Econ Exam 4

Question 1

a single seller of a product with no close substitutes

Answer 1

monopolist

Question 2

the profit-maximizing quantity for both a perfectly competitive firm and a monopoly

Answer 2

Marginal revenue equals marginal cost.

Question 3

One likely result of monopoly power is ________

Answer 3

a higher price than would exist in a competitive industry

Question 4

Barriers to entry allow _______ to earn profit in the long run

Answer 4

monopolies

Question 5

Perfectly competitive firms are price takers because ______

Answer 5

each firm is too small, compared to the market, to affect price

Question 6

The demand curve for the output of a perfectly competitive firm is ______.

Answer 6

perfectly elastic

Question 7

The golden rule of profit maximization states that any firm maximizes profit by producing where ________

Answer 7

marginal revenue equals marginal cost

Question 8

If a perfectly competitive firm shuts down in the short run, they must pay_______.

Answer 8

only fixed cost

Question 9

• One seller
• Unique product
• Barriers to entry

Answer 9

Monopoly

Question 10

Government grants one person/firm exclusive right to produce something.

Answer 10

Government Created Monopolies

Question 11

Ex: Invention Incentives:
- patent
- copyright
- licenses + other restrictions

Answer 11

Government Created Monopolies

Question 12

A single firm can produce any amount of Q at least cost

Answer 12

Natural Monopolies

Question 13

There is only “Room in the mkt” for one firm.

Answer 13

Natural Monopolies

Question 14

Long-run: ATC decreases, Q increases

Answer 14

economies of scale

Question 15

Ex: Utilities
- water
- electric
- etc

Answer 15

Natural Monopolies

Question 16

1 firm controls a key resource of production
Ex.: ALCOA, pro sports

Answer 16

Monopoly Resources

Question 17

Main difference from “Perfect Comp,” is Monopolist control ____

Answer 17

Price

Question 18

Monopolist: To sell more, must decrease P _______

Answer 18

On all units

Question 19

P x Q = ______

Answer 19

TR

Question 20

For a monopolist MR is always _____ P after first unit sold.

Answer 20

<

Question 21

Profit max occurs where ____

Answer 21

MR = MC

Question 22

P > AVC: ______

Answer 22

continue producing

Question 23

P < AVC: _______

Answer 23

shut down

Question 24

__ = MR = MC

Answer 24

P

Question 25

When P > MC, firms should ________ production.

Answer 25

Increase

Question 26

d1 = _______

Answer 26

MR1

Question 27

When P > ATC there is ______

Answer 27

Profit

Question 28

The characteristics of a market that influence how trading takes place

Answer 28

Market Structure

Question 29

- The number of buyers + sellers - Product uniformity across firms - Ease of entry/exit

Answer 29

Market Structure

Question 30

All markets sit between _____ and _______

Answer 30

Monopolistic Competition and Oligopoly

Question 31

Each is very small relative to the market

Answer 31

Many buyers + sellers

Question 32

- Perfect substitutes - Standardized products

Answer 32

Firms sell commodity

Question 33

Over time firms + resources can easily enter or leave the market with no penalty or obstacle

Answer 33

Free entry/exit

Question 34

Buyers + sellers are fully informed about prices and availability of all resources and products

Answer 34

Perfect Information

Question 35

Price is determined by Market S + D Ex.: Agriculture markets Basic commodities Widely traded stock Foreign Exchange

Answer 35

B + S are Price Takers

Question 36

Profit = _____ - ______

Answer 36

TR - TC

Question 37

Only way to change TR is to change ______

Answer 37

Q

Question 38

A Perfect Competition firms SR S Curve = ______

Answer 38

MC Curve

Question 39

In a perfect competition, temporarily shut down if ____ < _____

Answer 39

TR < VC

Question 40

Shut down rule: If P < AVC firm will have a ______ loss if temporarily shut down

Answer 40

Smaller

Question 41

Decision to temporarily stop production

Answer 41

Short Run (SR)

Question 42

Decision to go out of business

Answer 42

Long run (LR)

Question 43

Break even point

Answer 43

PB

Question 44

When P = min ATC

Answer 44

Break even or PB

Question 45

The Q level that minimizes ATC

Answer 45

Efficient Scale of Production

Question 46

1. Find Q* (MR = MC) 2. At Q*, find ATC 3. Find profit or loss at Q*

Answer 46

Short run decision making process

Question 47

In SR # of firms is ____

Answer 47

Fixed

Question 48

Profits/losses are the forces driving _____ changes

Answer 48

LR

Question 49

In LR entry/exit are ______

Answer 49

Important

Question 50

AR = _____ / ______

Answer 50

TR divided by Q

Question 51

Perfectly competitive firms are price takers because ____________

Answer 51

firms must accept any price consumers offer them

Question 52

The demand curve for the output of a perfectly competitive firm is ______

Answer 52

perfectly elastic (not asking for SHAPE!!!)

Question 53

The golden rule of profit maximization states that any firm maximizing profit by producing where ________

Answer 53

MR = MC

Question 54

If a perfectly competitive firm shuts down in the short run, they must pay ________.

Answer 54

only FIXED cost

Question 55

T or F A perfectly competitive firm in long-run equilibrium economic profit will be zero.

Answer 55

True

Question 56

T or F A perfectly competitive firm in long-run equilibrium accounting profit is positive.

Answer 56

True

Question 57

T or F A perfectly competitive firm in long-run equilibrium ATC is minimized

Answer 57

True

Question 58

T or F A perfectly competitive firm in long-run equilibrium the firm will be charging a price equal to MC.

Answer 58

True

Question 59

T or F A perfectly competitive firm in long-run equilibrium MC is minimized

Answer 59

False