question

What describes monopolistic competition?

answer

A relatively large number of sellers producing differentiated products and in which entry or exit from the industry is quite easy.

question

Marginal revenue is the _____ in total revenue that results from selling _____ more unit (extra unit) of output.

answer

Change/1

question

What best describes oligopoly?

answer

Involves only a few sellers of a standardized or differentiated product, so each firm is affected by the decisions of its rivals.

question

In a purely competitive industry, marginal _____ is equal to ______.

answer

Cost/price; revenue/marginal cost; revenue;price

question

What best describes a pure monopoly?

answer

One firm selling a single unique product, where entry of additional firms is blocked and product differentiation is not an issue.

question

In a purely competitive market, price per unit to the purchaser is the same as _____ per unit or _____ revenue to a seller.

answer

Revenue/Average

question

From an economic standpoint, the break-even point is the level of output at which a firm makes ______ profit.

answer

zero/normal

question

Which of the following best describes marginal revenue

answer

the additional or extra revenue that an additional or extra unit of output contributes to total revenue

question

Which of the following factors will alter costs and shift the marginal cost or short-run supply curve to a new location

answer

Technology Price of variable inputs

question

The marginal cost curve is the firm's short-run ____ curve

answer

supply

question

A wage increase would increase marginal costs and shift the supply curve

answer

upward; to the left

question

Which of the following describes the purely competitive industry's supply curve

answer

it is the sum of the supply curves of all the firms in the industry and has an important bearing on price

question

A purely competitive firm is a price _____

answer

taker

question

Confronted with the market price of its product, a purely competitive producer will ask which three questions

answer

What economic profit or loss will we realize if we produce this product If we produce this product, in what amount Should we produce this product

question

in the short run, the firm has a _____ plant and therefore, can adjust its output only through changes in the amount of ______ resources it uses.

answer

fixed; variable

question

At a profit-maximizing level of output of 25 units, a perfectly competitive firm's marginal revenue is $4, average variable cost is $.30, average total cost is $1.22 and marginal cost is $3.75 this firm's economic profit equal

answer

$69.50

question

True or false: A firm within pure competition will maximize its profits when total cost is maximized over total revenue

answer

false (A firm with pure competition will maximize its profit when total revenue is maximized over total cost)

question

When price is above ______ total cost, the firm incurs and economic profit

answer

average

question

A purely competitive firm can maximize its economic profit (or minimize its loss) only by adjusting its

answer

supply

question

Economists group industries into _______ distinct market structures

answer

four

question

In pure competition, a firm's economic profits is equal to:

answer

-marginal revenue minus average total cost multiplied by quantity -price minus average total cost multiplied by quantity

question

_______ is relatively rare in the real world, although this market model is highly __________ to several industries

answer

Pure competition; relevant

question

A purely competitive firm's demand schedule is also known as its:

answer

average-revenue schedule & marginal-revenue schedule

question

The MR = MC rule is known as the:

answer

profit-maximizing rule loss-minimizing rule

question

Match each market structure with the description that best describes the conditions for exit and entry into the industry:

answer

Purely competitive - very easy, no obstacles Monopoly - blocked Monopolistically competitive - relatively easy Oligopoly - significant obstacles

question

A purely competitive firm's total revenue (TR) curve will slope _____ and to the ________/

answer

Upward; right

question

A firm within pure competition will produce up to the point where marginal revenue equals marginal cost because

answer

-it will experience the lowest losses at this point -it will experience the highest possible profits at this point

question

Match each structure with its correct description in terms of non-price competition

answer

Monopoly - mostly public relations, advertising Monopolistically competitive - considerable emphasis on advertising, brand names, trademarks Oligopoly - a great deal, particularly with product differentiation Purely competitive - none

question

A purely competitive firm's total revenue curve will

answer

have a constant slope because each extra unit of sales increases total revenue by a constant amount

question

Which of the following are true about the profit-maximizing rule of MR = MC?

