ECON 1B - week 9 and forward - Flashcards

question

Firms in a perfectly competitive market are said to be "price takers"—that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?

answer

no you wouldn't

question

Who can influence the market price in perfect competition?

answer

no individ buyer or seller

question

Which of the following are assumptions of perfect competition?

answer

products are identical, many buyers and sellers, consumers have all relevant information to make rational buying decisions

question

In a perfectly competitive market, which of the following is correct?

answer

first demand curve is perfectly elastic

question

Pete owns a firm that produces wheat in a purely competitive market. The firm's demand curve is a:

answer

horizontal line

question

?The demand curve for a firm in a perfectly competitive market is different from that of the entire market. The market demand curve ________, while the perfectly competitive firm's demand curve ________.?

answer

slopes downward and is a horizontal line

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What is the shape of a marginal revenue curve for a perfectly competitive firm?

answer

flat

question

How is the total revenue calculated in a perfectly competitive firm?

answer

quantity of goods sold x market price

question

If a perfectly competitive firm is producing output at a point where marginal revenue is equal to marginal cost, then it should:

answer

stick with that level of production

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?The profit-maximizing choice for a perfectly competitive firm will occur where marginal revenue is equal to ________.

answer

marginal cost

question

Even if it is making economic losses, a perfectly competitive firm should keep operating in the short run so long as the price is not:

answer

lower than avg var cost

question

A perfectly competitive firm should not shut down immediately as long as the price is:

answer

higher than avg variable cost

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The point where the marginal cost curve crosses the average cost curve is called the:

answer

zero profit point

question

In long run equilibrium, firms ________.

answer

neither enter nor exit the industry

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Which of the following statements accurately explains why profits for firms in a perfectly competitive industry tend to vanish in the long run?

answer

prices drop

question

when firms exit a perfectly competitive market, what is the impact on prices

answer

up?

question

The long-term result of entry and exit in a perfectly competitive market is that all firms end up selling at the price level determined by the lowest point on the:

answer

avg cost curve (good)

question

For a perfectly competitive firm in the long run, all of the following conditions hold EXCEPT:

answer

price = afc

question

Suppose there is a perfectly competitive market for grapefruit. If the price for grapefruit is lower than the marginal cost of producing grapefruit, what will happen in the long run, in order for the market to achieve productive and allocative efficiency?

answer

fewer grapefruit produced

question

In perfectly competitive market, which of the following is correct?

answer

market demand curve flat

question

Which of the following are characteristics of a monopoly?

answer

faces no significant competition, sole supplier

question

Select all of the following examples that are considered monopolies:

answer

US postal service, electricity utility companies

question

monopolist

answer

maker

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Which of the following are barriers to entry that are directly enforced by government?

answer

permit to conduct business operations

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Which of the following are considered barriers to entry?

answer

heavy spending on advertising by establish companies

question

Suppose P0 is $10 and P1 is $11. Suppose a new firm with the same LRAC curve as the incumbent tries to break into the market by selling 4,000 units of output. Estimate from the graph below what the new firm's average cost of producing output would be.

answer

13

question

If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price:

answer

marginal revenue affected by adding one additional unit sold @ new price

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If a firm holds a pure monopoly in the market and is able to sell 5 units of output at $4.00 per unit and 6 units of output at $3,90 per unit, it will produce and sell the sixth unit if its marginal cost is:

answer

3.40 or less

question

If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, the result will be:

answer

abnormally high sustained profits

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Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?

answer

small output high price

question

Why is a monopoly allocatively inefficient?

answer

price > MC

question

Price discrimination occurs when a:

answer

firm charges diff prices to different customers based on willingness to pay

question

In the United States, price discrimination is ________.

answer

permitted

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If an industry is perfectly competitive or monopolistically competitive, then the government has relatively little reason for concern about:

answer

extent of competition

question

If two companies are seeking regulatory approval to merge their respective businesses, which of the following will most likely be the focus of the arguments that they will present in favor of the merger?

answer

newly created firm benefit consumer by operating more efficiently consumers can purchase better quality goods or services at lower price newly created firm is able to take advantage of economies of scale

question

Which one of the following is the most accurate description of a monopolist?

answer

sole producer of a product for which good substitutes are lacking in a market with high barriers to entry

question

Which of the following is most unlikely to present a barrier to entry into a market?

answer

deregulation

question

If the North American newsprint paper market has barriers to entry, then

answer

entry will be blocked even firms are earning high profits

question

Regulations that permit a regulated firm to cover its costs and to make a normal level of profit are commonly referred to as:

answer

cost plus

question

Firms in an oligopoly typically act more like ________.

