ECO 102 – CHAPTER 3 – Flashcards
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Refer to Figure 13-1. Which of the following could explain why the total product curve would shift from TP2 to TP1?
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NOT: The firm has developed improved production technology.
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Total revenue minus both explicit and implicit costs is called
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economic profit.
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An entrepreneur's motivation to start a business arises from
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All of the above could be correct.
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The marginal product of an input in the production process is the increase in
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quantity of output obtained from an additional unit of that input.
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Trevor's Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of $65. Trevor's Tire Company's total profits are
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NOT $25,000
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Implicit costs
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do not require an outlay of money by the firm.
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Scenario 13-5 Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%.
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NOT $14000
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Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. William can arrange 18 bouquets per day. What would be the total daily output of Kate's firm if she hired her husband?
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NOT 19 bouquets
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If Danielle sells 300 wrist bands for $0.50 each, her total revenues are
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$150.
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Scenario 13-5 Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%.
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NOT $14000
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If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then
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decreasing output would increase the firm's profit.
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If firms are competitive and profit maximizing, the price of a good equals the
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marginal cost of production.
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Table 14-8 Suppose that a firm in a competitive market faces the following revenues and costs: Refer to Table 14-8. The firm will produce a quantity greater than 3 because at 3 units of output, marginal cost
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is less than marginal revenue.
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A firm has market power if it can
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influence the market price of the good it sells.
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Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal cost is equal to
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NOT $9
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At the profit-maximizing level of output,
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marginal revenue equals marginal cost.
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For any competitive market, the supply curve is closely related to the
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firms' costs of production in that market.
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If a competitive firm is currently producing a level of output at which profit is not maximized, then it must be true that
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None of the above is correct.
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Refer to Table 14-9. If the firm produces 3 units of output,
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total revenue is greater than variable cost.
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In the long run, a firm will enter a competitive industry if
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All of the above are correct.
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Perfect price discrimination
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eliminates deadweight loss.
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For a monopolist, when does marginal revenue exceed average revenue?
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never
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A monopolist
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does not have a supply curve because the monopolist sets its price at the same time it chooses the quantity to supply.
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When a monopolist is able to sell its product at different prices, it is engaging in
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price discrimination.
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Refer to Figure 15-7. A profit-maximizing monopolist would earn total revenues of
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$240
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The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as
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price discrimination.
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Which of the following statements is correct for a monopolist? (i) The firm maximizes profits by equating marginal revenue with marginal cost. (ii) The firm maximizes profits by equating price with marginal cost. (iii) Demand equals marginal revenue. (iv) Average revenue equals price.
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(i) and (iv) only
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Monopoly firms have
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downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.
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downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.
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All of the above are correct
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A firm cannot price discriminate if it
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operates in a competitive market.
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Refer to Figure 16-4. What price will the monopolistically competitive firm charge in this market?
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$800
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In the study done by Lee Benham on advertising for eyeglasses,
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advertising decreased the average price.
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Monopolistic competition is a type of
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market structure.
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Refer to Scenario 16-7. If YumYum decides to advertise its product it can expect to
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NOT earn a profit of $1.5 million.
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In a monopolistically competitive industry, firms set price
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above marginal cost since each firm is a price setter.
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On a vacation to China, you find yourself eating every meal at the local Burger King rather than buying a meal from one of the street vendors. Your traveling companion claims that you are irrational, since you never eat Burger King hamburgers when you are home, and Burger King's hamburgers cost more than the meals prepared and sold by China's street vendors. An economist would most likely explain your behavior by suggesting that
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the Burger King brand name suggests consistent quality.
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Refer to Scenario 16-7. If Bertollini decides to advertise its product it can expect to
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NOT earn a profit of $147 million per year.
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A firm charges a price that exceeds marginal cost
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when the market is a monopoly or monopolistically competitive.
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A recent outbreak of hepatitis was linked to a national fast-food restaurant chain. This is an example of a case in which
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brand name identity can be detrimental to the profitability of a firm.
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Which of the following examples illustrates an oligopoly market?
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a city with two firms who are licensed to sell school uniforms for the local schools
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In choosing among alternative courses of action, Raj must consider how others might respond to the action he takes. In the language of game theory, we say that Raj must think
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strategically
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We must be knowledgeable of how people behave in strategic situations if we are to understand
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oligopolistic markets.
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OPEC is able to raise the price of its product by
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setting production levels for each of its members.
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A special kind of imperfectly competitive market that has only two firms is called
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a duopoly.
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Refer to Table 17-1. If the market for water were perfectly competitive instead of monopolistic, how many gallons of water would be produced and sold?
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1,200 gallons
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In the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a
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strategic situation.
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to Table 17-3. If this market for milk were perfectly competitive instead of monopolistic, how many gallons of milk would be produced and sold?
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12 gallons
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Game theory is necessary to understand which kinds of markets?
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NOT ALL OF THE ABOVE
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Which of the following statements is correct?
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Game theory is not necessary for understanding competitive or monopoly markets.
