Microeconomics: Exam 4 - Assignment Essays

question

total revenue

answer

_______ _________ is the full amount of total sales of goods and services. It is calculated by multiplying the total amount of goods and services sold by their prices.

question

total cost

answer

_______ ______ is the sum of all the fixed and variable costs.

question

production function

answer

A ________ _________ shows the relationship between the quantity of inputs used to produce a good and the quantity of output of that good.

question

marginal product

answer

The _________ _________ of any input is the increase in output arising from an additional unit of that input, holding all other inputs constant.

question

Diminishing marginal product

answer

_________ ______ _______ is the marginal product of an input declines as the quantity of the input increases (other things equal).

question

Marginal cost

answer

_______ _______ is the increase in total cost that results from producing one more unit.

question

Fixed costs

answer

______ _______ are those costs that do not vary with the quantity of output produced.

question

Variable costs

answer

________ ______ change, depending on the quantity of output produced.

question

average fixed cost

answer

The ________ ______ _______ tells us the fixed cost per unit, when producing a certain amount of output.

question

average variable cost

answer

The ________ _______ _____ tells us the variable cost per unit, when producing a certain amount of output.

question

average total cost

answer

The ________ _______ _______ tells us the total "cost per unit" when producing a certain amount of output.

question

profit

answer

_______ equals total revenue minus total cost.

question

Accounting profit

answer

_______ _____ is calculated by subtracting total explicit costs from total revenue.

question

Accounting Profit equation

answer

Accounting Profit = Total revenue — Total explicit costs

question

Economic profit equation

answer

Economic Profit = Total revenue — Total Cost

question

Economic profit

answer

______ _______ is calculated by subtracting total cost from total revenue, where total cost includes both explicit and implicit costs.

question

efficient scale

answer

_________ ________ is the quantity that minimizes ATC. (Average Total Cost)

question

economies of scale

answer

A firm exhibits _________ ___ ________ when ATC decreases as Q increases.

question

Implicit costs

answer

_______ _____ are those costs that do not require a cash outlay

question

Explicit costs

answer

__________ ______ are those costs that require an outlay of money

question

profits.

answer

Economists assume that the goal of the firm is to maximize total

question

lease payments for the land on which a firm's factory stands.

answer

An example of an explicit cost of production would be the

question

implicit cost

answer

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is an

question

the manner in which costs are defined

answer

The difference between accounting profit and economic profit relates to

question

quantity of output obtained from an additional unit of that input.

answer

The marginal product of an input in the production process is the increase in

question

diminishing marginal product

answer

As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters

question

quantity of output produced and the total cost of production.

answer

A total-cost curve shows the relationship between the

question

less

answer

When MC is ________ than ATC, ATC is falling.

question

greater

answer

When MC is _______ than ATC, ATC is rising.

question

equals

answer

MC ________ ATC at the firm's efficient scale of production.

question

fixed costs plus variable costs

answer

total cost is equal to

question

divided

answer

average fixed cost is equal to fixed costs ___________ by quantity

question

divided

answer

average variable cost is equal to variable costs ___________ by quantity

question

variable cost

answer

is equal to average variable cost times quantity

question

average total cost

answer

is equal to total cost divided by quantity

question

marginal cost

answer

is equal to change in total cost divided by change in quantity

question

Marginal cost equals average total cost.

answer

Which of the following is true at the output level where the average total cost is at its minimum?

question

fixed

answer

As output increases, average _______ cost gets smaller and smaller.

question

Constant returns to scale

answer

a firm exhibits constant returns to scale when ATC stays the same as Q increases.

question

Diseconomies of scale

answer

a firm exhibits diseconomies of scale when ATC increases as Q increases.

question

time horizon under consideration.

answer

The nature of a firm's cost (fixed or variable) depends on the

question

how many workers to hire

answer

In the short run, a firm that produces and sells house paint can adjust

question

specialization of labor

answer

The most likely explanation for economies of scale is

question

economies of scale

answer

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

question

long-run average total costs rise as output increases.