answer

competitors

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________ arises when firms act together to reduce output and keep prices high.

answer

cartel

question

Mary and Raj are the only two growers who provide organically grown corn to a local grocery store. They know that if they cooperated and produced less corn, they could raise the price of the corn. If they work independently, they will each earn $100. If they decide to work together and both lower their output, they can each earn $150. If one person lowers output and the other does not, the person who lowers output will earn $0 and the other person will capture the entire market and will earn $200. The table represents the choices available to Mary and Raj. What is the best choice for Raj if he is sure that Mary will cooperate?

answer

raj makes sure mary cooperate and he will cheat

question

For which of the following reason(s) are oligopolies inefficient?

answer

typically they don't product at the minimum avg cost curves they may lack incentives to provide innovative products and high quality service

question

Suppose circumstances have allowed several large firms to have all or most of the sales in an industry. Which of the following may be happening?

answer

oligopoly and cartel

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Firms in an oligopoly often:

answer

make decision based on behavior or expected behavior of competitors

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In 2007, five or six major pharmaceutical companies formed a group in order to control the price of vitamins and adjust their production. Such an arrangement is called a ________.

answer

cartel

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Which of the following are advantages that firms could gain by working together as if they were a monopoly?

answer

charge a higher price hold down industry output increase industry output

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In the framework of an oligopoly, what strategy can work like a silent form of cooperation?

answer

always match other cartel firms' price cuts but don't match price increase

question

How do oligopolies influence market inefficiencies?

answer

deadweight loss for society is increased

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In some cases oligopolies can benefit society by:

answer

b) taking advantage of scale economies to produce at low averagecost.

question

Suppose circumstances have allowed several large firms to have all or most of the sales in an industry. Which of the following may be happening?

answer

cartel and oligopoly

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oligopolistic markets

answer

typically have higher barriers to entry characterized as having a smaller # of sellers

question

which is illegal in us?

answer

collusion

question

In a prisoner's dilemma, what type of behavior provides the most benefit for each individual?

answer

cooperate

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Monopolistic competitors in the food industry, acting in their own self-interest, will often include a recyclable symbol on packaging used for their product as a means to:

answer

diff. their product be perceived more favorably in the marketplace

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Monopolistic competition is different from perfect competition in that, in the long-run: Monopolistic competition is different from perfect competition in that, in the long-run:

answer

characteristics will be more dynamic

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Which of the following statement(s) accurately describe(s) a monopolistically competitive firm?

answer

competes against large # of firms selling diff products will try and diff. its products to create a mini monopoly

question

Monopolistic competition is different from perfect competition in that monopolistically competitive markets:

answer

focus on other things besides price?

question

If the firm is producing at a quantity of output where marginal cost exceeds marginal revenue, then ________.

answer

firm should reduce production

question

Total Cost can be expressed as:

answer

ac x quantity implicit + explicit

question

In monopolistic competition, the end result of entry and exit is that firms end up with a price that lies

answer

downward sloping portion of avg cost curve

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Within a monopolistically competitive industry, it would be expected that:

answer

firms make positive/neg econ profit in short run short-run innovative firms price > ac

question

Within a monopolistically competitive industry in the long-run, it would be expected that:

answer

price>mc? firms not producing @ lowest possible ac that tech allows

question

A successful advertising campaign results in ________.

answer

perceived demand curve to become more inelastic so demand increases

question

Effective advertising has what effect on product differentiation?

answer

increase product differentiation

question

In what way(s) is a monopolistically competitive firm inefficient?

answer

charges price higher than marginal cost doesn't produce at the minimum of its avg cost curve

question

If a monopoly or a monopolistic competitor raises their prices, the quantity demanded ________.

answer

decline

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If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then ________.

answer

excess profit would attract additional competition firm should keep expanding production

question

When entry occurs in a monopolistically competitive industry,

answer

perceived demand and marginal revenue curves for each firm will shift to left

question

A successful advertising campaign may allow competing monopolists to

answer

charge a higher price, increase its profits, sell a greater quantity

question

In the framework of monopolistic competition, the way advertising works can be perceived as:

answer

causing a firm's perceived demand curve to become more inelastic

question

A monopolistically competitive industry does not display ________ in either the short-run, when firms are making ________, nor in the long-run, when firms are earning ________ .

answer

allocative efficiency; economic profits and losses; zero economic profits

question

Perfect competition displays allocative efficiency because the social benefits of additional production, as measured by the price that people are willing to pay, are in balance with the ________ to society of that production.

