Exam 2 Multiple Choice Flashcards
(28 cards)
Implicit costs are
Payments for self employed resources
Competitive firms are assumed to be
Price takers
Costs that do not change with output are called
Fixed
The monopolistically competitive firm that is earning an economic profit is also
Earning a normal profit
If price is equal to ATC the firm is
Earning only normal profit
Costs that are incurred through monetary payment are
Explicit
What is an example of a homogeneous good?
Wheat
Rate-of-return regulation of a natural monopolist has a goal of
Lower prices, higher output
What is a characteristic of monopolistic competition?
Relatively easy entry
The change in total cost that results from a change in output is what cost?
Marginal
When does a horizontal merger occur?
When a firm buys its competition
What is not a type of merger?
Reverse
The US auto industry is an
Oligopoly
A major distinction between a monopolistically competitive firm and an oligopolistic firm is that
A recognized interdependence exists between firms in one industry but not the other
Most economists say the firm’s goal is
To maximize profits
In the short run output:
Can vary as a result of using a fixed amount of plant and equipment more or less intensively
Which is true of pure competition but not monopolistic competition?
Long-run equilibrium occurs at the minimum point on the ATC curve
Local Utility type services are typically
Regulated by various government units to restrain market power
Which of the following is an assumption of the theory of monopoly?
There are extremely high barriers to entry
The marginal cost curve cuts the what curve at its lowest point?
Average variable cost
The main difference between the short and long run is
In the short run one or more inputs is fixed
As outputs increase, fixed costs
Remain constant
Which market has the smallest number of firms?
Pure monopoly
A firm should increase the quantity of output as long as its:
Marginal revenue is greater than marginal cost
