ECON EXAM 2 – Flashcards

If you compute the price elasticity of demand using a quantity of tickets from 1 to 8 and using a quantity of tickets from 1,000 to 8,000, the value of the price elasticity of demand is

If a university passed a rule stating that university students must live in university dormitories, what effect would this have on the price elasticity of demand for dorm space? What effect would this have on room rates?

Product Income Elasticity Movies +3.4 Dental services +1.0 Clothing +0.5 The values indicate that

Research has found that an increase in the price of beer would reduce the amount of marijuana consumed. This research indicates that the cross elasticity of the two products is

A firm charges different groups of customers different prices in order to

What are the major determinants of price elasticity of demand?

Price and total revenue move in the opposite direction when demand is

Price falls and demand is inelastic:

Price rises and demand is elastic

Price rises and supply is elastic

Price rises and supply is inelastic

Price rises and demand is inelastic

Price falls and demand is elastic

Price falls and demand is of unit elasticity:

Suppose the cross elasticity of demand for products A and B is +3.6 and for products C and D is -5.4.

Suppose that the total revenue received by a company selling basketballs is $960 when the price is set at $30 per basketball and $960 when the price is set at $20 per basketball. Without using the midpoint formula, identify whether demand is elastic, inelastic, or unit-elastic over this price range.

What is the formula for measuring the price elasticity of supply

Explicit costs are payments the firm makes for

The explicit costs of going to college include

Which of the following statements is true

A normal profit is considered a cost because

Which of the following statements is true regarding the costs associated with owning and operating an automobile

You are considering whether to drive your car or fly 1,000 miles to Florida for spring break. In making your decision you should consider

Linda sells 100 bottles of homemade ketchup for $10 each. The cost of the ingredients, the bottles, and the labels was $700. In addition, it took her 20 hours to make the ketchup and to do so she took time off from a job that paid her $20 per hour. Linda's accounting profit is _____________ while her economic profit is ______________.

True or false. The U shape of the long-run ATC curve is the result of diminishing returns.

Pure competition

Pure monopoly

Monopolistic competition

Oligopoly

A supermarket in your hometown

The steel industry

A Kansas wheat farm

The commercial bank in which you or your family has an account

The automobile industry

We study pure competition because it

Consider the statement: "Even if a firm is losing money, it may be better to stay in business in the short run." This statement is

The firm should produce in the short run so long as the price

Consider a firm that has no fixed costs and which is currently losing money. Are there any situations in which it would want to stay open for business in the short run?

A firm with no fixed cost

The equality of marginal revenue and marginal cost is essential for profit maximization in all market structures because when this is true the

When an industry is purely competitive, price can be substituted for marginal revenue in the MR = MC rule because

If a firm's current revenues are less than its current variable costs, it should shut down

If a firm's current revenues are less than its current variable costs and it decides to shut down, this decision

Suppose that the paper clip industry is perfectly competitive. Also assume that the market price for paper clips is 2 cents per paper clip. The demand curve faced by each firm in the industry is:

A purely competitive firm whose goal is to maximize profit will choose to produce the amount of output at which:

If it is possible for a perfectly competitive firm to do better financially by producing rather than shutting down, then it should produce the amount of output at which

A perfectly competitive firm that makes car batteries has a fixed cost of $10,000 per month. The market price at which it can sell its output is $100 per battery. The firm's minimum AVC is $105 per battery. The firm is currently producing 500 batteries a month (the output level at which MR = MC). This firm is making a _____________ and should _______________ production.

Consider a profit-maximizing firm in a competitive industry. Under which of the following situations would the firm choose to produce where MR = MC?

In the long run in a purely competitive industry,

Profits encourage entry into purely competitive industries and losses encourage exit from purely competitive industries because

Entry and exit help to improve resource allocation because

Entry and exit in a purely competitive industry occur in the

The equality of marginal revenue and marginal cost is essential for profit maximization in all market structures because if

Price can be substituted for marginal revenue in the MR = MC rule when an industry is purely competitive because price

In long-run equilibrium, P = minimum ATC = MC. The equality of P and minimum ATC means the firm is achieving

The equality of P and MC means the firm is achieving

If all firms only earn a normal profit in the long run, firms will develop new products or lower-cost production methods because they can

"Ninety percent of new products fail within two years—so you shouldn't be so eager to innovate."

Suppose that as the output of mobile phones increases, the cost of touch screens and other component parts decreases. If the mobile phone industry features pure competition, we would expect the long-run supply curve for mobile phones to be:

"No firm is completely sheltered from rivals; all firms compete for consumer dollars. If that is so, then pure monopoly does not exist." A monopoly is more likely to persist if the cross price elasticity of demand is

Which of the following is not a major barrier to entry into an industry

Which of the following is true

The demand curve faced by a purely monopolistic seller

The demand curve facing a

The pure monopolist's demand curve is not

Assume that a pure monopolist and a purely competitive firm have the same unit costs. In this case, resources will be allocated

Even though both monopolists and competitive firms follow the MC = MR rule in maximizing profits, there are differences in the economic outcomes because the

The costs of a purely competitive firm and a monopoly could be different because

If a monopoly can experience economies of scale

Because they can control product price, monopolists are always assured of profitable production by simply charging the highest price consumers will pay.

The pure monopolist seeks the output that will yield the greatest per-unit profit.

An excess of price over marginal cost is the market's way of signaling the need for more production of a good.

The more profitable a firm, the greater its monopoly power.

The monopolist has a pricing policy; the competitive producer does not.

With respect to resource allocation, the interests of the seller and of society coincide in a purely competitive market but conflict in a monopolized market.

Assume a monopolistic publisher agrees to pay an author 15 percent of the total revenue from text sales. Which of the following statements is true?

U.S. pharmaceutical companies charge different prices for prescription drugs to buyers in different nations, depending on elasticity of demand and government-imposed price ceilings. U.S. pharmaceutical companies, for profit reasons, oppose laws allowing reimportation of drugs to the United States because reimportation would

It has been proposed that natural monopolists should be allowed to determine their profit-maximizing outputs and prices and then government should tax their profits away and distribute them to consumers in proportion to their purchases from the monopoly. This proposal

Which of the following could explain why a firm is a monopoly?

The MR curve of a perfectly competitive firm is horizontal. The MR curve of a monopoly firm is:

How often do perfectly competitive firms engage in price discrimination?

Suppose that a monopolist can segregate his buyers into two different groups to which he can charge two different prices. In order to maximize profit, the monopolist should charge a higher price to the group that has:

The socially optimal price (P = MC) is socially optimal because:

The main problem with imposing the socially optimal price (P = MC) on a monopoly is that the socially optimal price