Microeconomics - Assignment Essays

question

Industrial Organization

answer

study of how firm's decisions about prices and quantities depend on market conditions they face

question

All you need to know about firm behavior is...

answer

Law of Supply

question

What are key determinants of production and pricing decisions?

answer

Costs

question

A firm's objective is commonly...

answer

to make money or maximize profit

question

Total Revenue

answer

the amount a firm receives for the sale of its output

question

Total Cost

answer

the market value of the inputs a firm uses in production

question

Profit

answer

Total revenue minus costs

question

Total Revenue =

answer

Quantity X Price

question

Opportunity Cost

answer

all things forgone to acquire that item

question

Explicit Costs

answer

input costs that require an outlay of money by the firm

question

Implicit Costs

answer

input costs that do not require an outlay of money by the firm

question

Distinction between ____ costs & ____ costs highlight important differences between how ____ & ____ analyze a business.

answer

explicit...implicit......economists...accountants

question

Economists decisions are based on...

answer

both implicit and explicit costs

question

Accountants decisions are based on...

answer

explicit costs

question

Economic Profit =

answer

Total Revenue - Total Cost

question

Accounting Profit =

answer

Total Revenue - Explicit Cost

question

Economic Profit

answer

total revenue minus total cost, including both explicit and implicit costs

question

Accounting Profit

answer

total revenue minus explicit cost

question

Economic Profit is ___ than accounting profit

answer

LESS

question

Production Function

answer

the relationship between quantity of inputs used to make a good and the quantity of output of that good

question

Marginal Product

answer

the increase in output that arises from an additional unit of input

question

Diminishing Marginal Product

answer

the property whereby the marginal product of an input declines as the quantity of the input increases

question

Productions slope (RISE OVER RUN) tells change in ____ (RISE) for each additional ____ of labor (RUN)

answer

output...input

question

Slope of production function measures the ___ of a worker

answer

Marginal Product

question

Total-Cost-Curve

answer

two columns of data with quantity produced on the horizontal axis and total cost on the vertical axis

question

Total cost is divided into...

answer

Fixed Cost & Variable Cost

question

Fixed Cost

answer

costs that do not vary with the quantity of output produced

question

Variable Costs

answer

costs that vary with the quantity of output produced

question

Firm's Total Cost =

answer

Fixed + Variable Costs

question

Cost of Unit =

answer

Firm's Costs / Quantity of Output Produced

question

Average Total Cost (ATC) =

answer

Average Fixed Cost + Average Variable Cost

question

Average Fixed Cost (AFC) =

answer

Fixed Cost / Quantity of Output Produced

question

Average Variable Cost (AVC) =

answer

Variable Cost / Quantity of Output Produced

question

Marginal Cost

answer

the increase in total cost that arises from an extra unit of production

question

Marginal Cost (MC) =

answer

Change in Total Cost / Change in Quantity

question

Cost Curves 3 Features

answer

1. Marginal cost rises with quantity of output
2. The average-total-cost curve is U-shaped
3. The marginal-cost curve crosses the average-total-cost curve at the minimum of average total cost

question

Efficient Scale

answer

the quantity of output that minimizes average total cost

question

The division of total costs between fixed & variable costs depends on the...

answer

time horizon

question

Cost of factories in short-run

answer

Fixed Cost

question

Cost of factories in long-run

answer

Variable Cost

question

Economies of Scale

answer

property whereby long-run average total costs falls as quantity of output increases

question

Dis-economies of Scale

answer

the property whereby long-run average total costs rises as quantity of output increases

question

Constant Returns to Scale

answer

the property whereby long-run average stays the same as quantity of output increases

question

Specialization

answer

permits each worker to become better at a specific task

question

Coordination Problems

answer

more stretched the management team becomes, less effective managers become which decrease productivity

question

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.

answer

True

question

The debate over whether advertising serves a valuable purpose in society is definitely answered by economists who study the tastes and preferences of individuals.