answer

Diseconomies of scale occur when

question

perfectly competitive market

answer

A ________ ________ _______ is a market with many buyers and sellers trading identical products, so that each buyer and seller is a price taker. Firms can freely enter or exit perfectly competitive markets.

question

marginal revenue

answer

__________ ________ is the change in total revenue from an additional unit sold.

question

total revenue

answer

_______ _______ is the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold,

question

average revenue

answer

______ _______ is how much revenue a firm receives for the typical unit sold, computed as the total revenue divided by the quantity sold. This always equals the price, for all types of firms.

question

shutdown

answer

A ________ is a short-run decision by the firm not to produce anything during a specific period of time because of current market conditions.

question

exit

answer

An _____ is a long-run decision by the firm to not produce any output for the rest of time, and leave the market completely.

question

sunk cost

answer

A ____ _____ is a cost that has already been committed and cannot be recovered.

question

positive economic profit

answer

A firm is earning ______ ______ ______ if the total revenue they are earning is greater than their total cost of production (i.e. TR>TC). In a perfectly competitive market, new firms will enter if current firms are earning positive economic profit.

question

negative economic profit

answer

A firm is earning _______ _______ _______ (i.e. incurring economic losses) if the total revenue they are earning is less than their total cost of production (i.e. TR<TC). In a perfectly competitive market, firms will eventually exit the market if they are earning negative economic profit.

question

zero economic profit

answer

A firm is earning ______ _____ _____ if the total revenue they are earning is equal to their total cost of production (i.e. TR=TC). In a perfectly competitive market, firms will neither enter nor exit if firms are earning zero economic profit.

question

long run equilibrium

answer

_______ ____ ________ occurs when no new firms are entering, and no existing firms are exiting the market. This only occurs when zero economic profit is being earned by each firm.

question

profit

answer

________ is total revenue minus total cost (i.e. Profit = TR-TC). Can also be calculated as Profit = (P-ATC) x Q where P stands for the price, ATC is the average total cost, and Q is the quantity of output being produced.

question

characteristics of perfect competition

answer

-Many buyers and sellers
-Identical (or nearly identical) goods being offered for sale
-Free market entry and exit for firms

question

Total Revenue Equation

answer

Price x Quantity

question

average revenue equation

answer

total revenue/quantity

question

marginal revenue equation

answer

change in total revenue / change in quantity

question

equal

answer

price is always going to be ______ to average revenue

question

greater

answer

If MR is _________ than MC, then increase Q to raise profit.

question

less

answer

If MR is _________ than MC, then decrease Q to raise profit.

question

equal

answer

If MR is _______ to MC, then Q is at maximum profit.

question

a one-unit increase in output will increase the firm's profit.

answer

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then _______.

question

marginal revenue equals marginal cost.

answer

At the profit-maximizing level of output, _______.

question

profit is maximized.

answer

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which _______.

question

shutdown

answer

a firm will __________ in the short run if the revenue per unit (aka the price) is less than the variable cost per unit (aka the AVC).

question

exit

answer

a firm will _______ the market (and eventually go out of business) if the revenue per unit is less than the cost per unit.

question

Zero economic profit

answer

_______ _____ _______ occurs when the price of a good is equal to the firm's average total cost (P = ATC). In other words, when the revenue per unit equals the cost per unit.

question

When profit-maximizing firms in competitive markets are earning profits, _______.

answer

When profit-maximizing firms in competitive markets are earning profits, _______.

question

price is greater than average variable cost.

answer

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the _______.

question

Less than average variable cost.

answer

In the short run, a firm operating in a competitive industry will shut down if price is _______.

question

its fixed costs but not its variable costs.

answer

A firm that shuts down temporarily has to pay _______.

question

average total cost exceeds the price.

answer

In the long run, a firm will exit a competitive industry if _______.

question

monopoly

answer

A ________ is a firm that is the sole seller of a product without any close substitutes.

question

natural

answer

A ________ monopoly is a type of monopoly that arises because a single firm can supply a good or service to an entire market at a lower cost than could two or more firms.

question

market power

answer

_______ _______ is the ability of a single economic actor (like a monopolist) to have a substantial influence on market prices.