answer

-The rule applies only if producing is preferable to shutting down -The rule is an accurate guide to product maximization for all firms regardless of their market structure -The rule can be re-stated as P=MC when applied to a purely competitive firm because product price and MR are equal -When MR is equal to MC at a fractional level of output, the last complete unit of output should be produced where MR > MC

question

In regards to its slope, a purely competitive firms demand curve is perfectly ________

answer

elastic

question

Match each market structure with the correct description of how price control is exerted

answer

Oligopoly - limited by mutual interdependence Monopoly - considerable control Monopolistically competitive - some, but within narrow limits Purely competitive - none

question

In pure competition, a firm's product price and marginal revenue are _______

answer

equal

question

Which of the following best describes a firm continuing to operate even though it incurs an economic loss?

answer

Whenever price exceeds average variable costs but is less than average total cost, the firm can pay part but not all, its fixed costs by producing

question

What is the behavior of marginal revenue for the monopolist compared to that of a pure competitor?

answer

Declining and lower than product price

question

Which of the following describes why marginal revenue is less than price in an imperfect market?

answer

Because the lower price of the extra unit of output also applies to all prior units of output

question

Two solutions to the economic losses caused by socially optimal pricing are public ______ and price discrimination

answer

subsidies

question

What are potential solutions to the economic losses incurred by a regulated monopoly caused by socially optimal pricing?

answer

Price discrimination & public subsidies

question

For a pure monopolist, total revenue _______ at a diminishing rate

answer

increases

question

A monopolist does not have a supply curve because:

answer

-it does not equate price with marginal cost -there is no single, unique price associated with each level of output

question

Patents provide the in venture with a __________ position for the life of the patent

answer

monopoly

question

The _______ price is where a monopoly's price is equal to marginal cost

answer

socially optimal

question

A natural monopoly occurs when the market demand curve crosses the long-run average total cost curve where average total costs are:

answer

still declining

question

Which of the following can be a cause of extensive economies of scale?

answer

Modern technology

question

Economics of scale refer to ______ average total costs with added firm size.

answer

declining

question

What are two legal barriers to entry created by the government?

answer

Patents and licenses

question

___________ competitors include pure monopolists, oligopolists, and monopolistic competitors.

answer

Imperfect

question

The profit-maximizing monopolist will always want to avoid the ________ segment of its demand curve

answer

inelastic

question

The change in total revenue is called __________ revenue

answer

marginal

question

When are society's resources allocated efficiently?

answer

When purely competitive firms produce where price is equal to marginal cost

question

When disrupted by changes in the economy, a purely competitive market can restore the efficiency associated with marginal revenue or ________ = _________ cost = lowest ATC.

answer

price; marginal

question

A specific number of firms, all with fixed unalterable plants, mainly describes:

answer

an industry's short run

question

Competitive market economies strive to generate:

answer

allocative efficiency & productive efficiency

question

Whether a purely competitive industry is a constant-cost industry or an increasing-cost industry, the final long-run equilibrium position of all competitive firms share which of the following characteristics?

answer

-Price or marginal revenue will settle where it is equal to minimum average total cost -In the long run, a multiple equality occurs where price equals marginal revenue which equals the minimum average total cost -In the long run, a multiple equality occurs where price equals marginal cost which equals the minimum average total cost

question

An unfavorable shift or _______ in demand will upset the original industry equilibrium and produce __________.

answer

decrease; losses

question

In pure competition, society's resources are allocated efficiently when:

answer

profit-motivated firms produce output to the point where price or marginal revenue (MR) and marginal cost (MC) are equal

question

Competition, reflected in the entry and exit of firms eliminates economic profits and losses by adjusting the product ______ to equal the minimum long-run average ______ cost

answer

price; total

question

________ efficiency means that resources are distributed among firms and industries to yield a mix of products and services that is most wanted by society

answer

allocative

question

A constant-cost industry is one where ______ or ________ will not affect resource prices and production costs

answer

expansion; contraction

question

_______ efficiency means that goods are produced in the least costly way.

answer

productive

question

Which of the following does an increasing-cost industry experience?

