prices refers to the ability of the competitive forces of supply and demand to establish a price at which ______.

answer

buying and selling decisions are consistent

question

The interaction between buyers and sellers determines the equilibrium price and the ________ quantity.

answer

equilibrium

question

Competition among corn producers forces them to use the best technology and right mix of productive resources; otherwise their costs will be too high relative to the market price and they will be unprofitable. This is best described as ______.

answer

productive efficiency

question

The equilibrium price where the quantity demanded equals the quantity supplied is otherwise known as the __________ price

answer

market-clearing

question

A decrease in demand while holding supply constant results in _______.

answer

a decrease in both equilibrium price and quantity

question

The ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent is called ______.

answer

the rationing function of prices

question

______,while holding demand constant, results in an increase in the equilibrium price of the good, but a decrease in the equilibrium quantity of the good.

answer

A decrease in the supply of a good

question

The production of a good or service in the least costly way is known as ______ efficiency.

answer

productive

question

Which of the following shows the effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand?

answer

Equilibrium price falls and the change in equilibrium quantity is indeterminate.

question

Government may place legal limits on prices when it is determined that prices are unfairly ______ for buyers or unfairly ______ for sellers.

answer

high, low

question

A decrease in demand while holding supply constant results in ______ in both equilibrium price and quantity.

answer

a decline

question

A decrease in supply while holding demand constant results in a(n) ______ in equilibrium price, and a(n) ______ in equilibrium quantity.

answer

increase; decrease

question

A price ceiling is the maximum legal price a seller may charge for a product or service where a price at or below the ceiling is ______ and a price above the price ceiling is ______.

answer

legal; illegal

question

The effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand are shown by ______.

answer

a decrease in equilibrium price and an indeterminate change in equilibrium quantity

question

In which of the following situations do governments intervene to prevent prices from rising above or falling below their equilibrium levels?

answer

-Prices are too high for consumers.
-Prices are too low for firms.

question

Price controls or ______ mandated in the apartment rental market benefit the consumer by establishing a price ______ the free market equilibrium price.

answer

ceilings; below

question

A price _____ is a minimum price fixed by the government, generally imposed above the equilibrium price.

answer

floor

question

A decrease in equilibrium price and indeterminate result on equilibrium quantity is a result of which of the following?

answer

An increase in supply and a simultaneous decrease in demand

question

Which of the following in the rental market for housing benefits renters, but makes it unprofitable for suppliers or landowners?

answer

A price ceiling

question

Which of the following are the characteristics of a competitive market?

answer

A large number of buyers and sellers
Standardized products

question

According to the law of demand, which of the following statements are true, all other things being equal?

answer

As price decreases, quantity demanded increases.
As price increases, quantity demanded decreases.

question

A change in the number of buyers is a determinant of market

answer

demand

question

A ______ good is one that is used together with another good.

answer

complementary

question

Market ______ is a schedule or curve showing the various amounts of a product that producers are willing and able to make available for sale at each possible price during a specific period.

answer

supply

question

The supply curve illustrates the relationship between ______.

answer

price and quantity supplied

question

The supply curve measures quantity ______ on the horizontal axis and ______ on the vertical axis.

answer

supplied; price

question

Which of the following has the greatest effect on the quantity supplied?

answer

Price

question

The price of ______ goods is a determinant of demand.

answer

question

On a simple supply model, a change in quantity supplied is illustrated by a ______ and a change in supply is illustrated by a ______.

answer

movement along the supply curve; shift of the supply curve

question

If costs of production rise, the producer has an incentive to produce (one word) output.

answer

less, lower, fewer, decreased, reduced, lesser, or low

question

The equilibrium price where the quantity demanded equals the quantity supplied is otherwise known as the ______-clearing price.

answer

Market

question

The ability of the competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent is called ______.

answer

the rationing function of prices

question

A decrease in demand while holding supply constant results in _______.

answer

a decrease in both equilibrium price and quantity

question

A decrease in equilibrium price and indeterminate result on equilibrium quantity is a result of which of the following?

answer

An increase in supply and a simultaneous decrease in demand

question

Choose all of the following that will cause a change in supply, not quantity supplied.

answer

Technology
Producer expectations
Number of sellers

question

The effects on equilibrium price and quantity due to an increase in supply and a simultaneous decrease in demand are shown by ______.

answer

a decrease in equilibrium price and an indeterminate change in equilibrium quantity

question

A price _____ (one word) is a minimum price fixed by the government, generally imposed above the equilibrium price.

answer

floor

question

How is the market supply curve derived from the supply curves of individual producers?

answer

...

question

Which of the following characteristics leads to a upward-sloping supply curve? Select all that apply

.- Increasing opportunity costs

- Increasing marginal costs

- Diminishing marginal utility

- A decrease in resource prices

- An increase in resource prices

- Increasing labor productivity

answer

- Increasing opportunity costs

- Increasing marginal costs

question

Allocative efficiency refers to:
-the full employment of all available resources.

-production at some point inside of the production possibilities curve.

-the production of the product mix most wanted by society.

-the use of the least-cost method of production.

answer

...

question

Which of the following will cause the demand curve for product A to shift to the left?

answer

An increase in money income if A is an inferior good.

question

The supply curve shows the relationship between:

answer

price and quantity supplied.

question

A leftward shift of a product supply curve might be caused by:

answer

some firms leaving an industry.

question

Economists use the term "demand" to refer to:

answer

a schedule of various combinations of market prices and amounts/quantities demanded.

question

The location of the product supply curve depends on the:

answer

production technology.

question

Blu-ray players and Blu-ray discs are:

answer

complementary goods

question

Refer to the diagram. A surplus of 160 units would be encountered if the price was

answer

$1.60

question

Allocative efficiency refers to:

answer

the production of the product mix most wanted by society.

question

Refer to the diagram. A shortage of 160 units would be encountered if price was:

answer

$0.50

question

If products A and B are complements and the price of B decreases, the:

answer

demand for A will increase and the quantity of B demanded will increase

question

The rationing function of prices refers to the:

answer

capacity of a competitive market to equate the quantity demanded and the quantity supplied.

question

If price is above the equilibrium level, competition among sellers to reduce the resulting:

answer

...

question

The law of supply indicates that, other things equal:

answer

...

question

The disagreement among economists typically revolves around

answer

normative economics

question

If economists examine the relationship between the price of a good and sales of that good while ignoring other related factors, or assuming those other factors are equal, they are using which of the following?

answer

ceteris paribus

question

Which discipline studies the decision-making process of customers, workers, households, and business firms on an individual basis rather than as aggregates?

answer

Microeconomics

question

Economic principles are generalized statements that ______ consumer behavior.

answer

look at typical

question

What is the focus of positive economics?

answer

Cause-and-effect relationships and Facts

question

The ____ problem refers to the need to make choices because economic wants exceed economic means.

answer

economizing

question

As a result of our ______ incomes and ______ wants, it is in our self-interest to economize or pick and choose goods and services that maximize our satisfaction.

answer

limited; insatiable

question

______ economic resources means limited goods and services.

answer

scarce

question

What do combinations of output that fall inside the production possibilities curve represent?

answer

goods that are attainable and less total outcome than points on the curve

question

What is the cause of a society's increasing opportunity costs with respect to the production of goods?

answer

Resources that are not fully interchangeable

question

The assumption behind purposeful behavior is that ______.

answer

people act in such a way as to rationally pursue their own interests

question

When people get satisfaction from charitable giving, they are ______.

answer

acting out of rational self-interest

question

Because consumers behave in a rationally self-interested manner, the consumer will purchase a good or service ______.

answer

when the marginal benefit is greater than the marginal cost

question

Economic principles are generalizations that are ______.

answer

expressed as the tendencies of average consumers, workers or firms

question

In a world of scarcity, ______.

answer

the decision to obtain the marginal benefit (MB) of a specific option always includes the marginal cost (MC) of forgoing something else

question

A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions is known as a(n) ______.

answer

economic principle

question

_____is the discipline that examines the performance and behavior of an economy as a whole.

answer

Macroeconomics

question

When economists consider the output of all U.S. businesses as a single entity, they are treating them as a(n) ______.

answer

aggregate

question

True or false: Positive economics encourages value judgments.

answer

false

question

Normative economics is ______.

answer

Based on value judgments

question

For better or worse, people have ______.

answer

virtually unlimited wants

question

Which of the following describes a budget line?

answer

A curve showing various combinations of two products a consumer can purchase with a specific amount of income.

question

What does every point on a budget line graph represent?

answer

All combinations of goods that can be purchased with a given income

question

Which of the following combinations are unattainable given a consumer's budget line?

answer

Combinations that fall beyond the budget line

question

True or false: A decrease in income will shift the budget line to the left.