answer

False

question

Free entry eliminates long-run profits for firms in competitive and monopolistic industries

answer

True

question

Firms in monopolistically competitive markets and monopolies can earn long-run profits due barriers to reentry

answer

False

question

The profit that a monopolist earns represents a loss to society that is measured through deadweight loss

answer

False

question

A monopolist's supply curve is horizontal

answer

False

question

Variable costs usually change as the firm alters the quantity of output produced

answer

True

question

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost

answer

True

question

Average variable cost is equal to total variable cost divided by quantity of output

answer

True

question

At the profit-maximizing quantity of output for a monopolist, average revenue, marginal revenue, and price are all equal

answer

False

question

Variable costs equal fixed costs when nothing is produced

answer

False

question

Suppose a firm is considering producing zero units of output. We call this exiting an industry in the short run and shutting down in the long run

answer

False

question

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality

answer

False

question

If the marginal cost of producing the tenth unit of output is $3, and if the average total cost of producing the tenth unit of output is $2, then at ten units of output, average total cost is rising

answer

True

question

A monopolist produces where P > MC = MR

answer

True

question

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets

answer

True

question

When McDonald's opens a store in Dhaka, Bangladesh, it has a strong incentive to enforce product quality consistent with stores in the United States

answer

True

question

All firms maximize profits by producing an output level where marginal revenue equals marginal cost for firms operating in perfectly competitive industries, maximizing profits also means producing an output level where price equals marginal cost

answer

True

question

The marginal-cost curve intersects the average-total-cost curve at the output level where average fixed costs are zero

answer

False

question

A firm currently producing 100 units of output per day. The manager reports tot the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $4.75. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses)

answer

False

question

Average total cost reveals how much total cost will change as the firm alters its level of production

answer

False

question

Like competitive firms, monopolies charge a price equal to marginal cost

answer

False

question

If the marginal cost of producing the tenth unit of output is $2.50, and if the average total cost of producing the tenth unit of output is $3, then at ten units of output, average total cost is rising

answer

False

question

During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost

answer

True

question

Advertising during the Super Bowl is an example for information about quality contained primarily in the existence and expense of the advertising

answer

True

question

A monopolist produces where P = MC = MR

answer

False

question

If the marginal-cost curve is rising, then so is the average-total-cost curve

answer

False

question

The socially efficient quantity is found where the demand curve intersects the marginal cost curve

answer

True

question

Brand names are rarely used to convey information about product quality

answer

False

question

The government of Italy will not allow any Hard Rock Cafe restaurants to open in Italy. Defenders of the efficiency of brand-name markets would argue that this has hindered restaurant market efficiency in Italy

answer

True

question

Average total cost and marginal cost express information that is already contained in a firm's total cost

answer

True

question

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the unit for $6. The firm should produce more than 100 units in order to maximize its profits (or minimize its losses)

answer

True

question

A monopolist's supply curve is vertical

answer

False

question

In the short run, a firm should exit the industry if its marginal cost exceeds its marginal revenue

answer

False

question

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost

answer

False

question

There is general disagreement among economists about the role of advertising but there is widespread agreement about the role of brand names on market economy

answer

False

question

The marginal-cost curve intersects the average-total-cost curve at the minimum point of the average-total-cost curve

answer

True

question

Assume Jack receives all As in his classes last semester. If Jack gets all Bs in his classes this semester, his GPA may or may not fall

answer

True

question

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York. This is an example of a brand name enhancing market efficiency for U.S. tourists visiting the Philippines

answer

True

question

When a profit-maximizing firm in a competitive market experiences rising prices, it will respond with an increase in production

answer

True

question

Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products

answer

False

question

The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves

answer

True

question

The average-total-cost curve is unaffected by diminishing marginal product

answer

False

question

A monopolist's profit is equal to (Price Marginal Cost) ? Quantity

answer

False

question

Suppose a firm is considering producing zero units of output. We call this shutting down in the short run and exiting an industry in the long run

answer

True

question

The deadweight loss for a monopolist equals one-half of its profits for any given level of output

answer

False

question

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firms average variable cost but greater than the firms average fixed cost

answer

False

question

Deadweight loss measures the loss in society's welfare that occurs because a monopolist can earn profits without the concern of new firms entering its industry

answer

False

question

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firms average variable cost

answer

False

question

The cost of producing an additional unit of a good is not the same as the average cost of the good

answer

True

question

Deadweight loss measures the loss in society's welfare that occurs because a monopolist does not produce the socially efficient level of output

answer

True

question

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firms average total cost but greater than the firms average variable cost

answer

True

question

The government may not be able to improve the inefficiencies of a monopolistically competitive market

answer

True

question

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost

answer

True

question

A monopolist does not have a supply curve because the firms decision about how much to supply is impossible to separate from the demand curve it faces

answer

True

question

Economists are unanimous in their belief that advertising is socially inefficient

answer

False

question

Like competitive firms, monopolies choose to produce a quantity in which marginal revenue equals marginal cost

answer

True

question

A firms is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $5. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses)

answer

True

question

A firm operating in a perfectly competitive industry will shut down i n the short run but earn losses if the market price is less than that firms average variable cost

answer

True

question

The marginal-cost curve intersects the average-total-cost curve at the minimum point of the marginal-cost curve

answer

False

question

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production

answer

True

1 of 106

question

Industrial Organization

answer

study of how firm's decisions about prices and quantities depend on market conditions they face

question

All you need to know about firm behavior is...

