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Econ 202 > Exam 3 > Flashcards

Exam 3 Flashcards

1
Q

Fixed Input

A

An input whose quantity is fixed for a period of time and cannot be varied

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2
Q

Variable input

A

an input whose quantity the firm can vary at any time

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3
Q

Long run

A

Time period in which all inputs can be varied

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4
Q

short run

A

the time period in which at least one input is fixed

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5
Q

total product curve

A

The quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input.

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6
Q

the marginal product

A

is the additional quantity of output produced by using one more unit.

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7
Q

diminishing returns to an input

A

The quantity of the input that hold all levels fixed goes up, the marginal product of the input falls

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8
Q

The _______ shows the relationship between the firm’s inputs and its output.

A

production function

The relationship between the firm’s output and the input used to produce it is the production function.

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9
Q

The _____ product of labor is the added quantity of output from using one more worker.

A

marginal

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10
Q

An input that cannot be varied for a specified time period is a(n) _______ input.

A

fixed

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11
Q

Adding more fixed inputs to the production process shifts the total product curve _______ and the marginal product curve ___________.

A

upward; upward

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12
Q

Fixed Cost

A

Does not depends on out produced. it is the cost of the fixed input.

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13
Q

Variable Cost

A

cost depends on output. Cost of variable input

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14
Q

total cost

A

sum of the fixed cost + variable cost

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15
Q

Total cost curve

A

Shows how total cost depends on quantity of output

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16
Q

A cost that depends on the quantity of output produced is a _____ cost.

A

variable

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17
Q

There is a trade-off between higher fixed cost and lower variable cost for any output level.

A

True

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18
Q

Products produced by monopolistically competitive firms are viewed by consumers as

A

imperfect substitutes.

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19
Q

A firm’s _________ is the fraction of the total industry output accounted for by that producer’s output.

A

market share

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20
Q

Which of the following industries is most likely to be monopolistically competitive?

A

food vendors in the food court of a mall

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21
Q

True or False? A commodity is a standardized product.

A

true

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22
Q

technological superiority

A

Will act as a barrier to entry the is likely to be temporary.

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23
Q

In the fast food industry, there are many firms producing a differentiated product. This is an example of which market structure?

A

monopolistic competition

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24
Q

An industry with many firms producing differentiated products with free entry and exit in the long run is

A

monopolistic competition.

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25
Q

In the market for wheat, there are many farmers selling exactly the same type of wheat. This is an example of:

A

perfect competition

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26
Q

True or False? A natural monopoly exists when the owner controls a scarce natural resource.

A

false

27
Q

True or False? The wheat growing industry is a perfectly competitive industry because it produces a standardized product and each farmer has a very small market share.

A

true

28
Q

Which of the following industries is likely to be monopolistically competitive?

A

fast food

29
Q

when profit is maximized by producing the quantity of output where the marginal revenue of the last unit produced is equal to its marginal cost

A

optimal output rule

30
Q

A firm’s profit is equal to total _____ minus total cost.

A

revenue

31
Q

The change in total revenue when output increases by one unit is known as _____ revenue.

A

Marginal

32
Q

the change in total revenue divided by the change in output.

A

Marginal revenue is

33
Q

The firm will shut down in the short run if price is less than the minimum average _____ cost.

A

Variable

34
Q

Dan sells his firewood in a competitive market. At a price of $140 per load, at a quantity of 5, the total revenue at Dan’s profit-maximizing output is is?

A

$700 (140x5)

35
Q

Suppose that Prince Puckler’s Ice Cream sells 100 cones each day. It sells each cone for $3, its average variable cost is $2.50, marginal cost is $3, and the average total cost is $3.20. From this we know:

A

The firm will exit the industry in the long run because their marginal cost is than the average total cost.

36
Q

Dan sells his firewood in a competitive market. If the price is $55 per load, and quantity is 3 (MC is below ATC), Dan should ________ in the long-run.

A

shut down and leave the industry since his price is less than the average total cost.

37
Q

New firms will enter a perfectly competitive industry if:

A

Firms currently in the industry are producing at the point where price is above ATC.

38
Q

What is the formula for a firm’s profit?

A

Profit = (Price − ATC) × Quantity

39
Q

What cost do you use to tell if you need to exit the market?

A

ATC once it decreases then immediately increases

40
Q

The firm will maximize profit by producing at which point?

A

A point where price is equal to marginal cost.

41
Q

Which is true?

    - The firm will cease production in the short run if price falls below $18.
- The firm's short-run supply curve is its average variable cost curve.
- The firm's average total cost is minimized when it is equal to marginal cost.
- The firm will earn a positive economic profit if price is above $10.
A

The firm’s average total cost is minimized when it is equal to marginal cost.

42
Q

True or False? An individual firm’s demand curve in a perfectly competitive market is perfectly elastic.

A

True

43
Q

The profit-maximizing rule for the perfectly competitive firm is that it will choose output such that:

A

MR = MC.

44
Q

Compared to a perfectly competitive firm, a monopolist produces _______ and charges a _____ price.

A

less; higher

45
Q

True or False? Both perfectly competitive firms and monopolies earn economic profits in the long run.

A

False

46
Q

The demand curve for a monopolist:

A

is the industry demand curve.

47
Q

The short-run industry supply curve is the sum of the individual ________ cost curves, assuming that there is _____ entry and exit to and from the industry.

A

marginal; no

48
Q

When the number of producers is given, the short-run industry supply curve shows

A

the total quantity supplied for each possible price.

49
Q

Suppose that the long-run industry supply in the production of synthetic fabrics is perfectly elastic. Which of the following statements then is TRUE?

A

The long-run industry supply for synthetics is horizontal.

50
Q

How does the long-run industry supply curve compare to the short-run industry supply curve?

A

The long-run curve is always flatter than the short-run curve.

51
Q

The relationship between the long-run industry supply curve and the short-run industry supply curve is such that:

A

the long-run supply curve is more elastic than the short-run supply curve.

52
Q

If costs are constant in the industry so that each firm faces the same cost structure, then the long-run industry supply curve is:

A

perfectly elastic.

53
Q

The long-run industry supply curve can slope downward if costs are:

A

decreasing

54
Q

Suppose a perfectly competitive industry is in long-run equilibrium and no economic profits are being earned. If demand increases, firms will ________ the industry in response, and until exiting firms earn _________ economic profits.

A

exit; positive

55
Q

Assume that some firms in a perfectly competitive industry are incurring negative economic profits. In the long run, the:

A

industry supply curve will shift to the left.

56
Q

In the long-run equilibrium of a perfectly competitive industry:

A

every consumer who is willing to pay the cost of producing the good gets it.

57
Q

A perfectly competitive tomato industry is in long-run equilibrium. Now suppose that a study shows that eating too many tomatoes can be harmful. In the long run:

A

the supply of tomatoes will decrease and the market price will increase.

58
Q

In the long-run equilibrium of a perfectly competitive industry:

A

every consumer who is willing to pay the cost of producing the good gets it.

59
Q

Suppose GoSports pennant monopoly is broken up and the pennant industry becomes perfectly competitive. It would be expected that the _____ would increase from the breakup and the _____ would decrease from the breakup.

A

consumer surplus and total surplus; producer surplus

60
Q

Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is:

A

$19.

61
Q

The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as:

A

market power.

62
Q

The demand curve for a perfectly competitive firm is:

A

perfectly elastic.

63
Q

In perfect competition, the assumption of easy entry and exit implies that:

A

in the long run all firms in the industry will earn zero economic profits.

Econ 202 (4 decks)

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