question

output effect

answer

__________ _______ is the effect that increasing output has on total revenue for the monopolist. When more output is sold, Q is higher, which increases total revenue (where TR=PxQ).

question

Price effect

answer

______ _______ is the effect that decreasing price has on total revenue for the monopolist. When the price falls, P is lower, which decreases total revenue (where TR=PxQ).

question

price discrimination

answer

________ __________ is the business practice of selling the same good at different prices to different customers.

question

perfect price discrimination

answer

______ _______ ______ is a situation in which the monopolist knows exactly each customer's willingness to pay and can charge each customer a different price.

question

antitust laws

answer

_______ ________ are a group of statutes aimed at curbing monopoly power and promoting competition. They allow the government to prevent mergers, break up a large company into a group of smaller ones, and prevent companies from coordinating their activities in ways that make markets less competitive.

question

A competitive firm

answer

_______ ______ ______ is a price taker, whereas a monopolist is a price maker.

question

a monopoly

answer

___ _________ can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.

question

not in the best interest of society, one that fails to maximize total economic well-being, inefficient

answer

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often

question

entry is limited

answer

Which of the following is not a characteristic of a competitive market?

question

dairy farming

answer

Which of the following industries is most likely to exhibit the characteristic of free entry?

question

buyers will go elsewhere

answer

When firms are said to be price takers, it implies that if a firm raises its price,

question

double

answer

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

question

total revenue is constant

answer

For a firm operating in a competitive industry, which of the following statements is not correct?

question

marginal revenue

answer

a monopolist maximizes profit by producing the quantity where ______ ________ = Marginal Cost

question

supply

answer

A monopoly does not have a _____ curve; quantity and price are determined by MC, MR, and the demand curve.

question

profit equation

answer

(P-ATC) x Q

question

price always exceeds marginal revenue.

answer

For a monopoly firm,

question

how a monopolist maximizes profit

answer

producing an output level where marginal revenue equals marginal cost, and charging a price that is greater than marginal revenue

question

a monopolist produces

answer

less than the socially efficient quantity of output but at a higher price than in a competitive market.

question

produces an output level less than the socially optimal level.

answer

The deadweight loss associated with a monopoly occurs because the monopolist

question

Synergies

answer

strategic relationships between media and information companies

question

selling the same good at different prices to different customers.

answer

Price discrimination is the business practice of

question

separate customers according to their willingness to pay.

answer

Price discrimination requires the firm to

question

higher than if the firm charged just one price because the firm will capture more consumer surplus.

answer

A monopolist's profits with price discrimination will be

question

eliminate consumer surplus and deadweight loss, and maximize profits

answer

If a monopolist can practice perfect price discrimination, the monopolist will

1 of 104

question

total revenue

answer

_______ _________ is the full amount of total sales of goods and services. It is calculated by multiplying the total amount of goods and services sold by their prices.

question

total cost

answer

_______ ______ is the sum of all the fixed and variable costs.

question

production function

answer

A ________ _________ shows the relationship between the quantity of inputs used to produce a good and the quantity of output of that good.

question

marginal product

answer

The _________ _________ of any input is the increase in output arising from an additional unit of that input, holding all other inputs constant.

question

Diminishing marginal product

answer

_________ ______ _______ is the marginal product of an input declines as the quantity of the input increases (other things equal).

question

Marginal cost

answer

_______ _______ is the increase in total cost that results from producing one more unit.

question

Fixed costs

answer

______ _______ are those costs that do not vary with the quantity of output produced.

question

Variable costs

answer

________ ______ change, depending on the quantity of output produced.

question

average fixed cost

answer

The ________ ______ _______ tells us the fixed cost per unit, when producing a certain amount of output.

question

average variable cost

answer

The ________ _______ _____ tells us the variable cost per unit, when producing a certain amount of output.

question

average total cost

answer

The ________ _______ _______ tells us the total "cost per unit" when producing a certain amount of output.