answer

Law of Supply

question

What are key determinants of production and pricing decisions?

answer

Costs

question

A firm's objective is commonly...

answer

to make money or maximize profit

question

Total Revenue

answer

the amount a firm receives for the sale of its output

question

Total Cost

answer

the market value of the inputs a firm uses in production

question

Profit

answer

Total revenue minus costs

question

Total Revenue =

answer

Quantity X Price

question

Opportunity Cost

answer

all things forgone to acquire that item

question

Explicit Costs

answer

input costs that require an outlay of money by the firm

question

Implicit Costs

answer

input costs that do not require an outlay of money by the firm

question

Distinction between ____ costs & ____ costs highlight important differences between how ____ & ____ analyze a business.

answer

explicit...implicit......economists...accountants

question

Economists decisions are based on...

answer

both implicit and explicit costs

question

Accountants decisions are based on...

answer

explicit costs

question

Economic Profit =

answer

Total Revenue - Total Cost

question

Accounting Profit =

answer

Total Revenue - Explicit Cost

question

Economic Profit

answer

total revenue minus total cost, including both explicit and implicit costs

question

Accounting Profit

answer

total revenue minus explicit cost

question

Economic Profit is ___ than accounting profit

answer

LESS

question

Production Function

answer

the relationship between quantity of inputs used to make a good and the quantity of output of that good

question

Marginal Product

answer

the increase in output that arises from an additional unit of input

question

Diminishing Marginal Product

answer

the property whereby the marginal product of an input declines as the quantity of the input increases

question

Productions slope (RISE OVER RUN) tells change in ____ (RISE) for each additional ____ of labor (RUN)

answer

output...input

question

Slope of production function measures the ___ of a worker

answer

Marginal Product

question

Total-Cost-Curve

answer

two columns of data with quantity produced on the horizontal axis and total cost on the vertical axis

question

Total cost is divided into...

answer

Fixed Cost & Variable Cost

question

Fixed Cost

answer

costs that do not vary with the quantity of output produced

question

Variable Costs

answer

costs that vary with the quantity of output produced

question

Firm's Total Cost =

answer

Fixed + Variable Costs

question

Cost of Unit =

answer

Firm's Costs / Quantity of Output Produced

question

Average Total Cost (ATC) =

answer

Average Fixed Cost + Average Variable Cost

question

Average Fixed Cost (AFC) =

answer

Fixed Cost / Quantity of Output Produced

question

Average Variable Cost (AVC) =

answer

Variable Cost / Quantity of Output Produced

question

Marginal Cost

answer

the increase in total cost that arises from an extra unit of production

question

Marginal Cost (MC) =

answer

Change in Total Cost / Change in Quantity

question

Cost Curves 3 Features

answer

1. Marginal cost rises with quantity of output
2. The average-total-cost curve is U-shaped
3. The marginal-cost curve crosses the average-total-cost curve at the minimum of average total cost

question

Efficient Scale

answer

the quantity of output that minimizes average total cost

question

The division of total costs between fixed & variable costs depends on the...

answer

time horizon

question

Cost of factories in short-run

answer

Fixed Cost

question

Cost of factories in long-run

answer

Variable Cost

question

Economies of Scale

answer

property whereby long-run average total costs falls as quantity of output increases

question

Dis-economies of Scale

answer

the property whereby long-run average total costs rises as quantity of output increases

question

Constant Returns to Scale

answer

the property whereby long-run average stays the same as quantity of output increases

question

Specialization

answer

permits each worker to become better at a specific task

question

Coordination Problems

answer

more stretched the management team becomes, less effective managers become which decrease productivity

question

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.

answer

True

question

The debate over whether advertising serves a valuable purpose in society is definitely answered by economists who study the tastes and preferences of individuals.