answer

-The downward shifting average total cost (ATC) curve as the industry contracts -An upward shifting average total cost (ATC) curve as the industry expands

question

What describes consumer surplus?

answer

It is the difference between the maximum price that consumers are willing to pay for a product and the market price for the product

question

A type of implicit understanding used by oligopolists to coordinate prices without engaging in outright collusion is known as:

answer

price leadership

question

The benefits to oligopolists from collusion are:

answer

-it increases profits -it reduces price uncertainty -it possible prohibits the entry of new rivals

question

Price leaders make price adjustments:

answer

-by communicating impending price adjustments to the industry -infrequently due to the uncertainty in rivals' response to those price changes -by establishing a price that discourages new entrants into the industry

question

Which of the following best exemplifies a firm with excess capacity

answer

A fast-good restaurant where consumers never have to wait to place an order

question

A good way to describe ______ competition is that it mixes a small amount of monopoly power with a large amount of competition, which ______ blends a large amount of monopoly power, a small amount of competition through entry, and considerable rivalry among firms

answer

monopolistic; oligopoly

question

Three models used to study pricing and output by oligopolies are:

answer

-price leadership model -collusive pricing model -the kinked-demand curve model

question

Monopolistic competition normally consists of 25 to 75 firms rather than hundreds or thousands and involves"

answer

-no collusion -small market shares -independent action

question

The rudy of how people behave in strategic situations is called:

answer

game theory

question

In the long run, if a monopolistic competitive firm is earning normal profits (breaking even), then it should exit or stagy in the industry, and why?

answer

Not exit the industry because both explicit and implicit costs are covered

question

Which of the following are typical characteristics of monopolistic competition?

answer

-Small market share -No collusion -Independent

question

What describes the difference between products under pure competition versus products under monopolistic competition?

answer

Standardized products are sold in pure competition but differentiated products are sold in monopolistic competition

question

When firms in an oligopoly _______, their payoffs will be greater than if they did not.

answer

collude

question

What means illegal cooperation with rivals?

answer

Collusion

question

Multiple models are used to study oligopolies because oligopolies

answer

-encompass a greater range and diversity of market situations -cannot estimate both their demand and marginal revenue curves due to rivals' reactions

question

Firms in monopolistic competition produce goods with:

answer

-varying degrees of customer service -slightly varying physical characteristics

question

___ ___ competition is illustrated through product differentiation and advertising.

answer

non-price

question

Which of the following are shortcomings of the kinked-demand analysis of oligopoly

answer

-The kinked-demand curve explains price inflexibility but not price itself -During macroeconomic instability, oligopoly prices are not as rigid as the kinked-demand theory implies

question

advertising increases efficiency by..

answer

facilitating introduction of new products lowering search costs for consumers

question

an oligopolistic firm's marginal revenue curve is made up of two segments if

answer

its rivals match a price cut but ignore a price increase

question

The equality of price and minimum average total cost yields technical ____ efficiency; the equality of price and marginal cost yields ____ efficiency.

answer

Productive, Allocative

question

A monopolistic competitor's demand curve

answer

more elastic than that of a pure monopoly but less elastic than hat of a firm in pure competition

question

Oligopolistic behavior implies that oligopolists prefer competition

answer

-though product development -through advertising

question

Monopolistically competitive firms are not productively efficient because:

answer

Output is less than society's optimal level because a producer's average total cost per unit is not at its lowest possible cost

question

The Herfindahl index equals

answer

the sum of the squared percentage market shares of all firms in an industry

question

The kinked-demand curve of an oligopolist is based on the assumption that:

answer

competitors will follow a price cut but ignore a price increase.

question

Explicit costs:

answer

Monetary payments

question

Implicit costs:

answer

Value of next best use Self-owned resources Includes normal profit

question

Accounting profit =

answer

revenue - explicit costs

question

Economic profit =

answer

Accounting profit - implicit costs

question

Short run:

answer

-some variable inputs -fixed plant

question

Long run:

answer

-all inputs are variable -Variable plant -Firms enter and exit

Study for test 3 – microeconomics – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards