Microeconomics Final Answers – Flashcards
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A market is perfectly competitive if?
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It has many buyers and many sellers whom are selling identical products, with no barriers to new firms entering the market.
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Perfect competitive firms should produce the quantity where?
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The difference between total revenue and total cost is as large as possible.
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Profit for a perfectly competitive firm can be expressed as?
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Profit= (P*Q)-(ATC*Q), where P is Price, Q is output, and ATC is average total cost.
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The supply curve for a firm in a perfect competitive market in the short run is?
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That firm's marginal cost curve for prices at or above average variable cost.
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In a perfectly competitive industry in the long run,
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New firms will enter if existing firms are making a profit and existing firms will exit if they are experiencing losses.
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Suppose the markets for cotton is perfectly competitive and that input prices increase as the industry expands. Characterize the industry's long-run supply curve. The cotton industry's long-run supply curve will be?
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Upward sloping because the long-run average cost of production will be increasing.
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Does the market system in allocative efficiency? In the long run, perfect competition,
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Results in allocative efficiency because firms produce where price equals marginal cost.
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Assume the market for oranges is perfectly competitive. If the demand for oranges increases, will the market supply additional oranges? If the demand for oranges increases, then the market?
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Will supply additional oranges because producers seek the highest return on their investments.
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Does the market system result in productive efficiency? In the long run, perfect competition?
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Results in productive efficiency because firms enter and exit until they break even where prices equals minimum average cost.
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Is zero economic profit inevitable in the long run for monopolistically competitive firms? In the long run, monopolistically competitive firms?
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May continue to earn profit by reducing cost.
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Compared to perfect competition, when a consumer purchases a product from a monopolistically competitive firm, the consumer benefits from purchasing a product?
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That is appealing because it is differentiated.
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Are monopolistically competitive firms efficient in long run equilibrium? Monopolistically competitive firms?
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Are not productively efficient because they do not produce at minimum average total cost and they are not allocatively efficient because they produce where price is greater than marginal cost.
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Once way in which monopolistically competitive markets and perfectly competitive market differ is that in long run equilibrium, monopolistically competitive firms?
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Charge a price greater than marginal cost.
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One possible effect of advertising is to?
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Decrease profit by increasing the cost of production.
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Suppose a firm introduces a new product. How might that firm use brand management? Such a firm might use brand management to?
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To postpone the time when they will no longer be able to earn economic profits.
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Which of the following is a threat to a trademarked company name? Trademarked brands are threatened by?
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Their names becoming so widely used for a type of product that they no longer are associated with a specific company.
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How do firms use marketing? A firm might use marketing to?
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Advertise their product.
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What factor under the control of owners and managers make a firm successful and allow it to earn economic profits? Owner and Managers control some of the factors that make a firm successful such as?
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The firm's ability to produce its product at a lower average cost than competitors.
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When is a firm a monopoly, or are monopolies inly theoretical concepts that do not exist?
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A firm is a monopoly if it can ignore that actions of all other firms.
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How might the government affect whether a firm is a monopoly? The government could?
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Grant a copyright to a firm, giving it the exclusive right to produce a product.
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Network externalities
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Create barriers to entry because if a firm can attract enough customers initially, it can attract addition customers as its product's value increases by more people using it, which attracts even more customers.
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The government issues patents because?
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To encourage firms to spend money on the research and development necessary to create new products.
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How long does patents last?
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A patent is the exclusive right to a product for a period of 20 years from the date the patent is filed with the government.