answer

False

question

Free entry eliminates long-run profits for firms in competitive and monopolistic industries

answer

True

question

Firms in monopolistically competitive markets and monopolies can earn long-run profits due barriers to reentry

answer

False

question

The profit that a monopolist earns represents a loss to society that is measured through deadweight loss

answer

False

question

A monopolist's supply curve is horizontal

answer

False

question

Variable costs usually change as the firm alters the quantity of output produced

answer

True

question

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost

answer

True

question

Average variable cost is equal to total variable cost divided by quantity of output

answer

True

question

At the profit-maximizing quantity of output for a monopolist, average revenue, marginal revenue, and price are all equal

answer

False

question

Variable costs equal fixed costs when nothing is produced

answer

False

question

Suppose a firm is considering producing zero units of output. We call this exiting an industry in the short run and shutting down in the long run

answer

False

question

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality

answer

False

question

If the marginal cost of producing the tenth unit of output is $3, and if the average total cost of producing the tenth unit of output is $2, then at ten units of output, average total cost is rising

answer

True

question

A monopolist produces where P > MC = MR

answer

True

question

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets

answer

True

question

When McDonald's opens a store in Dhaka, Bangladesh, it has a strong incentive to enforce product quality consistent with stores in the United States

answer

True

question

answer

True

question

The marginal-cost curve intersects the average-total-cost curve at the output level where average fixed costs are zero

answer

False

question

answer

False

question

Average total cost reveals how much total cost will change as the firm alters its level of production

answer

False

question

Like competitive firms, monopolies charge a price equal to marginal cost

answer

False

question

answer

False

question

During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost

answer

True

question

Advertising during the Super Bowl is an example for information about quality contained primarily in the existence and expense of the advertising

answer

True

question

A monopolist produces where P = MC = MR

answer

False

question

If the marginal-cost curve is rising, then so is the average-total-cost curve

answer

False

question

The socially efficient quantity is found where the demand curve intersects the marginal cost curve

answer

True

question

Brand names are rarely used to convey information about product quality

answer

False

question

answer

True

question

Average total cost and marginal cost express information that is already contained in a firm's total cost

answer

True

question

answer

True

question

A monopolist's supply curve is vertical

answer

False

question

In the short run, a firm should exit the industry if its marginal cost exceeds its marginal revenue

answer

False

question

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost

answer

False

question

There is general disagreement among economists about the role of advertising but there is widespread agreement about the role of brand names on market economy

answer

False

question

The marginal-cost curve intersects the average-total-cost curve at the minimum point of the average-total-cost curve

answer

True

question

Assume Jack receives all As in his classes last semester. If Jack gets all Bs in his classes this semester, his GPA may or may not fall

answer

True

question

answer

True

question

When a profit-maximizing firm in a competitive market experiences rising prices, it will respond with an increase in production

answer

True

question

Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products

answer

False

question

The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves

answer

True

question

The average-total-cost curve is unaffected by diminishing marginal product

answer

False

question

A monopolist's profit is equal to (Price Marginal Cost) ? Quantity

answer

False

question

Suppose a firm is considering producing zero units of output. We call this shutting down in the short run and exiting an industry in the long run

answer

True

question

The deadweight loss for a monopolist equals one-half of its profits for any given level of output

answer

False

question

answer

False

question

Deadweight loss measures the loss in society's welfare that occurs because a monopolist can earn profits without the concern of new firms entering its industry

answer

False

question

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firms average variable cost

answer

False

question

The cost of producing an additional unit of a good is not the same as the average cost of the good

answer

True

question

Deadweight loss measures the loss in society's welfare that occurs because a monopolist does not produce the socially efficient level of output

answer

True

question

answer

True

question

The government may not be able to improve the inefficiencies of a monopolistically competitive market

answer

True

question

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost

answer

True

question

A monopolist does not have a supply curve because the firms decision about how much to supply is impossible to separate from the demand curve it faces

answer

True

question

Economists are unanimous in their belief that advertising is socially inefficient

answer

False

question

Like competitive firms, monopolies choose to produce a quantity in which marginal revenue equals marginal cost

answer

True

question

answer

True

question

A firm operating in a perfectly competitive industry will shut down i n the short run but earn losses if the market price is less than that firms average variable cost

answer

True

question

The marginal-cost curve intersects the average-total-cost curve at the minimum point of the marginal-cost curve

answer

False

question

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production

answer

True

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