Unit 2 (☠️)

Question 1

How to calculate average total cost/average cost

Answer 1

Divide total cost by quantity (TC/Q)

Question 2

How to calculate average variable cost

Answer 2

Divide variable cost by total product/output

Question 3

How to calculate marginal cost

Answer 3

Divide the change in total cost by the change in quantity

Question 4

Short run average cost characteristics

Answer 4

Fixed assets are held fixed
All SRAC curves are above the LRAC
Less flexibility
Higher costs

Question 5

Long run average cost characteristics

Answer 5

Costs are variable
Less flexible
All LRAC curves are below the SRAC

Question 6

How to calculate economic profit

Answer 6

Revenue minus explicit costs minus opportunity cost
(R-EC-OC)

Question 7

Perfectly competitive firm

Answer 7

Many firms produce identical products

Many buyers are available to buy the product and many sellers are available to sell the product

Sellers and buyers have all relevant information to make rational decisions about the product

Firms can enter and leave the market with zero restrictions (free entry/exit)

PRICE TAKER!!!!!

Question 8

When should a firm enter or exit the market under perfect competition?

Answer 8

If there are profits to be made, firms will enter the market

If there is negative profit, firms will exit the market

If existing firms are taking economic losses, then the firms with the highest costs will leave the market a

Question 9

How to find profit maximizing point

Answer 9

MR=MC

Question 10

How to calculate average fixed cost

Answer 10

Total fixed cost divided by quantity

Question 11

Characteristics of monopolies

Answer 11

One firm produces all the output in a market (no competition)

Barriers to entry/exit

Question 12

How to calculate marginal revenue

Answer 12

Change in total revenue divided by change in quantity

Question 13

How to calculate area of profit for a monopoly

Answer 13

Use the average cost curve to determine production costs, then subtract that number from the total revenue

Question 14

Characteristics of monopolistic competitive firms

Answer 14

Large number of competing firms that sell non identical products

Question 15

Characteristics of oligopolies

Answer 15

Dominated by small number of firms

High barriers to entry

Question 16

Dominant strategy

Answer 16

It always earns more than every other strategy for the player no matter what others do

Question 17

Dominated strategy

Answer 17

Always earns less than another strategy for that player no matter what others do

Question 18

How to find nash equilibrium

Answer 18

Model out each possible scenario and identify the optimal strategy

Question 19

Diseconomies of scale

Answer 19

The long-run average cost of producing output increases as total output increases

Question 20

How to calculate marginal product

Answer 20

Change in total product divided by change in quantity

Question 21

Revenue

Answer 21

Price times quantity sold

Question 22

Break even point

Answer 22

Level of output where the marginal cost curve intersects the average cost curve at the minimum point of AC; if the price is at this point, the firm is earning zero economic profits

Question 23

For a perfectly competitive firm in the long run their profit is equal to

Answer 23

Zero in the long run

Question 24

How to calculate HHI of firms

Answer 24

Square each share and add them all