answer

marginal costs

question

In order for a good to be classified as ________ , when one person uses the good, others are also able to use it.

answer

nonrivalrous

question

An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a ________.

answer

free rider

question

Which of the following are examples of positive externalities?

answer

investments in private education raise your country's standard of living bird watcher and neighbor puts up birdhouses and gardens to attract birds

question

A cost imposed on others outside of any market exchange is:

answer

an external cost leads to overproduction of the good/service in question not taken into account by imposing the cost

question

Which of the following is an example of economic activity that can injure the environment?

answer

paper mill discharging raw chemical waste into revier gold mine discharging arsenic into natural lake it's using for tailings pond excessive clear-cutting of wood resources by logging companies

question

The U.S. Government has a variety of policies that enable inventors to ________, such as the granting of patents and ________.

answer

receive an increased rate of return: subsidization of research and development

question

Which of the following would be classified as a positive externality?

answer

increase in neighborhood property values from converting a derelict empty lot to public vegetable garden

question

Which is the best example of a market-oriented environmental policy?

answer

us government establishes a market to trade the right to emit co2 among manufacturing industries

question

A public good is a good that is ________, and thus is difficult for market producers to sell to individual consumers.

answer

nonexcludable and nonrivalrous

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When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being:

answer

nonexcludable

question

An individual who wants others to pay for public goods, but plans to use those goods without paying, is often referred to as a ________.

answer

free rider

question

If large numbers of individuals choose to behave as free riders, ________.

answer

public good may never be provided

question

If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day

answer

negative externality

question

A positive externality arises when a third party, outside the transaction, ________.

answer

benefits from a market transaction

question

Which of the following is/are example(s) of command-and-control regulation?

answer

us gov determ which tech are cleaner and subsidizes use to reduce CO2 emissions from manufacturing industries US gov requires firms to install antipollution equipment to improve air and water quality US gov passes a law that imposes penalties on manufacturing industries whose CO2 emissions exceed certain levels

question

A pollution charge is a form of tax imposed on

answer

quantity of pollution that a firm emits

question

If a government wants to establish a marketable permit program, it must begin by determining ________.

answer

overall quantity of a certain pollutants that will be allowed

question

Many residents of a particular town enjoy taking their dogs with them when they go to their local park for recreation and picnics. Everybody enjoys the park more when each group cleans up after themselves and their pets, but nobody enjoys the act of cleaning up after themselves or their dogs. We can expect the park to be ________, due to a ________.

answer

dirty; prisoner's dilemma

question

A number of different government policies can increase the incentive to innovate, including:

answer

government assistance with costs of r&d patent protection to guarantee intellectual property rights regulations requiringmore investment innovation

question

Which of the following are ways in which the government promotes positive externalities? fo

answer

incentives for increasing output, spending r&d, protection of intellectual property

question

Brazil can produce 100 pounds of beef or 10 autos; in contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in producing beef?

answer

brazil

question

Brazil can produce 100 pounds of beef or 10 autos; in contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in producing autos?

answer

us

question

Assuming that Brazil can produce 100 pounds of beef or 10 autos and the United States can produce 40 pounds of beef or 30 autos, what is the opportunity cost of producing one pound of beef in Brazil?

answer

1/10th of an auto

question

What are the likely consequences of protecting domestic jobs in industries that are at a comparative disadvantage to our trading partners, like textiles?

answer

higher prices for textiles, more jobs for domestic textile workers

question

Assuming that government decision-makers are well aware of the consequences, what is the real reason why government may seek to protect an industry?

answer

acting to preserve jobs in an industry that's threatened by competition from abroad

question

Which of the following barriers to international trade harms domestic consumers?

answer

tariffs, non-tariff barriers, quotas

question

Trade agreements and free trade negotiations have:

answer

allowed for a more efficient use of world's productive resources stimulated protests based on issues other than protecting certain industries from competition

question

Generally, international trade laws in the last 60 years have served to:

answer

increase economic interdependence radically lower tariffs

question

The WTO is an organization that:

answer

resolves trade disputes between nations can tame political influence that an industry may exert on trade laws

question

If the value of the Euro falls compared to the Dollar, what is the likely outcome for the US balance of trade with the EU?

answer

americans import from EU rises american exports to EU fall

question

As the result of exchange rate volatility:

answer

even large banks are significantly expose demand on trading economy can fluctuate

question

Some success stories in global trade include(s):

answer

cultural blending and variety never seen before regional trade block that includes the US and few central american nations

question

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) ________ in producing that product.

