Exam 3 Flashcards
How do you maximize profit?
you maximize profit when marginal cost equals marginal revenue.
In a perfectly competitive market, the firm is a price taker because ______.
A firm that cannot influence the price of the good or service that it produces is a price taker.
Firms in a perfectly competitive market are price takers because they produce a tiny proportion of the total output of a particular good and buyers are well informed about the prices of other firms.
If a firm raises it price, buyers will buy a perfect substitute from other firms and the firm with the higher price will not sell any of its product.
In perfect competition, a firm maximizes its economic profit if it produces the output at which _______.
In perfect competition, a firm maximizes its economic profit if it produces the output at which marginal cost equals marginal revenue.
In a perfectly competitive market, marginal revenue equals price, so a firm maximizes its economic profit if it produces the output at which marginal cost equals price.
Monopoly is a market in which one firm sells a good or service that has _____ substitutes and _____ blocks the entry of new firms.
Monopoly is a market in which one firm sells a good or service that has no close substitutes and a barrier blocks the entry of new firms.
How to find economic loss
To find economic loss we calculate the loss per batch, which is equal to average total cost minus price, multiplied by the number of batches of product (cookies) produced.
Marginal product
The change in total product that results from a one-unit increase in the quantity of labor employed.
Marginal product = Change in total product/Change in quantity of labor
Average product
the total product per worker employed (aka productivity).
AP = TP/quantity of labor
TC
the cost of all the factors of production the firm uses (2parts)
Total fixed cost
Total variable cost
Average cost types
AFC - the total fixed cost per unit of output
AVC - total variable cost per unit of output
ATC - average total cost per unit
TC = TFC+TVC
Economic profit
equal to price minus average total cost multiplied by the quantity produced.
If firms in a competitive industry are ______, then in the long run, firms have ______ the industry.
Firms respond to economic profit or economic loss by either entering or exiting an industry.
Firms enter an industry in which firms in the industry are making an economic profit, and firms exit an industry in which firms are incurring an economic loss.
As new firms enter an industry, the market supply increases, the market price falls, and the economic profit of each existing firm decreases.
As firms leave an industry, the market supply decreases, the market price rises, and the economic loss of each firm remaining in the industry decreases.
When firms in a competitive industry are making positive economic profits, new firms have an incentive to enter the industry.
The NCAA is ______.
A legal monopoly is a market in which competition and entry are restricted by the granting of a public franchise, government license, patent, or copyright.
The NCAA is a legal monopoly that restricts competition and entry in college athletics.
If another group tries to sanction a college sport, the NCAA would expel from all sports any college that joined that competing group.
Monopoly is a market in which one firm sells a good or service that has _____ substitutes and _____ blocks the entry of new firms.
Monopoly is a market in which one firm sells a good or service that has no close substitutes and a barrier blocks the entry of new firms.
Total revenue and marginal revenue
Total revenue is equal to price multiplied by the quantity sold.
Marginal revenue is the change in total revenue resulting from a one-unit increase in the quantity sold.
Marginal revenue curves
The marginal revenue curve has twice the slope of the demand curve.
U.S. gross domestic product is the market value of all the ______ produced ______ in a given time period.
U.S. gross domestic product is the market value of all the final goods and services produced with the United States in a given time period.
Total expenditure in the United States is equal to consumption expenditure plus investment ______.
Total expenditure on goods and services produced in the United States is the sum of consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services.
Using symbols, total expenditure is:
Y = C + I + G + NX.