answer

True

question

_____ lists the different combinations of two products that can be produced with a specific set of resources, assuming full employment

answer

Production Possibilities Table

question

Points lying ______ the production possibilities curve represent greater, but unachievable levels of output with current inputs, than that at any point on the curve.

answer

outside

question

Positive economics ______ value judgments, tries to establish ______ statements about economic behavior, and deals with ______ economic events.

answer

avoids; scientific; actual

question

What best describes the combination of goods that lie on the production possibilities curve?

answer

they are attainable; they utilize the economy's available resources

question

An increase in income will ______.

answer

shift the budget line to the right

question

Which of the following are ways of expressing the meaning of ceteris paribus?

answer

Assuming other things remain constant and Assuming factors other than those being considered in a particular analysis do not change

question

A consumer's ____ line or constraint shows various combinations of two products that can be purchased with a specific amount of income.

answer

budget

question

Which of the following are issues most explored in microeconomics?

answer

Measuring the price of specific goods,
the expenditures of a government entity,
measuring total revenues of a firm

question

The straight-line budget constraint indicates ______ opportunity cost.

answer

constant

question

Trade-offs arising from limited resources give rise to ______.

answer

opportunity costs

question

Consumers must make choices about what to buy and what to forgo to fulfill wants because ______.

answer

consumers' incomes are limited

question

A production possibilities curve (PPC) illustrates the attainable combination ______,

answer

of two goods that can be produced given a specific set of resources

question

A production possibilities curve with an increasing slope is the result of which of the following?

answer

The law of increasing opportunity costs

question

When an economy produces a good such that the marginal benefit equals the marginal cost, this indicates that ______.

answer

resources are being allocated efficiently

question

Points lying ______ the production possibilities curve are attainable but reflect less total output than can be produced.

answer

inside

question

Which of the following is true of positive economics?

answer

It avoids value judgments, tries to establish scientific statements about economic behavior, focuses on facts and cause-and-effect relationships.

question

A trade-off occurs when some quantity of production of a good is given up in order to produce another good.

answer

True

question

All natural resources, human resources, and manufactured goods that go into the production of goods and services are considered as society's scarce __________ resources.

answer

economic

question

From an economic standpoint, ______ includes all natural resources used in the production process.

answer

land

question

The work-related activities of a teacher and doctor fall under the resource category of _______.

answer

labor

question

Factories, storage, transportation, and machinery are all examples of ______ goods.

answer

capital

question

In economics, the term ______ describes spending that pays for the production and accumulation of capital goods.

answer

investment

question

True or false: Everyone except for the super wealthy has a finite, or limited, amount of income.

answer

False

question

Economists do not include money as an economic resource because ______.

answer

money produces nothing

question

Taken together, the four general categories of economic resources (land, labor, capital, and entrepreneurial ability) are referred to as which of the following?

answer

Factors of production

question

A ______ lists the different combinations of two products that can be produced with a specific set of resources, assuming full employment.

answer

production possibilities table

question

Which statement best describes combinations of goods that are beyond the production possibilities curve?

answer

They are unattainable

question

Land and mineral resources, transportation and communication facilities, factories and farm buildings, equipment, tools and machinery are all examples of _______.

answer

scarce economic resources

question

Which of the following resources would be considered to be land by an economist?

answer

Water
Oil and mineral deposits
Forests
Arable land

question

Unemployment in the economy is graphically represented by ______ the production possibilities curve.

answer

points inside

question

Which of the following enables society to produce more goods with current resources?

answer

Advances in technology

question

Which of the following can be stated as potentially true about any economy?

answer

Its current choice of position on its production possibilities curve helps determine the curve's future location.

question

When a country engages in international specialization, it focuses on producing which of the following?

answer

Goods with the lowest opportunity costs

question

The pleasure, satisfaction, or happiness obtained from consuming a good or service is known as ________

answer

utility

question

Your next-door neighbors want to go on a European vacation but cannot afford it, so they decide to visit a local amusement park instead. This is an example of ______.

answer

the economizing problem

question

People desire goods and services that provide maximum utility. In fact, our desires or wants are ______.

answer

unlimited

question

The ratio of the price of two goods on a graphed budget line is measured by its _______.

answer

slope

question

This ______ table lists the different combinations of pizza and robots that can be produced with a specific set of resources.

answer

production possibilities

question

A manufacturing firm builds a new warehouse to expand its inventory capacity. Economists refer to this activity as ______.

answer

investment

question

What is the simplified term economists use to refer to "factors of production"?

answer

inputs

question

Which of the following illustrates the attainable combination of two goods that can be produced given a specific set of resources?

answer

Production possibilities curve

question

The optimal allocation of resources occurs when ______.

answer

the marginal benefit of the good equals the marginal cost

question

A point that lies inside the production possibilities curve reflects which of the following?

answer

A failure to achieve full employment

question

Improvements in the methods of production allows for the creation of ______.

answer

more goods with available resources

question

Specializing and participating in international trade allows an economy to do which of the following?

answer

Circumvent the output limits imposed by its own production possibilities curve
Increase the quantities of capital and consumer goods available to society

question

_______ comes in form of wages, interest, rent, profit, and even from government programs.

answer

Income

1 of 713

question

How much will a profit-seeking monopolist produce if producing is preferable to shutting down?

answer

It will produce to the output at which marginal revenue equals marginal cost (MR=MC)

question

Government creates_____ barriers to entry.

answer

legal

question

Two legal ___ to entry are patents and licenses

answer

barriers

question

Which of the following is considered a barrier to entry into an industry?

answer

Ownership of essential property

question

Monopolists may create an entry barrier when confronted with a new entrant into the industry by _____

answer

-reducing product price
- taking other strategic and making entry difficult to rival
- incurring advertising cost

question

What is the term used to refer to charging different prices to different buyers of a specific product?

answer

price discrimination

question

Which of the following is a reason for a monopolist to use pirce discrimination?

answer

to increase its profits

question

Which of the following are conditions necessary for price discrimination?

answer

-monopoly power
-market segregation
-no resale

question

True or false: Price discrimination is not practiced very often in the US economy.

answer

False (price discrimination is widely practiced in the US economy)

question

Which of the following can increase profits by charging different prices to different buyers?

answer

A monopoly

question

True or false: Price discrimination is always legal in the US

answer

False

question

A monopolist can increase its profit by

answer

Charging different prices to different buyers

question

The change in total revenue is called ___ revenue

answer

marginal

question

Which of the following descries why marginal revenue is less than price in an imperfect market?

answer

because the lower price of the extra unit of output also applies to all prior units of output.

question

Whit a fixed downward-sloping demand curve, the pure monopolist can only increase sales by charging a ___ price

answer

lower

question

Marginal revenues (MR) for the monopolist compared to that of a pure competitor .......

answer

declines and is lower than product price

question

In a pure monopoly,____ is less than the price for every unit of output except the first.

answer

marginal revenue

question

True or false: For a pure monopolist, total revenue increases at an increasing rate

answer

False (total revenue increases at a diminishing rate)

question

When marginal revenues is _____ (positive/negative) total revenues is diminishing.

answer

negative

question

What happend to total revenue when marginal revenue is positive?

answer

it its increasing

question

______ competitors include pure monopolists, oligopolists, and monopolistic competitors.

answer

Imperfect

question

Firms with downward-sloping product____ curves are called price_____.

answer

demand; makers

question

Imperfect competitors, by changing market supply, cna influence product____.

answer

price

question

______ competitors can influence total supply through their won output decisions.

answer

Imperfect

question

A monopolist will never choose a price-quantity combination where price reductions cause:

answer

total revenues to decrease (marginal revenue to be negative)

question

The profit-maximizing monopolist will always want to avoid the _____ segment of tis demand curve

answer

inelastic

question

If a firm is found guilty of achieving a monopoly through anticompetitive actions, then the firm

answer

-may be bronkent into 2 or more cometing firms
-may be expressly prohibited from engaging in business activities.

question

Which of the following can cause X-inefficiency?

answer

-hiring incompetent relatives
-poorly motivated work force
-desire for easier work life

question

What is it called when a firm spends significant money to mantain a monopoly through government legistlation?

answer

rent-seeking expenditures

question

Economies of scale refer to ____ average total costs whit added firm size.

answer

declining

question

Barriers to ___reduce the likelihood or prohibits firms from entering an industry

answer

entry

question

Which of the following wxists when a single firm is the sole producer of a product for which there are no close substitutes?

answer

pure monopoly

question

X-inefficiency occurs when a firm operates at a cost, which is_____ than the lowest cost for a particluar level of output.

answer

higher

question

answer

-Employ the profit-maximizing or loss-minimizing ruel of MR=MC
Identify the profit-maximizing or loss-minimizing price and output by finding the price/output combination at MR=MC

question

Government licesing is a legal ___ to entry.

answer

barrier

question

What is the differnce in demand between a purely competitive seller and a monopolist?

answer

Demand for the purely competitive seller is perfectly elastic, and demand for the monopolist is not.