question

profit

answer

_______ equals total revenue minus total cost.

question

Accounting profit

answer

_______ _____ is calculated by subtracting total explicit costs from total revenue.

question

Accounting Profit equation

answer

Accounting Profit = Total revenue — Total explicit costs

question

Economic profit equation

answer

Economic Profit = Total revenue — Total Cost

question

Economic profit

answer

______ _______ is calculated by subtracting total cost from total revenue, where total cost includes both explicit and implicit costs.

question

efficient scale

answer

_________ ________ is the quantity that minimizes ATC. (Average Total Cost)

question

economies of scale

answer

A firm exhibits _________ ___ ________ when ATC decreases as Q increases.

question

Implicit costs

answer

_______ _____ are those costs that do not require a cash outlay

question

Explicit costs

answer

__________ ______ are those costs that require an outlay of money

question

profits.

answer

Economists assume that the goal of the firm is to maximize total

question

lease payments for the land on which a firm's factory stands.

answer

An example of an explicit cost of production would be the

question

implicit cost

answer

The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is an

question

the manner in which costs are defined

answer

The difference between accounting profit and economic profit relates to

question

quantity of output obtained from an additional unit of that input.

answer

The marginal product of an input in the production process is the increase in

question

diminishing marginal product

answer

question

quantity of output produced and the total cost of production.

answer

A total-cost curve shows the relationship between the

question

less

answer

When MC is ________ than ATC, ATC is falling.

question

greater

answer

When MC is _______ than ATC, ATC is rising.

question

equals

answer

MC ________ ATC at the firm's efficient scale of production.

question

fixed costs plus variable costs

answer

total cost is equal to

question

divided

answer

average fixed cost is equal to fixed costs ___________ by quantity

question

divided

answer

average variable cost is equal to variable costs ___________ by quantity

question

variable cost

answer

is equal to average variable cost times quantity

question

average total cost

answer

is equal to total cost divided by quantity

question

marginal cost

answer

is equal to change in total cost divided by change in quantity

question

Marginal cost equals average total cost.

answer

Which of the following is true at the output level where the average total cost is at its minimum?

question

fixed

answer

As output increases, average _______ cost gets smaller and smaller.

question

Constant returns to scale

answer

a firm exhibits constant returns to scale when ATC stays the same as Q increases.

question

Diseconomies of scale

answer

a firm exhibits diseconomies of scale when ATC increases as Q increases.

question

time horizon under consideration.

answer

The nature of a firm's cost (fixed or variable) depends on the

question

how many workers to hire

answer

In the short run, a firm that produces and sells house paint can adjust

question

specialization of labor

answer

The most likely explanation for economies of scale is

question

economies of scale

answer

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

question

long-run average total costs rise as output increases.

answer

Diseconomies of scale occur when

question

perfectly competitive market

answer

question

marginal revenue

answer

__________ ________ is the change in total revenue from an additional unit sold.

question

total revenue

answer

_______ _______ is the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold,

question

average revenue

answer

______ _______ is how much revenue a firm receives for the typical unit sold, computed as the total revenue divided by the quantity sold. This always equals the price, for all types of firms.

question

shutdown

answer

A ________ is a short-run decision by the firm not to produce anything during a specific period of time because of current market conditions.

question

exit

answer

An _____ is a long-run decision by the firm to not produce any output for the rest of time, and leave the market completely.

question

sunk cost

answer

A ____ _____ is a cost that has already been committed and cannot be recovered.

question

positive economic profit

answer

question

negative economic profit

answer

question

zero economic profit

answer

question

long run equilibrium

answer

_______ ____ ________ occurs when no new firms are entering, and no existing firms are exiting the market. This only occurs when zero economic profit is being earned by each firm.

question

profit

answer

question

characteristics of perfect competition

answer

-Many buyers and sellers
-Identical (or nearly identical) goods being offered for sale
-Free market entry and exit for firms

question

Total Revenue Equation

answer

Price x Quantity

question

average revenue equation

answer

total revenue/quantity

question

marginal revenue equation

answer

change in total revenue / change in quantity

question

equal

answer

price is always going to be ______ to average revenue

question

greater

answer

If MR is _________ than MC, then increase Q to raise profit.

question

less

answer

If MR is _________ than MC, then decrease Q to raise profit.