answer

absolute advantage

question

Say that Aliceland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 8 units of clothing. Which of the following is true?

answer

aliceland has a comparative advantage but not an absolute advantage in producing food

question

When the world price of some good is above the domestic price (before trade), then after trade, that nation will likely be:

answer

exporting that item and importing whatever it produces at a comparative advantage

question

Which of the following phenomena can a nation expect when it opens (more widely) to international trade?

answer

some industries will prosper and expand some industries will suffer and shrink prices will fall

question

Assume that the US produces mangoes in California and also imports them from India. India produces mangoes at a lower cost. A tariff imposed by the US government on mangoes from India will:

answer

increase the price of mangoes in the US and lower the quantity of mangoes sold in the US

question

The slow pace of international trade negotiations is understandable given that:

answer

many nations involed separate rules were set up for different nations

question

Why are some economists concerned about the proliferation of regional trade agreements?

answer

regional trade agreements may limit trade from outside the regions in agreement regional trade agreements terms can conflict with those of the WTO

question

If the value of the Euro appreciates compared to the Dollar, what is logical outcome for US exports to the EU?

answer

amount of exports to EU falls

question

A weaker U.S. dollar has its advantages:

answer

increases demand on US econ makes american exporters happy makes american exports cheaper

question

A nation suffering from inflation would have a reason to welcome:

answer

inflation fighting effects of less expensive imports currency appreciation

question

A nation suffering from high unemployment would welcome:

answer

currency depreciation wave of foreign investment effects of less expensive exports

question

Some of the forces working against freer global trade are:

answer

bi-lateral trade agreements strategic trade policy by national governments

question

The global movement toward generally freer trade:

answer

threatens established livelihoods and ways of life allows for sustained trade deficits by some nations offers gains from trade to all trading nations

question

Here are alternate outputs from one day's labor input: USA: 12 bushels of wheat OR 3 yards of textiles. India: 3 bushels of wheat OR 12 yards of textiles. The opportunity cost of one bushel of wheat in India is:

answer

4 yards of textiles

question

Long-term trends in global trade include(s):

answer

nations are accusing each other of dumping goods regional trading blocks are becoming more popular despite tariffs falling more generally

question

If the US wanted to ensure that its cars could be exported to Cuba without tariffs, not give any other concessions to Cuba or anger Canada with its agreement, it should negotiate a:

answer

free trade area

question

If the value of the Euro appreciates compared to the Dollar, what is logical outcome for US exports to the EU?

answer

amounts of exports to the EU rises

question

A stronger dollar will have the following effects:

answer

makes imported goods and services cheaper

question

A higher wage has an income and a substitution effect. Based on the ________, a higher wage for labor leads to a higher quantity of labor supplied.

answer

substitution effect

question

Other things being equal, a ________ supply of workers tends to put ________ pressure on real wages.

answer

larger, downward

question

Which of the following will NOT result in a leftward shift of the market demand curve for labor?

answer

increase in wage rate, increase in immigration

question

A Lorenz curve graphic shows:

answer

what perfect equality of income distribution looks like compared to actual income distribution

question

A Lorenz curve refers to a graphic illustration of the cumulative share of population on the ________ and the cumulative percentage of total income received on the ________ .

answer

horizontal and vertical axis

question

A Lorenz curve shows:

answer

how a population's total income distributed among members

question

Suppose that new high-technology farming equipment is developed. These new machines are substitutes for low-income workers such as farm laborers, but they are complements for high-income workers such as farm technicians and farm owners. This new technology will shift the demand curve for low-income workers to the ________ while shifting the demand curve for high-income workers to the ________.

answer

left right

question

When wages and work conditions are agreed upon by business owners and workers, the process is called?

answer

collective bargaining

question

A ________ is an organization of workers that negotiates with employers as a group over wages and working conditions.

answer

labor union

question

Incomes rise for low-income and high-income workers, but rise more for the high-income earners. How will this change affect income inequality?

answer

poverty falls, inequality rises

question

If a rise in incomes for both low-income and high-income workers is higher for the high-income workers,

answer

poverty will fall and inequality will rise

question

Wages are what? I

answer

income that results from labor input

question

The labor ________ curve(s) will shift ________ if there is an increase in productivity or an increase in the demand for the final product.

answer

not supply right

question

A market in which there is only one buyer of a good, service, or factor of production is called a

answer

monopsony

ECON 1B – week 9 and forward – Flashcards

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