question

When comparing the demand curve for a perfectly competitive firm to demand curve of a monopolist, the monopolist's demand curve would be more______

answer

inelastic

question

What aspect of the market defines the crucial difference between a pure monopolist and a purely competitive seller?

answer

the demand curve

question

Which of the following are assumptions made in the model of pure monopoly?

answer

question

Comparing total revenue and total cost at each possible level of production and choosing the output with the greatest possible difference is another way to determine

answer

-the loss-minimizing output
-the profit-maximizing output

question

For the pure monopolist, there is no relationship between____ and quantity supply and therefore no supply curve

answer

priceWhich

question

Which of the following are reasons that a monopolist is consider a price maker?

answer

-the monopolist exerts control over the price
-the monopolist controls the total quantity supplied

question

The economic profict per unit is the amount that the product price ______the average total cost at the profit-maximizing output

answer

is grater than

question

Total ____ profit is found by multiplying per-unit profit by the profit-maximizing output.

answer

economic

question

Which of the following are characteristics of public utilities?

answer

-Government owned or regulated
-Monopolies or near monopolies

question

Entry is completely blocked to competitors in the case of pure______

answer

monopoly

question

_____ laws aim to protect an inventor from rivals who would use teh invention without having shared in the effort and expense of developing it.

answer

Patent

question

What is another name for deadweight loss?

answer

Efficiency loss

question

When productive efficiency and allocative efficiency are not achieved in the market, it is called

answer

Efficiency loss

question

Simultaneous_____ is a product's ability to satisfy a large number of consumers at the same time

answer

consumption

question

True or false: Network effects exist if the value of a product to each user decreases as teh total number of users increases.

answer

False (value of product increases as the number ot users increases)

question

Which of the following are potential solutions to the economic losses incurred by a regulated monopoly cuased by socially optimal pricing?

answer

-providing a public subsidy to cover the loss
-to condone price discrimination

question

True or false: In the Unitde States, most regulatory agencies do not establish a fair return price.

answer

False

question

Which of the following are the main characteristics of a pure monopoly?

answer

-Absolute control over the price
-Presence of a single seller
-Unavailability of close substitutes for its products
-Blocked entry for other firms

question

A monopolist is a price____ because it controls the total quantity produced and thus has control over the price

answer

maker

question

Which of the following are examples of a geographic monopolies?

answer

-A small town with one railroad
-A small town served by one airline
-A small town with one restaurant

question

A monopolist does not achieve productive efficiency because it produces a level of output that does not correspond to the minimum point of the ______ ______ cost curve

answer

average total

question

Monopoly yields neither productive nor _______ efficiency

answer

allocative

question

At the profit-maximizing output, a monopolist's _____ is higher than marginal cost; therefore, a monopolist has alloctive inefficiency

answer

price

question

Which of the following combine, in differing degrees, characteristics of pure competitions and pure monopoly?

answer

Monopolistic competition and oligopoly

question

A price _____ will use its power over product quantity and price whenever it is adventageous to do so.

answer

maker

question

The main characteristics of a pure_____ are a single seller, no close substitutes, a price maker, blocked entry, and non-price competition.

answer

monopoly

question

How close a monopolist charge the price of its products?

answer

By changing the quantity of the product it produces

question

Which of the following are reasons for a monopoly's loss of economic profit?

answer

-change in tastes reducing demand
-upward-shifting curves caused by escaliting resource price

question

Which of the following does the monopolist ot have?

answer

a supply curve

question

A monopolist uses the profit-maximizing rule of marginal revenue equals marginal cost to determine______ and ____

answer

price; quantity

question

If the objective of government is to achieve allocative efficiency, what kind of price should government establish for the monopolist?

answer

One that is equal to its marginal cost

question

The socially optimal price is where a monopoly's price is equal to :

answer

marginal cost

question

With a natural monopoly the demand curve intersects the long-run average total cost curve where the long run average total cost curve is still_____.

answer

falling

question

What may occur when only a single firm can achieve the economies of scale necessary to compete in an industry?

answer

Natural monopoly

question

Which of the following are entry barriers created by monopolists?

answer

-Increased advertising
-Price reductions

question

Slashing prices is an example of an entry barrier created by a (n)

answer

monopoly

question

A pure monopolist must face a downward-sloping product _______ curve

answer

demand

question

A _______ -monopoly is a single firm that has the bulk of sales in a specific market.

answer

near

question

Because Intel provides 80% of the central microprocessors used in persoanl computers, it is a:

answer

near-monopoly

question

Which of the following reasons explains why a professional sport team can be considered a monopoly?

answer

They are the sole suppliers of specific services in a large geographic area

question

_______ (one word) is/are worth studying because it provides insights into the market structures of monopolistic competition and oligopoly

answer

Monopoly

question

What is the term used to describe a single firm with the bulk of sales in a specific market<

answer

Near-monopoly

question

answer

-Identify the profit-maximizing or loss-minimizing price and output by finding the price/output combination at MR=MC
-Employ the profit-maximizing or loss-minimizing rule of MR=MC

question

Which characteristics of pure monopoly requires a consumer to buy the monopolized product or do without it enterely?

answer

No close substitutes

question

A firms's long-run average total cost may decline over a wide range of output due to ______ of scale

answer

economies

question

Which of the following are reasons monopoly is not widespread in the United States

answer

-Patents eventually expire
-Barriers to entry are seldom completely successful

question

A(n)________ is able to mantain an economic profit in the long run because there are no new entrants to increase supply, dirve down price, and eliminate economic profit

answer

monopoly

question

All else equals, which is more likely to experience and economic profit in the long-run?

answer

A pure monopolist

question

A pure monopolist has no____ curve

answer

supply

question

Patents and patent laws aim to protect the inventor from

answer

rivals

question

What leads to most patentable inventions and products?

answer

Research and development

question

The exclusive right of an inventor to use, or to allow another to use her or his invention is called:

answer

patent

question

A natural monopoly occurs when he market demand curve crosses the long-run average total cost curve where average total costs (ATC) are still.....

answer

declining

question

Which of the following is a good example of network effects?

answer

_The Internet allows people to send and recieve emails
-People with similar software can share pictures

question

Which of the following is a reason for a monopolist to block entry in a market?

answer

-To restrict potential competitors from entering the market

question

When the demand for a good is price elastic, an increase in its price, will _______ total revenue

answer

decrease

question

Declines in long-run average total costs occur due to which of the following

answer

-spreding of product development costs
-simultaneous consumption
-network effects
-learning by doing
-greater use of specialized inputs

question

Monopolists use economies of scale to block the entry of new firms into an industry by reducing ______so that other firms cannot compete

answer

prices

question

All following are examples of barriers to entry except______.

answer

Income

question

answer

Produce 5 units of output and charge $122

question

Monopolistic competition and ______ combine, in differing degrees, characteristics of pure competition and pure monopoly

answer

oligopoly

question

Monopolies that produce standardized products engage mainly in _______

answer

public relations advertising

question

answer

each unit of output after the MR=MC amount will earn less revenue than its costs

question

Higher-than-competitive wages, nicer-than-typical office buildings, and more managers and staff than necessary are all examples of x-inefficiency found in ______ monopoly firms.

answer

regulated

question

Modern technology can be a cause of extensive____.

answer

economies of scale

question

The firm and ______ are synonymous in pure monopoly.

answer

industry

question

The highest barriers to entry can be found with pure_______. The lowest barriers to entry can be found with pure ________.

answer

monopoly; competition

question

A monopoly is likely to suffer loses when:

answer

- Price is set to marginal cost
-Price is set to achieve the most efficient allocation of resources

question

Which of the following contribute to the complexities incolve in fair-return pricing?`

answer

question

"Single-seller" refers to:

answer

-A sole producer of a specific good or service

question

The price discriminator's total profit is _____ than it would be with no discrimination .

answer

higher

question

In price discrimination, the price differences are not justified by _________ differences

answer

cost

question

The economic profit per unit is the amount that the product price ________ the average total cost ath the profit-maximizing output.

answer

is greater than

question

Which of the following types of firms have achieved economies of scale through information technologies?

answer

-Computer software
-Internet service
- Wireless communication

question

Monopolists that have________ products engage mainly in public relations advetising, while those with ______ products advertise their products' attributes

answer

standardized; differentiated

question

Economic, technological, legal, pricing and advertising strategies are all types of:

answer

Barriers of entry

question

Establishing a price ceiling for a mnopoly causes the monopoly's demand curve to become perfectly elastic out to:

answer

the quantity of demand that corresponds with the regulated price

question

Microsoft is a firm that benefits from _______ consumption.

answer

simultaneous

question

Which of the following are forms of price discrimination?

answer

question

What allows a natural monopoly to produce efficiently?