question

equal

answer

If MR is _______ to MC, then Q is at maximum profit.

question

a one-unit increase in output will increase the firm's profit.

answer

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then _______.

question

marginal revenue equals marginal cost.

answer

At the profit-maximizing level of output, _______.

question

profit is maximized.

answer

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which _______.

question

shutdown

answer

a firm will __________ in the short run if the revenue per unit (aka the price) is less than the variable cost per unit (aka the AVC).

question

exit

answer

a firm will _______ the market (and eventually go out of business) if the revenue per unit is less than the cost per unit.

question

Zero economic profit

answer

_______ _____ _______ occurs when the price of a good is equal to the firm's average total cost (P = ATC). In other words, when the revenue per unit equals the cost per unit.

question

When profit-maximizing firms in competitive markets are earning profits, _______.

answer

When profit-maximizing firms in competitive markets are earning profits, _______.

question

price is greater than average variable cost.

answer

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the _______.

question

Less than average variable cost.

answer

In the short run, a firm operating in a competitive industry will shut down if price is _______.

question

its fixed costs but not its variable costs.

answer

A firm that shuts down temporarily has to pay _______.

question

average total cost exceeds the price.

answer

In the long run, a firm will exit a competitive industry if _______.

question

monopoly

answer

A ________ is a firm that is the sole seller of a product without any close substitutes.

question

natural

answer

A ________ monopoly is a type of monopoly that arises because a single firm can supply a good or service to an entire market at a lower cost than could two or more firms.

question

market power

answer

_______ _______ is the ability of a single economic actor (like a monopolist) to have a substantial influence on market prices.

question

output effect

answer

__________ _______ is the effect that increasing output has on total revenue for the monopolist. When more output is sold, Q is higher, which increases total revenue (where TR=PxQ).

question

Price effect

answer

______ _______ is the effect that decreasing price has on total revenue for the monopolist. When the price falls, P is lower, which decreases total revenue (where TR=PxQ).

question

price discrimination

answer

________ __________ is the business practice of selling the same good at different prices to different customers.

question

perfect price discrimination

answer

______ _______ ______ is a situation in which the monopolist knows exactly each customer's willingness to pay and can charge each customer a different price.

question

antitust laws

answer

question

A competitive firm

answer

_______ ______ ______ is a price taker, whereas a monopolist is a price maker.

question

a monopoly

answer

___ _________ can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.

question

not in the best interest of society, one that fails to maximize total economic well-being, inefficient

answer

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often

question

entry is limited

answer

Which of the following is not a characteristic of a competitive market?

question

dairy farming

answer

Which of the following industries is most likely to exhibit the characteristic of free entry?

question

buyers will go elsewhere

answer

When firms are said to be price takers, it implies that if a firm raises its price,

question

double

answer

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

question

total revenue is constant

answer

For a firm operating in a competitive industry, which of the following statements is not correct?

question

marginal revenue

answer

a monopolist maximizes profit by producing the quantity where ______ ________ = Marginal Cost

question

supply

answer

A monopoly does not have a _____ curve; quantity and price are determined by MC, MR, and the demand curve.

question

profit equation

answer

(P-ATC) x Q

question

price always exceeds marginal revenue.

answer

For a monopoly firm,

question

how a monopolist maximizes profit

answer

producing an output level where marginal revenue equals marginal cost, and charging a price that is greater than marginal revenue

question

a monopolist produces

answer

less than the socially efficient quantity of output but at a higher price than in a competitive market.

question

produces an output level less than the socially optimal level.

answer

The deadweight loss associated with a monopoly occurs because the monopolist

question

Synergies

answer

strategic relationships between media and information companies

question

selling the same good at different prices to different customers.

answer

Price discrimination is the business practice of

question

separate customers according to their willingness to pay.

answer

Price discrimination requires the firm to

question

higher than if the firm charged just one price because the firm will capture more consumer surplus.

answer

A monopolist's profits with price discrimination will be

question

eliminate consumer surplus and deadweight loss, and maximize profits

answer

If a monopolist can practice perfect price discrimination, the monopolist will

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