question

What is a production function?

answer

Is a technological relationship between factors of production and output.

question

Economies and diseconomies of scale is a _______-run concept.

answer

long

question

What is often realistic for a firm in the short run?

answer

The firm can vary the number of workers it employs, but not the size of its factory.

question

The cost of producing an additional unit of output is the firm's

answer

marginal cost

question

Average total cost is very high when a small amount of output is produced because

answer

average fixed cost is high

question

Diminishing marginal product suggests that

answer

marginal cost is upward sloping

question

A U-shaped average total cost curve implies:

answer

First, marginal cost below average total cost, and then marginal cost above average total cost.

question

Economies of scale are reductions in average:

answer

Total cost that result from using operations of larger size.

question

When adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, we have the property of

answer

diminishing marginal product.

question

Changes in short-run total costs result from changes in only:

answer

variable costs

question

In a competitive market, no single producer can influence the market price because

answer

many other sellers are offering a product that is essentially identical.

question

Shows the relationship between quantity supplied and market price, once firms have had time to adjust (i.e., enter or exit)

answer

Long-run supply curve

question

Which of the following represents the change in total revenue that results from a 1-unit increase in the quantity sold?

answer

marginal revenue

question

Consumers regard the products of all producers as equivalent; i.e., perfect substitutes

answer

Standardized product

question

Zero economic profits mean that:

answer

only at this point does market entry and exit stop

question

A competitive firm's output has to be...

answer

so small relative to the market supply that it has no effect on market price.

question

In a competitive market, the actions of any single buyer or seller will

answer

have a negligible impact on the market price.

question

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

answer

marginal cost curve

question

A firm that shuts down temporarily

answer

still has to pay its fixed costs, but not its variable costs.

question

A competitive firm's marginal cost curve is regarded as its supply curve because

answer

the marginal cost curve determines the quantity of output the firm is willing to supply at any price.

question

A monopolist produces less than the socially efficient...

answer

quantity of output, but at a higher price than in a competitive market.

question

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

answer

Marginal cost and marginal revenue

question

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

answer

marginal revenue is less than the price of the product.

question

A barrier to entry is...

answer

an obstacle that makes it difficult for new firms to enter the market

question

A monopoly firm is different from a competitive firm in that:

answer

the monopolist is a price maker, where the competitive firm is a price taker

question

Compared to a perfectly competitive firm, a monopolist charges a ________ price

answer

higher price

question

A monopoly that may persist because of cost advantages over smaller firms if economies of scale exist

answer

natural monopoly

question

Both a competitive firm and a monopoly:

answer

face downward-sloping market demand curves

question

As compared to a normal monopolist, a price-discriminating monopolist produces a:

answer

larger output and charges each consumer a different price.

question

A monopolist will charge a price that exceeds:

answer

marginal cost

question

A monopolistically competitive firm can raise its price somewhat without fear of great change in unit sales because of:

answer

brand loyalty

question

In a monopolistically competitive industry, in the long run we can expect:

answer

price to be equal to average total cost - but not at minimum average total cost

question

What categorizes a monopolistic competition firm?

answer

Many firms produce a particular type of product, but each maintains some independent control over its own price.

question

True or False: If the Boston donut market is monopolistically competitive, consumers in Boston will see less diversity in the donuts offered over time.

answer

False

question

Under monopolistic competition, the demand curve faced by an individual firm is downward sloping because:

answer

the product of each seller is differentiated from that of others.

question

In a monopolistically competitive market, firms may enter even though...

answer

they will earn zero economic profit in the long run.

question

To maximize its profit, a monopolistically competitive firm

answer

chooses its quantity and price, just as a monopoly does

question

If firms in a monopolistically competitive market are earning positive profits, then

answer

new firms will enter the market

question

In a monopolistically competitive industry, firms set price

answer

above marginal cost since each firm is a price setter

question

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

answer

each of the sellers offers a somewhat different product

question

Game theory is commonly used to explain behavior in oligopolies, because oligopolies are characterized by:

answer

interdependence

question

In the classic prisoners' dilemma with two accomplices in crime, the dominant strategy for each individual is to

answer

confess

question

When oligopoly firms collude to raise prices:

answer

the firms benefit, but society loses

question

When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by other firms in the market, we have

answer

a Nash equilibrium

question

In markets characterized by oligopoly, the firms can profit the most by...

answer

cooperating and behaving like monopolists

question

The prisoners' dilemma is an important game to study because

answer

it identifies the fundamental difficulty in maintaining cooperative agreements

question

In a two-person repeated game, a tit-for-tat strategy starts with

answer

cooperation than each player mimics the other player's last move

question

Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it

answer

is always in their best interest to leave their quantities supplied unchanged.

question

The equilibrium price in a market characterized by oligopoly is

answer

lower than in monopoly markets and higher than in perfectly competitive markets.

question

One key difference between an oligopoly market and a competitive market is that oligopolistic firms

answer

can affect the profit of other firms in the market by the choices they make while firms in competitive markets do not affect each other by the choices they make.

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