answer

- A declining long-run average total cost curve
-Extensive economies of scale

question

The price-discrimination monopolist charges a higher price to costumers who have ________ elastic demand and a lower price to costumers who have ______ elastic demand.

answer

less; more

question

The entry and the exit of firms in an industry are considered to be -run adjustments.

answer

long

question

The long run, every purely competitive firm tends to operate at its ______.

answer

minimum ATC

question

profits in a competitive industry will attract new firms into the industry.

answer

Economic

question

Economic profit for a firm will result if:

answer

price exceeds average total cost

question

In this graph, the equilibrium price is $50 and is equal to a firm's average total cost. Therefore, the firm is earning ______ economic profits, or a(n) ______ profit.

answer

zero; normal

question

Which of the following occur only in the long-run?

answer

The expansion or contraction of plant capacity
The entry and exit of firms

question

After all long-run adjustments are completed in a perfectly competitive market, output will occur at each firm's minimum average ______.

answer

total cost where product price is equal to marginal revenue

question

Economists maintain that new firms are attracted into an industry due to:

answer

economic profits

question

If the market price exceeds the firm's minimum average total cost (ATC), then it will ______.

answer

incur an economic profit

question

There is no incentive for firms to enter or exit the industry in the long run when ______.

answer

firms earn a normal profit
price equals minimum average total cost
MR = MC

question

Economic profit will fall to zero and firms will choose not to enter an industry when price is equal to which of the following factors?

answer

Minimum average total cost
Marginal cost

question

Why will firms choose not to enter an industry when marginal revenue, marginal cost, price, and average total cost are equal?

answer

Existing firms are earning only normal profits.

question

An unfavorable shift or ______ in demand will upset the original industry equilibrium and produce ______.

answer

decrease; losses

question

As firms exit the industry in the long run, market price rises and the losses for the remaining firms begin to subside. Firms will continue to exit until which of the following happens?

answer

There are no economic losses.

question

An industry where expansion or contraction will not affect resource prices and production costs is known as a(n) ______.

answer

constant-cost industry

question

Which of the following best explains why the long-run supply curve of a constant-cost industry is perfectly elastic?

answer

The entry and exit of firms changes industry output bringing the price back to its original level, where it is equal to the constant minimum ATC

question

Which of the following does an increasing-cost industry experience?

answer

A downward shifting average total cost (ATC) curve as the industry contracts.
An upward shifting average total cost (ATC) curve as the industry expands.

question

If demand for the good decreases creating economic losses, firms will exit the industry in the long run. As firms exit in the long run, industry supply will ______ and market price will ______.

answer

decrease; rise

question

True or false: Higher resource prices create lower ATC and cause an upward shift of the long-run ATC curve.

answer

False

question

If there are losses in the long run, what adjustments will take place?

answer

Firms will exit the industry until losses are eliminated.

question

A constant-cost industry is one where ______ will not affect resource prices and production costs.

answer

expansion or contraction

question

The entry of new firms entering an increasing-cost industry increase resource prices particularly:

answer

in industries using specialized resources whose long-run supplies do not readily increase in response to increases in resource demand

question

The shape of the long-run supply curve for a constant-cost industry can best be described as:

answer

horizontal

question

In an increasing-cost industry, increases in resource prices and the minimum average total cost (ATC) are a result of ______.

answer

increases in product demand resulting in economic profits and industry expansion

question

An industry whose average total cost curve shifts upward as the industry expands and shifts downward as the industry contracts is known as a(n) ______ industry.

answer

increasing-cost

question

A decreasing-cost industry is one in which firms experience ______ costs as their industry ______.

answer

higher; contracts
lower; expands

question

Higher resource prices will result in ______ total costs.

answer

higher average

question

All firms in a(n) ______ industry share the same basic efficiency characteristics.

answer

purely competitive

question

In the long run, a purely competitive firm will only earn a ______ profit.

answer

Normal

question

New firms entering an increasing-cost industry will usually (increase/decrease) resource prices.

answer

Increase

question

Competitive market economies generate ______.

answer

productive efficiency
allocative efficiency

question

In an increasing-cost industry, which of the following occur when an increase in product demand results in economic profits and attracts new firms to the industry?

answer

Increased resource demand drives up resource prices.
Each firm's ATC curve shifts upward.

question

Which of the following does a decreasing-cost industry experience?

answer

Lower costs as industry output expands.

question

Which type of market produces the most efficient use of society's resources?

answer

Pure competition

question

answer

question

A competitive firm may realize an economic profit or loss in the run but will earn only a normal profit in the run.

answer

Blank 1: short
Blank 2: long or longer

question

(Allocative/Productive) efficiency means that goods are produced in the least costly way.

answer

Productive

question

A competitive market generates efficiency and efficiency. (Enter one word for each blank.)

answer

Blank 1: productive
Blank 2: allocative

question

_ (one word) efficiency means that resources are distributed among firms and industries to yield a mix of goods and services that is most wanted by society.

answer

allocative

question

A purely competitive market leads to the efficient use of:

answer

society's scarce resources

question

The difference between the maximum price a consumer is willing to pay for a product and the actual price that they do pay is known as _____.

answer

consumer surplus

question

Productive efficiency requires that goods be produced ___.

answer

in the least costly way

question

Which of the following statements are true about allocative efficiency?

answer

question

How does a purely competitive market restore allocative efficiency when an increase in demand disrupts efficiency?

answer

New firms enter and increase industry output until price and marginal cost are equal.

question

Which of the following describes consumer surplus?

answer

It is the difference between the maximum price that consumers are willing to pay for a product and the market price for that product.

question

In purely competitive markets, efficiency can be temporarily disrupted and then restored by changes in:

answer

consumer tastes.
technological changes.
resource supplies.

question

When efficiency is disrupted in pure competition, producers will reallocate resources until product supply is such that price will again _____ marginal cost.

answer

equal

question

What must be eliminated or avoided if the "invisible hand" is to produce socially optimal outcomes in purely competitive markets?

answer

Externalities

question

True or false: Efficiency within pure competition can be temporarily disrupted by a change in consumer tastes.

answer

True

question

What will happen to a firm that finds a way to lower production costs through better technology or improved organization?

answer

Its profits will increase.

question

The transformative effects of competition are often referred to as:

answer

creative destruction

question

What are the effects of the "invisible hand" in a purely competitive economy?

answer

Maximum profits for individual producers
Resource allocation that maximizes consumer satisfaction

question

Strategies attempted by firms for increasing their profits include:

answer

developing a new product that is popular with consumers.
lowering production costs through improved business organization.
lowering production costs through better technology.

question

Creative captures the idea that the creation of new products and new production methods erodes the market positions of firms committed to existing products and old ways of doing business

answer

destruction

question

Match the market models based on the number of firms present in each model.

answer

Pure competition = Very large number
Monopolistic competition = relatively large number
oligopoly = few
Monopoly = One

question

Match each market structure with the description that best describes the conditions for exit and entry into that industry.

answer

Very easy, no obstacles = purely competitive
Relatively easy = monopolistically competitive
Significant obstacles = oligopoly
Blocked = monopoly

question

Which of the following are considered to be the four basic market structures?

answer

Pure competition
Pure monopoly
Oligopoly
Monopolistic competition

question

Which of the following best describes pure competition?

answer

An industry involving a very large number of firms producing identical products and in which new firms can enter or exit the industry very easily.

question

Which market structure has the fewest obstacles to entry or exit?

answer

Pure competition

question

A purely competitive industry has a very ______ number of sellers, whereas the other three market structures reflect a progressively ______ or ______ number of sellers.

answer

large; smaller; decreasing

question

Which of the following best describes a pure monopoly?

answer

One firm selling a single unique product, where entry of additional firms is blocked and there is considerable control over price

question

Economists group industries into distinct market structures.

answer

question

Pure ___ involves a very large number of firms.

answer

competition

question

Which of the following is a characteristic of a monopolistically competitive market?

answer

A relatively large number of sellers producing differentiated products

question

Which of the following best describes oligopoly?

answer

Involves only a few sellers of a standardized or differentiated product, so each firm is affected by the decisions of its rivals.

question

competition is considered to be rare in the real world.

answer

Pure or perfect

question

True or false: A pure monopoly involves a very large number of firms producing a single unique product.

answer

False

question

Firms within pure competition are considered to be price .

answer

takers or taker

question

Which of the following features occur in a purely competitive market?

answer

Sales in both national and international markets.
Many independently acting sellers

question

In which market model do firms rely on product differentiation to distinguish themselves from the competition?

answer

monopolistic competition

question

True or false: Firms within pure competition will produce standardized products.

answer

True

question

An oligopoly has ___ sellers and must consider the decisions of its rivals in determining its own ___ and output.

answer

few; price

question

Firms that operate in a purely competitive industry:

answer

do not differentiate their products

question

______ is relatively rare in the real world, although this market model is highly ______ to several industries.

answer

Pure competition; relevant

question

Which of the following are conditions necessary to have pure competition?

