Firm Behavior and Market Structure

Question 1

marginal revenue formula

Answer 1

change in total revenue / change in quantity

Question 2

marginal cost formula

Answer 2

change in total cost / change in quantity

Question 3

the change in a firm’s revenue from producing one more unit of a good

Answer 3

Marginal revenue

Question 4

the change in a firm’s cost from producing one more unit of a good

Answer 4

marginal cost

Question 5

profit point of production

Answer 5

where marginal revenue is equal to marginal cost

Question 6

if marginal revenue is greater than marginal cost the firm should produce more/less goods

Answer 6

more

Question 7

if marginal revenue is less than marginal cost the firm should produce more/less goods

Answer 7

less

Question 8

a firm cannot increase profits by producing any more or any less than the point where

Answer 8

marginal revenue equals marginal cost, or marginal profits equals 0

Question 9

marginal revenue stay constant and equal to the price under what condition

Answer 9

perfect competition (price taker can’t influence the price on their own)

Question 10

a firm will shut down production any time the price is below

Answer 10

average variable cost

Question 11

the short-run supply curve for the firm is the marginal cost curve at any point below/above (blank blank) cost

Answer 11

above average variable cost

Question 12

the long run supply curve is the marginal cost curve below/above average (blank blank)

Answer 12

above average total cost

Question 13

if the marginal revenue line crosses marginal cost at a point that the price is greater than average total cost, there is a profit/loss

Answer 13

profit

Question 14

if the marginal revenue line crosses marginal cost at a point that the price is less than average total cost, there is a profit/loss

Answer 14

loss

Question 15

When the price is equal to average total cost (blank) economic profits will be realized

Answer 15

zero, no incentive to enter/exit a market

Question 16

lots of buyers and sellers able to enter and exit a market freely results in

Answer 16

perfect competition

Question 17

a (blank blank) causes a monopoly when one company is holding onto sole ownership of a key resource in production

Answer 17

resource restriction

Question 18

this type of monopoly is created when a firm is granted exclusive rights to produce or sell the specific good, usually related to contract laws, property right laws, copyright laws, or patent laws.

Answer 18

government created

Question 19

a (blank) monopoly is created when it costs less to society to have one firm producing the good than to have more than one firm producing - one firm can provide the good at a lower cost than two or more

Answer 19

natural

Question 20

difference between monopoly outcomes and socially efficient outcomes

Answer 20

deadweight loss

Question 21

profit formula

Answer 21

Profit = Total revenue − Total cost
= (Price)(Quantity produced) − (Average cost)(Quantity produced)

Question 22

graphically, a perfectly competitive market will show the sales price where marginal (blank) equals marginal (blank)

Answer 22

marginal revenue equals marginal cost

Question 23

shutdown point formula

Answer 23

marginal cost => average variable cost

Question 24

the point where marginal cost intersects with average cost

Answer 24

zero-profit point

Question 25

average variable cost formula

Answer 25

total variable cost / quantity produced

Question 26

goods being produced and sold at the lowest possible average cost is (blank) efficiency

Answer 26

productive

Question 27

among the points on the production possibility frontier, the point that is chosen as socially preferred is (blank) efficiency

Answer 27

allocative

Question 28

the conditions in an industry, such as number of sellers, how easy or difficult it is for a new firm to enter, and the type of products that are sold

Answer 28

market structure

Question 29

long-run equilibrium is reached when

Answer 29

all firms earn zero economic profits producing the output level where P = MR = MC and P = AC

Question 30

Marginal utility per dollar formula

Answer 30

marginal utility / price

Question 31

the utility-maximizing choice between consumption goods occurs where the (blank) is the same for both goods.

Answer 31

marginal utility per dollar

Question 32

the situation when high-wage people can earn so much that they respond to a still-higher wage by working fewer hours

Answer 32

backward-bending supply curve for labor

Question 33

a branch of economics that seeks to enrich the understanding of decision-making by integrating the insights of psychology and by investigating how given dollar amounts can mean different things to individuals depending on the situation.

Answer 33

behavioral economics

Question 34

shows the possible combinations of two goods that are affordable given a consumer’s limited income

Answer 34

budget constraint line

Question 35

when the ratio of the prices of goods is equal to the ratio of the marginal utilities (point at which the consumer can get the most satisfaction)

Answer 35

consumer equilibrium

Question 36

removing government controls over setting prices and quantities in certain industries

Answer 36

deregulation

Question 37

when an existing firm uses sharp but temporary price cuts to discourage new competition

Answer 37

predatory pricing

Question 38

a proportionate saving in costs gained by an increased level of production

Answer 38

economy of scale