Microeconomics 2 Final Exam

the assumption that firms select an output level so as to maximize profit (yeah, it's an obvious question)

the observation that in the competitive markets, firms that do not approximate profit-maximizing behavior fail, and the survivors are those firms that, intentionally or not, make the appropriate profit-maximizing decisions.

a firm or consumer who cannot affect the prevailing price through production and consumption decisions.

total revenue divided by the output (WRITE ENTIRE PHRASE)

the prevailing market price is the...

symbol for average revenue

the change in total revenue when there is a one-unit change in output (WRITE ENTIRE PHRASE)

symbol for marginal revenue

When the average revenue is constant (and its curve is thus flat and horizontal), AR =

price times the quantity sold (TYPE FULL PHRASE)

symbol for total revenue

the difference between total revenue and total cost (TYPE FULL PHRASE)

symbol for total profit

TR - TC =

total profit divided by the number of units sold (WRITE ENTIRE PHRASE)

symbol for average profit per unit

Profit is maximized at the output where total revenue exceeds total cost by the (smallest/largest) possible amount.

In terms of per-unit curves, the output that miximizes profit in the short run is where MC =

If MC > MR, a firm's profit will increase if it (decreases/increases) output.

In general, the rule for profit maximization is for MC =

In the short run, as long as AR = BLANK, then it is in the firm's interests to continue operation even if it is at a loss.

a graph of the systematic relationship between a product's price and a firm's most profitable output level.

MC = MR =

The minimum level of AVC is the...

A lower input price (decreases/increases) the MC.

If the MC decreases, it shifts (inwards/outwards).

the horizontal sum of individual firms' marginal cost curves.

the point at which total profit is zero since price equals the average cost of production

Should a firm continue operating at zero economic profit?

At long-run market BLANK, there is zero economic profit.

LMC = LMR at... (DON'T WRITE "EQUILIBRIUM")

If firm's cost curves differ, do they all still make long-run zero economic profit?

If one's firm production factors increase in value while another's don't, they still remain in long-run zero market equilibrium since the BLANK of the first firm goes up. (PLURAL)

The long-run relationship between price and industry output, which depends on whether input prices are constant, decreasing, or increasing as the industry expands or contracts. (DON'T FORGET THE HYPHEN)

an industry in which expansion of output does not bid up input prices, the long-run average production cost per unit remains unchanged, and the long-run industry supply curve is horizontal. (DON'T FORGET THE HYPHEN)

an industry in which expansion of output leads to higher production costs and the long-run supply curve slopes upwards. (DON'T FORGET THE HYPHEN)

A highly unusual (possibly non-existent) situation in which the long-run supply curve is downward sloping. (DON'T FORGET THE HYPHEN)

The constant-cost industry refers to the fact that a firm's cost curves do not shift. Does that mean that every firm has a horizontal LAC curve?

Is the long-run supply curve derived by summing LMC curves of an industry's firms?

The LS curve assumes BLANK is constant.

In reality, is an industry likely to fully attain a position of long-run equilibrium?

As we move up a long-run cost curve, who benefits? (PLURAL, UNLESS THE ANSWER IS "NO ONE")

The tendency towards zero economic profit means that the rate of return on invested resources will tend to BLANK across industries.

In deriving the BLANK curve, one assumes that a short-run equilibrium was first established and then long run forces came into play. (JUST TYPE ABBREVIATION/SYMBOL)

Economic profit is BLANK all along a competitive industry's long-run supply curve. (TYPE ENTIRE WORD OR PHRASE)

If firms produce a homogeneous product, then there will be a BLANK price.

TR - C =

A market with a single seller.

some ability to set price above the marginal cost

a monopoly that supplies the total market and can choose any price along the market demand curve that it wants

a firm in a competitive market

The demand curve is the same as the BLANK curve.

A competitive firm has a (horizontal/negative) demand curve.

A monopoly has a (horizontal/negative) demand curve)

The demand curve's slope depends on the market setting, but does the output-decision rule for maximizing profit?

If price must be lowered to sell more output, the firm is a BLANK.

In a monopoly, profit is maximized at the output where TR exceeds BLANK by the largest possible amount.

In a monopoly, profit is maximized at the output where BLANK exceeds TC by the largest possible amount.

symbol for the elasticity of demand

For a monopoly, (P-MC)/P =

For a monopoly, MC/[1-(1/η)] =

In simple terms, a monopoly has no BLANK curve.

If the LAC curve lies entirely above the D curve, can a monopoly make a profit?

A monopoly's demand curve is (elastic/inelastic/unit elastic) where MR is positive.

A monopoly's D curve is (elastic/inelastic/unit elastic) where MR is zero.

When a monopoly's demand curve is (elastic/inelastic/unit elastic where MR is negative.