answer

very large number of firms or sellers
free entry and exit
standardized product

question

A basic feature of the purely competitive market is the presence of ______.

answer

a large number of sellers

question

In a purely competitive industry, buyers view the products of firms B, C, D and E as ______ for the product of firm A.

answer

perfect substitutes

question

Which of the following market structures produces only a standardized product?

answer

A purely competitive market

question

A firm operating in a purely competitive market is a price taker because it ______.

answer

cannot change the market price, it can only adjust to it

question

Which of the following best summarizes why firms in purely competitive industries do not differentiate their products?

answer

Because there are so many of them selling a standardized product

question

Because there are so many of them selling a standardized product

answer

A purely competitive firm offers only a negligible fraction of total market supply and therefore must accept the price determined by the market

question

In a purely competitive industry, an increase in the price of the product produced by firm A will cause buyers to ______.

answer

substitute with products of firms B, C, or D

question

Which factors illustrate that the demand curve for a purely competitive firm is perfectly elastic?

answer

The firm does not need to lower its price to increase its sales volume.
The firm cannot obtain a higher price by restricting its output.

question

answer

large; only a fraction

question

In a purely competitive market, price per unit to the purchaser is synonymous with per unit or revenue to a seller. (Enter one word per blank.)

answer

Blank 1: revenue or cost
Blank 2: average or marginal

question

A purely competitive firm is a price (Enter one word).

answer

taker

question

The price, multiplied by the firm's output or goods produced, equals ______.

answer

total revenue

question

answer

393; 131

question

In a purely competitive market, marginal revenue is a constant that is equal to which of the following?

answer

price

question

In a perfectly competitive market, the demand curve for an individual firm is perfectly at the market price.

answer

Blank 1: elastic, horizontal, flat, constant, or fixed

question

In a purely competitive market, price per unit to a buyer equals:

answer

average revenue to a seller

question

A purely competitive firm's total revenue (TR) is a straight line that slopes (upward/downward) and to the (left/right).

answer

Blank 1: upward, up, or upwards
Blank 2: right

question

A firm's total revenue is calculated as (Enter one word) times quantity produced.

answer

Price

question

The change in total revenue that results from selling one more unit of output is called revenue.

answer

marginal

question

In pure competition, marginal revenue and are equal. (Remember to type only one word per blank.)

answer

price

question

A purely competitive firm's demand schedule is equal to which of the following?

answer

marginal revenue
average revenue

question

A purely competitive firm's total revenue curve will

answer

have a constant slope because each extra unit of sales increases total revenue by a constant amount

question

In the short run, a purely competitive firm can maximize its economic profit (or minimize its loss) by adjusting its .

answer

Blank 1: output, production, supply, or quantity

question

What are two ways that a purely competitive firm can determine the level of output at which it will realize maximum profit or minimum losses?

answer

By comparing marginal revenue to marginal costs
By comparing total revenue to total costs

question

A(n) competitive firm's average-revenue schedule is also known as its demand schedule.

answer

Blank 1: pure, perfectly, or purely

question

After a company has determined that it should produce a product and the amount of the product to produce, what basic question should it ask?

answer

What economic profit (or loss) will we realize?

question

A purely competitive firm can maximize its economic profit (or minimize its loss) by adjusting only its output because it ______.

answer

is a price taker

question

The equation for determining economic profit or loss is ______ minus ______.

answer

total revenue; total cost

question

The two ways to determine the level of output at which a firm will realize maximum profit or minimum loss are to compare total revenue to ______ and to compare marginal revenue to ______.

answer

total cost; marginal cost

question

From an economic standpoint, the break-even point is the level of output at which a firm makes a(n) ______ profit.

answer

normal

question

Which of the following best describes marginal revenue?

answer

The revenue that an additional unit of output contributes to total revenue.

question

Confronted with the market price of its product, a purely competitive producer will ask which three questions?

answer

What economic profit or loss will we realize if we produce this product?
Should we produce this product?
If we produce this product, in what amount?

question

In the table, total economic profits at the profit-maximizing level of output are calculated as a total revenue of $______ minus approximate total costs of $______.

answer

1179; 880

question

Which of the following best describes the economic break-even point?

answer

The point where total revenue covers all costs, but there is no economic profit.

question

revenue is the additional revenue that an additional unit of would add to total revenue.

answer

Blank 1: Marginal
Blank 2: output or production

question

Which of the following explains why a firm would not produce a unit of output where MC exceeds MR?

answer

Producing it would add more to costs than to revenue, and profit would decline or loss would increase

question

When the marginal cost of an additional unit of output exceeds the marginal revenue, what should the firm do?

answer

Not produce that additional unit of output

question

Which of the following are scenarios in which a firm should continue to produce?

answer

Marginal revenue is $0.25 and marginal cost is $0.20.
Marginal revenue is $5 and marginal cost is $4.75.
Marginal revenue is $1.50 and marginal cost is $1.45.

question

A firm would not produce a unit of output where ______.

answer

marginal cost exceeds marginal revenue

question

A firm should not produce a unit of output when the marginal cost is (greater/lesser) than its marginal revenue.

answer

Blank 1: greater, bigger, larger, more, or higher

question

The profit-maximizing rule of MR=MC states that in the short run, the firm will maximize profit or minimize loss by producing the output for which marginal revenue ______ marginal cost.

answer

equals

question

In this table, at a price of $131, the profit-maximizing level of output is _____ units of output.

answer

question

In pure competition, to calculate economic profit, we first calculate the difference between and average total cost and then multiply it by output. (Type only one word in blank.)

answer

Price

question

A firm should produce any unit of output whose ______.

answer

marginal revenue is greater than marginal cost

question

In a purely competitive industry, at the profit-maximizing or loss-minimizing level of output, marginal ______ is equal to ______.

answer

revenue; marginal cost
revenue; price
cost; price

question

Based on the information given in the table, which of the following statements are true?

answer

Every unit of output up to and including the ninth unit represents greater marginal revenue than marginal cost.
The ninth unit of output is the profit-maximizing level of output.

question

Which of the following is a method of calculating economic profit in pure competition?

answer

Price minus average total cost multiplied by quantity

question

In this table, at a price of $81.00, the loss-minimizing level of output is _____.

answer

6 units

question

Which of the following improves as production increases?

answer

Price-marginal cost relationship

question

In this graph, a firm incurs a loss but continues to operate because price is ______ than the lowest average total cost but above the lowest average ______ cost.

answer

less; variable

question

This graph illustrates that a firm can minimize its losses by producing where ______.

answer

price exceeds minimum average variable cost but is less than average total cost

question

In this table, at a price of $71, the profit-maximizing or loss-minimizing level of output is ______.

answer

0 units

question

Which of the following best explains why the price-marginal cost relationship improves as production increases?

answer

At the very early stages of production, marginal product is low, making marginal cost unusually high.

question

Based on the information in this chart, at which price will a firm shut down?

answer

question

At which point will a firm be indifferent whether to shut down or continue to produce?

answer

Point b

question

Which of the following statements is true of the firm represented by this graph?

answer

The firm incurs a loss but should continue to operate because price exceeds the lowest average variable cost.

question

A firm should always stop producing if its average ______ cost is ______ price.

answer

variable; greater than

question

Between P2 and P4, the firm will minimize its losses by producing and supplying the quantity at which:

answer

MR=P=MC

question

True or false: Quantity supplied increases as price decreases, and economic profit is usually higher at lower product prices and output.

answer

False

question

If price is below a firm's minimum average cost, the firm will not operate. (Insert only one word in the blank.)

answer

variable

question

What is the firm's most likely response if price is exactly equal to minimum average variable cost?

answer

Indifference to producing or shutting down

question

Based on the chart, what happens at a price P3 and an output of Q3?

answer

The firm incurs a loss but covers part of its fixed cost.

question

The quantity of a product supplied by a firm in pure competition should _____ as long as price rises.

answer

increase

question

A firm will break even where ______ will just cover ______ because the revenue per unit and the average total cost per unit are equal.

answer

total revenue; total cost

question

When will a firm earn an economic profit?

answer

When price is greater than average total cost.

question

In this graph, which curve represents the firm's short-run supply curve?

answer

The marginal-cost curve

question

Given an output of Q4, at which price will the firm break even or earn a normal profit?

answer

question

Which of the following factors will alter costs and shift the marginal cost or short-run supply curve to a new location?

answer

Technology
Prices of variable inputs

question

Total revenue equals ______ times ______.

answer

price; quantity

question

Which of the following reasons explains why the purely competitive firm's demand curve is perfectly elastic?

answer

Because the individual firm is a price taker, the marginal revenue curve coincides with the firm's equilibrium price.

question

At any price above ______, the firm will obtain economic profit by producing to the point where MR=P=MC.

answer

question

The portion of a firm's marginal cost curve that lies above its average variable cost is the firm's short-run curve.

answer

Supply

question

Changes in (Enter one word) and changes in prices of variable inputs alter costs and shift the marginal cost or short run supply curve.

answer

technology

question

Multiplying product price by output reveals which of the following?

answer

Total revenue

question

Each purely competitive firm's demand curve is perfectly at the equilibrium price.

answer

Blank 1: elastic, flat, or horizontal

question

What is the primary difference between the individual firm's supply curve and the industry supply curve?

answer

The individual supply curve has no effect on price, whereas the industry supply curve has an important bearing on price.

question

Which of the following describes the individual competitive firm's supply curve?

answer

The individual firm's supply curve represents a negligible fraction of total supply and therefore cannot affect price.

question

The ______ cost of any resource used to produce a good is the value or worth the resource would have in its best alternative use.

answer

economic

question

A firm's costs are the explicit and implicit costs of the resources it has used.

answer

economic

question

Total costs equal explicit costs plus implicit costs.

answer

economic

question

A firm's monetary payments to those who supply transportation services is an example of ______.

answer

explicit costs

question

costs are the monetary payments a firm makes to purchase resources from others..

answer

explicit

question

Which best describes economic costs?

answer

Payments that must be made to obtain a resource

question

True or false: Implicit costs are the firm's opportunity costs of using its self-owned, self-employed resources.

answer

True

question

When a firm considers its economic costs, it considers which of the following?

answer

Explicit and implicit costs
All opportunity costs of resources used

question

True or false: Economic costs equal explicit costs minus implicit costs.

answer

False

question

Accounting profit is what remains after a firm has paid its _______ costs.

answer

explicit

question

Which of the following would incur an explicit cost?

answer

Raw materials
Labor services
Utility usage

question

A(n) ______ profit is equal to total revenue less explicit costs.

answer

accounting

question

Which of the following explains the concept of explicit costs?

answer

A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services.
A firm's monetary payments made for the use of resources owned by others.

question

Which of the following are examples of implicit costs?

answer

Forgone wages
Forgone rent

question

What type of opportunity cost does a firm incur when it uses resources that it already possesses instead of selling them for cash?

answer

Implicit

question

answer

Reason:
$150,000 - $60,000 (explicit costs) = $90,000.

question

Generally speaking, there are two types of calculable profits. Of these, profit is what remains after a firm has paid itsexplicit costs.

answer

accounting

question

Forgone entrepreneurial income is an example of a(n) ______.

answer

implicit cost

question

Subtracting implicit costs from accounting profit yields which of the following?

answer

Economic profit

question

What is the total revenue if the economic profit is $24,000 and the economic costs are $96,000?

answer

$120,000
Reason:
Rearrange the profit formula to solve for total revenue: economic profit equals total revenue minus total economic cost.

question

profit is the firm's total revenue less its explicit costs, whereas profit is the firm's total revenue less economic costs (explicit and implicit).

answer

Blank 1: Accounting
Blank 2: economic

question

What does it mean to the entrepreneur when economic profit is zero?

answer

The entrepreneur is covering all explicit and implicit costs, including a normal profit.

question

Determining normal profit involves estimating which of the following?

answer

Forgone entrepreneurial income

question

Subtracting explicit and implicit costs from total revenue yields which of the following?

answer

Economic profit

question

If economic cost is $96,000 and total revenue is $120,000, what is the economic profit?

answer

$24,000
Reason:
Economic profit equals total revenue minus economic cost.

question

The size of the factory, the amount of machinery and equipment, and other capital resources define

answer

Blank 1: plant, operational, or operation
Blank 2: capacity or size

question

What is the difference between accounting profit and economic profit?

answer

Accounting profit equals total revenue less explicit costs. Economic profit equals total revenue less economic costs (explicit and implicit).

question

When total revenue earned by an entrepreneur is equal to the sum of explicit and implicit costs, then the entrepreneur earns a(n) ______.

answer

zero economic profit
Reason:
An economic profit is earned if revenues exceed the sum of all explicit and implicit costs.

question

Which industry requires the most time for its firms to alter plant capacity?

answer

Aircraft manufacturing

question

What is the definition of economic profit?

answer

Total revenue minus economic costs (explicit and implicit)

question

Which of the following resources can a firm easily and quickly adjust?

answer

Raw materials
Fuel
Hourly labor

question

What are the components of plant capacity?

answer

Amount of machinery and equipment
Size of the factory building

question

In the short run, if a firm wants to vary its output, what resources can it adjust?

answer

Labor
Materials

question

Which resource requires the most time for a firm to adjust, given a change in demand?

answer

Plant capacity

question

In microeconomics, the long run is also known as which of the following?

answer

Variable-plant period

question

True or false: Hourly labor, raw materials, and fuel are examples of resources a firm can easily adjust.

answer

True

question

Which of the following are long-run adjustments?

answer

Boeing installs more robotic welding equipment.
Boeing adds a new production facility.

question

Which of the following is true regarding a firm's plant capacity?

answer

It is fixed in the short run.

question

True or false: The short run and the long run are conceptual periods rather than calendar time periods.

answer

True

question

A time period during which a firm can adjust the quantities of all the resources that it employs, including plant capacity, is known as which of the following?

answer

Long run

question

What is the term for the total quantity of a specific good produced?

answer

Total product

question

Which of the following illustrate the concept of a short-run adjustment?

answer

Boeing adds an entire shift of workers.
Boeing hires 100 extra workers for one of its commercial airline plants.

question

If the change in total product is 10 units and the change in labor input is 1, what is marginal product?

answer

question

How is marginal product (MP) defined?

answer

The extra output or added product associated with adding a unit of a variable resource

question

Which of the following are examples of a long-run adjustment period?Which of the following are examples of a long-run adjustment period?

answer

The two days it takes a t-shirt maker to add sewing machines and silk-screen printers
The three years it takes an oil refining company to build a new plant

question

What is the average product If total product is 30 and there are 3 units of labor?

answer

question

From the industry's viewpoint, the run includes enough time for existing firms to dissolve and leave the industry or for new firms to be created and enter the industry.

answer

long

question

What is the definition of total product (TP)?

answer

The total quantity, or total output, of a particular good or service produced

question

Which best describes average product (AP)?

answer

The output per unit of labor input

question

A company has three workers. It adds an additional laborer and its total product increases by 21. What is the company's marginal product?

answer

question

answer

diminishing returns

question

product is the change in total product divided by the change in labor input.

answer

Marginal

question

answer

diminishing

question

If total product is 50 and the units of labor used is 10, then the average product is .

answer

question

The law of diminishing returns assumes that ______.

answer

all units of labor input are of equal quality

question

Which is another term for average product?

answer

Labor productivity

question

The law of ______ returns states that as successive units of a variable resource are added to a fixed resource, beyond some point, the marginal product will decline.

answer

diminishing

question

answer

diminishing returns

question

Total product goes through three phases: It initially at an increasing rate; then it increases but at a diminishing rate; finally, after reaching a maximum, it .

answer

Blank 1: rises, increases, grows, or expands
Blank 2: declines, decreases, falls, diminishes, or drops

question

What is the average product If total product is 30 and there are 3 units of labor?

answer

question

Why does marginal product eventually diminish as units of labor are added?

answer

Because the number of workers increases relative to the amount of capital equipment

question

Marginal product is the slope of the ______ curve.

answer

total product

question

When total product declines, marginal product ______.

answer

is negative

question

What happens to marginal product when total product is increasing but at a decreasing rate?

answer

Marginal product is positive but falling.

question

What happens to average product when marginal product exceeds it?

answer

Average product continues to rise.

question

Which of the following is true where the marginal product curve intersects the average product curve?

answer

Average product is at its maximum.

question

When total product is at its maximum, marginal product is ______.

answer

zero

question

What happens to marginal product when total product is increasing at an increasing rate?

answer

Marginal product is rising.

question

costs are part of the simple existence of a firm's plant and must be paid even when output is zero.

answer

Fixed

question

Why does marginal product eventually diminish as units of labor are added?

answer

Because the number of workers increases relative to the amount of capital equipment

question

What happens to average product as additional units of labor are added to a fixed plant?

answer

It increases, reaches a maximum, and then decreases.

question

Average product declines when ______.

answer

marginal product is less than average product

question

Which costs do not vary with changes in output?

answer

Fixed

question

Which of the following are examples of fixed costs?

answer

Rental payments
Interest on a firm's debts

question

What happens to fixed costs when the level of production output reaches zero?

answer

They remain unchanged.

question

Which of the following are examples of variable costs?

answer

Materials costs
Fuel costs
Transportation services payments

question

A firm's insurance premiums are generally considered costs.

answer

Fixed

question

A firm cannot avoid paying fixed costs in the run.

answer

short

question

Which best characterizes variable costs?