For monopolies, the slope of the MR curve is, in absolute value, exactly twice the slope of the BLANK curve. (JUST TYPE LETTER)

A profit-maximizing monopolist will always be selling at a price where demand is (elastic/inelastic/unit elastic).

a means of measuring a firm's monopoly power that takes the mark-up of price over marginal cost expressed as a percentage of a product's price.

The Learner Index of Monopoly Power formula

If a market demand curve is perfectly elastic, do any individual supplies have any monopoly power?

The monopoly power possessed by one firm is limited the greater the number of rival firms. True or false?

Among the factors that determine the extent of a firm's monopoly power are the elasticity of the market BLANK curve and the elasticity of the supply by other firms, and the number of rival firms. (WRITE ENTIRE WORD)

Among the factors that determine the extent of a firm's monopoly power are the elasticity of the market demand curve and the elasticity of the BLANK by other firms, and the number of rival firms. (WRITE ENTIRE WORD)

any factor that limits the number of firms operating in a market and thereby serves to promote monopoly power

a situation in which an incumbent firm's production cost (its LATC) is lower than potential rivals' production costs at all relevant output levels.

a situation in which a firm can increase its output more than proportionally to its total input cost.

an industry in which production cost is minimized if one firm supplies the entire output. this occurs in economies of scale

a means by which consumers perceive the product sold by an incumbent firm to be superior to that offered by prospective rivals.

barriers to entry created by the government through vehicles such as patents, copyrights, franchises, and licenses.

The four types of BLANK are absolute cost advantage, economies of scale, product differentiation, and regulatory barriers. (PLURAL)

In general, prices are (lower/higher) where there are bans on advertising.

If a possible new entrant can come into the market at a specific price, the monopoly cannot ever charge more than this price (and be successful). True or false?

A horizontal supply curve means that there is BLANK average cost.

For the same demand and cost conditions, price will be higher and output lower under a (monopoly/free-market competition).

Graphically, the area of the excess of value over cost associated with a monopoly increasing output is the societal BLANK due to the restriction of output.

a form of economic analysis that looks at the efficiency of a market at any one point in time.

a form of economic analysis that looks, over time, at the efficiency of a market.

A major factor of BLANK is that a firm that creates a new product knows it will (at least temporarily) receive a monopoly for it.

In general, monopolies appear to help society more when viewing through (dynamic/static) analysis.

a series of codes and amendments intended to promote a competitive market environment. (PLURAL)

For a monopoly, P * Q =

The practice of charging different prices for the same product when there is no difference to the producer in supplying the product.

a policy in which each unit of output is sold for the maximum price a consumer will pay. (DON'T WRITE PERFECT)

Another word for first-degree price discrimination is BLANK price discrimination

the use of a schedule of prices such that the price per unit declines with the quantity purchased by a particular consumer. (DON'T WRITE BLOCK PRICING)

another word for second-degree price discrimination

BLANK pricing creates a step-like price curve.

a situation in which each consumer faces a single price and can as much as desire at that price, but the price differs among categories of consumers. (DON'T WRITE MARKET SEGMENTATION)

Another word for third-degree price discrimination

In order to use price discrimination, a firm must possess some degree of...

arbitrage of a product among market segments

In order to use price discrimination, BLANK must be impossible.

In market segmentation, the firm divides output between the market segments so that the BLANK are equal. (WRITE FULL PHRASE, PLURAL)

the most profitable output occurs where ΣMR intersects BLANK.

Symbol for the sum of different market segment's marginal revenue

a form of third-degree price discrimination in which different market segments are willing to pay different prices, depending on the time at which they purchase a good

Intertemporal price discrimination is a type of (first/second/third)-decree price discrimination

A form of price discrimination where a firm charges a higher price in its domestic market than it charges abroad.

Intertemporal price discrimination creates multiple price curves for different BLANK frames

Does intertemporal price discrimination only apply when cost is constant?

a pricing policy in which different prices are charged for peak and off-peak periods.

a form of second-degree price discrimination in which a firm charges consumers a fixed fee per time period for the right to purchase a product at a uniform per-unit price.

A two-part tariff is a form of (first/second/third)-degree price discrimination.

a two-part tariff creates multiple BLANK (PLURAL)

a perfectly competitive firm maximizes price where MC = P =

a perfectly competitive firm maximizes price where MC = D =

symbol for deadweight loss

1/2(Price of Monopoly - Price of Competitive Firm)(Quantity of competitive firm - Quantity of Monopoly) =

If AVC < P, will a firm shutdown in the short-run?

If AVC > P, will a firm shutdown in the short-run?

If ATC > P, will a firm exit in the long run?

If ATC < P, will a firm exit in the long run?

P * TQ =