answer

Costs that change with the level of output

question

Later in a production cycle, as diminishing returns are encountered, variable costs ______ for each additional unit of output.

answer

increase by increasing amounts

question

Which group of costs is the most accurate example of variable cost?

answer

Payments for materials, fuel, power, and transportation services

question

If at 10 units of output, total fixed cost is $10 and total variable cost is $16, what is total cost?

answer

question

Variable costs change with the level of .

answer

Blank 1: output or production

question

What happens to variable costs during the onset of production when marginal product is increasing?

answer

They decrease with successive units of output.

question

How is total cost calculated?

answer

By adding total fixed cost and total variable cost

question

When output is 10, what is the total cost if total fixed cost is $50 and total variable cost is $75?

answer

125

question

At the point on a graph where total product (Q) is zero, total cost is equal to ______.

answer

total fixed cost

question

Which of the following enables firms to make per-unit comparisons with product price?

answer

Average-cost data

question

cost is the sum of fixed cost and variable cost at each level of output.

answer

Total

question

Which of the following is true of average fixed cost when output increases?

answer

Average fixed cost declines as output increases.

question

When viewed on a graph, total variable cost is measured ______ at each level of output from the X axis.

answer

vertically

question

Average fixed cost equals total fixed cost divided by the ______

answer

Amount if output

question

How can a business manager control variable costs in the short run?

answer

By altering levels of production

question

Per-unit costs are also referred to as ______ costs.

answer

Average

question

What is meant by the phrase "spreading the overhead"?

answer

As production increases, average fixed cost declines.

question

How is average fixed cost determined?

answer

Total fixed cost divided by output

question

Suppose the total fixed cost of a firm is $500, the total variable cost is $200, and the output produced is 5 units. The average fixed cost of the firm is ______.

answer

$100

question

In the short run, a business manager is unable to alter which of the following?

answer

Fixed Costs

question

If total variable cost is $100, total fixed cost is $100, and output is 10, what is average variable cost?

answer

$10

question

Which of the following enables firms to make per-unit comparisons with product price?

answer

Average-cost data

question

Which curve first falls and then rises?

answer

Average variable cost curve

question

What is the average fixed cost if total fixed cost is $100, total variable cost is $50, and output is 20?

answer

question

What is average variable cost if total variable cost is $500, total fixed cost is $100, and output is 50?

answer

question

Which of the following statements explain why the average variable cost curve is U-shaped?

answer

As output rises from the initial very low levels, greater specialization occurs, and average variable cost declines.
At low levels of output, production is relatively inefficient and costly.

question

Suppose at an output level of 150 units a firm's average fixed cost is $25 and average variable cost is $50. Then the average total cost of the firm is ______.

answer

question

What is the definition of average variable cost?

answer

Total variable cost divided by output (Q)

question

Which of the following sets of values are necessary to compute average total cost (ATC)?

answer

Total cost and output
Average fixed cost and average variable cost
Total variable cost, total fixed cost, and output

question

Which of the following best describes the average variable cost curve?

answer

It is U-shaped.

question

What methods can be used to calculate average total cost?

answer

Total cost divided by output (Q)
Average fixed cost plus average variable cost

question

One explanation for the U-shaped average variable cost curve is that greater ______ yields more efficiency and variable cost per unit of output declines

answer

specialization

question

What is the average fixed cost if the average total cost is $100 and the average variable cost is $75?

answer

question

What is average total cost if total cost is $100, variable costs are $75, fixed costs are $25, and output is 25?

answer

question

What does the vertical distance between the average total cost and average variable cost curves measure?

answer

Average fixed cost at any level of output

question

Total fixed cost divided by output plus total variable cost divided by the output yields which of the following?

answer

Average total cost

question

How is marginal cost (MC) calculated?

answer

By dividing the change in total cost by the change in output

question

If total cost rises from $300 to $700 when one additional unit of output is produced, what is the marginal cost?

answer

400

question

Marginal cost includes which of the following?

answer

All the cost associated with producing the last unit of output
The cost savings resulting from not producing the last unit of output

question

How is the average total cost curve determined from graphical information?

answer

By adding vertically the average fixed cost and average variable cost curves.

question

A firm's decision about what output level to produce is typically a ______ decision.

answer

marginal

question

What is the term for the extra cost of producing one more unit of output?

answer

Marginal cost

question

What is the marginal cost when output changes from 300 to 301 units and total cost rises from $400 to $500?

answer

100

question

Which best describes the graphical portrayal of marginal cost?

answer

The marginal cost curve declines sharply at first, reaches a minimum, and then rises abruptly.

question

What type of cost can be saved by not producing the last unit?

answer

Marginal

question

A firm's decision whether to produce a few more or a few less units of output is a decision based on which of the following?

answer

Marginal data

question

The marginal cost curve's shape is a consequence of the law of returns.

answer

diminishing

question

When is marginal cost at its minimum?

answer

When marginal product product is at its maximum

question

Where does the marginal-cost curve intersect the average-total-cost curve?

answer

At the minimum point of average total cost

question

The shape of the marginal cost curve reflects which of the following?

answer

Total variable cost first increases by decreasing amounts then by increasing amounts.

question

If all workers are hired at the same price, the marginal cost of producing each extra unit of output falls provided the ______ of each additional worker is rising.

answer

marginal product

question

The marginal-cost curve intersects with the average-variable-cost curve at the ______.

answer

average-variable-cost curve's minimum

question

The marginal-product curve is a mirror image of the ______ curve.

answer

marginal-cost

question

Average total cost goes up when marginal cost is greater than ______.

answer

average total cost

question

Which of the following are likely to cause cost curves to shift?

answer

Changes in resource prices
Changes in technology

question

Which of the following costs can a firm control directly and immediately?

answer

Marginal cost

question

What is the effect of an increase in the price of labor on the ATC, AVC, and MC curves?

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The average-variable-cost, average-total-cost, and marginal-cost curves shift upward.
The average-fixed-cost curve remains the same.

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How are marginal costs and average fixed costs related?

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They are not related.

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When is marginal cost at its minimum?

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When marginal product product is at its maximum

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Which of the following occur when fixed costs increase?

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The average total cost curve shifts upward.
The average fixed cost curve shifts upward.

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More efficient technology has what effect on the productivity of all inputs?

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It increases the productivity of all inputs.

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An increase in the price of labor has no effect on which cost curve?

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Average-fixed-cost

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Over what period of time can an industry and firms in that industry adjust all resource inputs used?

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The long run

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Under the definition of long run, all resources and inputs are ______.

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variable

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What is the relationship between productivity (MP & AP) and cost (MC & AVC) curves?

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They are mirror reflections of each other.
As productivity curves are rising, cost curves are falling.
As productivity curves are falling, cost curves are rising.

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The long-run average-total-cost curve is derived from the many short-run average-total-cost curves, each of which represents a different ______.

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Plant size

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In the run, firms are able to adjust all resources.

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Long

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A planning curve is another term for which of the following?

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Long run average-total-cost curve

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Economically speaking, what period of time is sufficient for new firms to enter or for existing firms to exit an industry?

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Long run

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How is the long-run average-total-cost curve derived?

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From all points of tangency of the short-run average-total-cost curves

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An increase in the price of labor has no effect on which cost curve?

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Average-fixed-cost

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If a firm estimates that its level of output will be 40 units, it will most likely select the plant size depicted by which short-run cost curve in the accompanying figure?

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ATC -3

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What does the long-run average-total-cost curve show?

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The lowest average total cost at which any chosen output level can be produced after the firm has had time to make adjustments in plant size

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Why does the law of diminishing returns not account for the U-shape of the long-run average-total-cost curve?

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In the long run all resources and inputs are variable.

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The smoothness of a long-run average-total-cost curve results from which of the following?

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The virtually unlimited number of available plant sizes

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Economies of scale explain the downward-sloping part of the ______ curve.

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long-run average-total-cost

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Increased labor ______ becomes more achievable as a plant increases in size.

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specialization

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How does labor specialization allow a worker to become more proficient?

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It allows a worker to focus on fewer tasks and become more skilled in performing those tasks.

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The U-shape of the long-run average-total-cost curve results from which of the following?

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Economies of scale
Diseconomies of scale

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What is another term for economies of scale?

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Economies of mass production

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Which businesses would allow for the greatest use of management specialization?

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An international airline
An automobile manufacturer

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Which of the following is an example of labor specialization?

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Assigning each worker one task instead of five or six
Hiring more workers in order to subdivide tasks

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Which of the following result from managerial specialization?

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Greater efficiency
Lower unit costs

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Greater labor specialization has which of the following effects?

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It eliminates the loss of time that occurs whenever a worker shifts from one task to another.

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What are reasons that it difficult for small firms to make use of efficient capital?

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The high price of production equipment is often prohibitive.
The efficient use of large-scale production equipment requires a high production volume.

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Learning by doing contributes to a firm's ______.

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economies of scale

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Which of the following best describes the relationship between a firm's size and its ability to use managerial specialization to its best advantage?

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Small firms cannot use management specialists to their best advantage.

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answer

managerial specialization

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In general, what production characteristic and plant size scale are required for efficient capital usage to be effective?

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Large-scale producers
High production volume

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A firm grows from one to three plants. As a result, the firm's sales increase, leading to greater marketing expertise. This is an example of which of the following?

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Learning by doing

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Less coordinated decision making by executives and supervisors leads to of scale.

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Diseconomies

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Which of the following illustrates constant returns to scale?

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A firm's 10% increase in given inputs, causing a proportionate 10% increase in output

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Learning by doing contributes to a firm's ______.

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economies of scale

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With economies of scale, a 10% increase in all resources that causes a 20% increase in output results in which of the following?

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A decline in average total cost (ATC)

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What is the primary cause of diseconomies of scale?

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The difficulty of efficiently controlling and coordinating a firm's operations as it becomes a large-scale producer

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Which of the following worker productivity factors often lead to diseconomies of scale?

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Worker alienation from the employer
Increased opportunities to shirk and avoid work

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Which of the following sections of a long-run average total cost curve depicts constant returns to scale?

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The flat section

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True or false: In an industry with an extended range of constant returns to scale, firms of varying sizes can coexist and be equally profitable.

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True

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By expanding the size of its operations, a growing firm is able to experience economies of scale to do which of the following?

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Lower its average total costs

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Which of the following best illustrates diseconomies of scale?

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The increase in average total costs as a firm expands the size of its plant in the long run

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True or false: Important determinants of an industry's structure are economies of scale and revenue.

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False

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The figure illustrates that in an industry with an extended range of returns to scale, firms of varying sizes can coexist and be equally profitable.

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constant

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Which of the following industries highlight the pattern of declining long-run average total costs?

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Computer microchip
Automobile
Aluminum

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A ______ is a relatively rare market situation in which average total cost is minimized when only one firm produces the good.

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natural monopoly

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When minimum efficient scale occurs at a low level of output, consumer ______ may support a large number of relatively ______ producers.

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demand; small

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True or false: Heavy industries, such as aluminum and steel, exhibit the pattern of declining long-run average total costs.

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True

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The shape of a long-run average-total-cost curve will determine ______.

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the number and size of firms in the industry

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In heavy industries, small firms are unlikely to realize ______ and will be unable to compete with large-scale producers.

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minimum efficient scale

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Start-up firms achieve of scale from learning by doing and through increased specialization of labor, management, and equipment.

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economies

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True or false: Important determinants of an industry's structure are economies of scale and revenue.

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False

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Which of the following occurs at a low level of output for small businesses such as those in retail trades and light manufacturing industries?

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Minimum efficient scale

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What determines the shape of the long-run average-total-cost curve?

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Technology

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By using economies of scale, successful start-up firms are able to shift their short-run cost curves in which directions?

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Downward and to the right

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The lowest level of output at which a firm can minimize long-run average costs is called ______.

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Mimimum effect scale

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What determines the shape of the long-run average-total-cost curve?

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...

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What determines the shape of the long-run average-total-cost curve?

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...

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Which of the following worker productivity factors often lead to diseconomies of scale?

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...

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Average total cost equals total cost _______ by output.

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divided

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What is the definition of economies of scale?

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Reductions in the average total cost of producing a product as the firm expands the size of its plant (its output) in the long run.

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When cost curves shift, it is die to changes in which of the following?

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b) Technology
c) Resource prices

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In time, the growth of a firm's plant size and output may lead to ________ and ________.

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higher average total costs; diseconomies of scale

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________ cost is the sum of fixed cost and variable cost at each level of output.

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total

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Which is the definition of explicit costs?

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b) A firm's monetary payments made for the use of resources owned by others.

d) A firm's monetary payments to those who supply labor services, materials, fuel, and transportation services.

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An ___________ cost is the value or worth the resource would have in its best alternative use.

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opportunity

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Which of the following are examples of an opportunity cost?

answer

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What is the best definition of constant returns to scale?

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d) The unchanging average total cost of producing a product as the firm expands the size of its plant (its output) in the long run.

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A firm's decision about what output level to produce at is based on ________ decisions.

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a) marginal

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________ costs are the firm's opportunity costs of using its self-owned, self-employed resources.

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implicit

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________ costs equals the change or difference in total cost divided by the change or difference in output.

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marginal

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Which of the following are types of costs that do not vary with changes in output (i.e., fixed costs)?

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a) Interest on a firm's debts
b) Rental payments
c) Insurance premiums

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Total costs, including _______ (one word) and marginal costs change with the level of output.

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variable

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Which of the following resources can a firm easily and quickly adjust?

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c) Raw materials
d) Fuel
e) Hourly labor

question

answer

a) diminishing marginal returns

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The _________ of any resource used to produce a good is the value or worth the resource would have in its best alternative use.

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economic cost

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What methods can be used to calculate average total cost?

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a) Total fixed cost divided by output (Q) plus total variable cost divided by output (Q)

b) Total cost divided by output (Q)

c) Average fixed cost plus average variable cost

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What type of costs in total do not vary with changes in output?

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b)Fixed

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What is the definition of explicit costs?

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a) A firm's monetary payments made for the use of resources owned by others.

c) A firm's monetary payments for those who supply labor services, materials, fuel, and transportation services.

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Economic costs are defined as

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a) the value or worth a resource would have in its best alternative use.

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The formula for marginal costs is

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b) the change or difference in total variable cost divided by the change or difference in output
c) the change or difference in total cost divided by the change or difference in output

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____________ costs are the monetary payments a firm makes to those who provide the factors or inputs to production.

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Explicit

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When a firm chooses to produce the appropriate level of output, it has made:

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b) a decision in the margin

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If a firm's total revenue is equal to its implicit and explicit costs, then the firm is said to earn a(n)

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a) normal profit
b) accounting profit
d) zero economic profit

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A firm's costs of producing a specific output depend on which of the following?

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a) The prices of the needed resources required to produce a given output.

d) The quantities of resources required to produce a given output.

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Which of the following are types of resources that require more time for a firm to adjust, given a change in demand?

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a) Amount of machinery

c) Size of the factory

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Average product of labor is also referred to as labor _________.

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productivity

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What is another term for economies of scale?

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Economies of mass production

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Which of the following are examples of implicit costs?

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b) Foregone wages
c) Foregone rent

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Average ________ cost always declines as output increases.

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fixed

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Economically speaking, what period of time is sufficient for new firms to enter or for existing firms to exit an industry?

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b) The long run

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_________ costs are payments made by firms to attract the resources they need away from alternate production opportunities.

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a) Economic
e) Opportunity

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From an existing firm's perspective, the ________ ________ is a time period during which it can adjust the quantities of all the inputs that it employs, including plant capacity.

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long run

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What is the total revenue if economic profit is $24,000 and economic costs are $96,000?

answer

$120,000

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Which of the following are ways that industries and firms can change the amounts of inputs used in the long-run?

answer

a) An industry can change its overall capacity.

c) A firm can build a larger plant.

d) An industry can make major complex technological production advances.

question

When marginal product at its maximum, marginal costs:

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a) begin rising with additional output produced.

c) are at a minimum at the same output level

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The long run average total cost curve is made up of:

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d) all points of tangency of the short run average total cost curves

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If at 10 units of output, total fixed cost is $10 and total variable cost is $16, what is total cost?

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c) $26

question

What is the effect of an increase in the price of labor on the ATC, AVC, AFC, and MC curves?

answer

a) The average variable cost, average total cost, and marginal cost curves shift upward.

c) The average fixed cost curve remains the same.

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Total variable costs _______ with increases in output

answer

rise

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What is average fixed cost if average total cost is $100 and average variable cost is $75?

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$25

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What type of costs do firms incur when producing products?

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a) Implicit
d) Explicit

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Labor _______ allows workers to become even more proficient in their tasks as they work at fewer tasks.

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specialization

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Which of the following is an example of labor specialization?

answer

question

What is the definition of efficient capital?

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c) The purchase and effective use of efficient capital equipment to achieve large scale production economies of scale

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The size of the factory, the amount of machinery and equipment, and other capital resources make up __________ __________.

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plant capacity

question

Marginal cost designates the cost that:

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a) can be incurred by producing an additional unit

c) can be saved by not producing the last unit

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As a firm grows, decision making may slow, impairing efficiency and _______ average total cost.

answer

raising

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Which of the following is not covered when an entrepreneur's economic profit is zero?

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b) Pure profit

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When a firm considers its economic costs, it considers

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a) all opportunity costs of resources used

d) explicit and implicit costs

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The shape of a long-run average total cost curve will determine:

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c) the number and size of firms in the industry

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If you quit your job to start your own business, your forgone wages are:

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