Econ 2100 Test Review PDF

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Econ 2100 Test Review...

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(i) and (ii) only - Economists normally assume that the goal of a firm is to earn: (i) profits as large as possible, even if it means reducing output. (ii) profits as large as possible, even if it means incurring a higher total cost. (iii) revenues as large as possible, even if it reduces profits. total cost - Which of the following can be added to profit to obtain total revenue? explicit costs + implicit costs. - A firm's opportunity costs of production are equal to its . require an outlay of money by the firm - Explicit costs how a firm turns inputs into output. - A production function describes increase in output obtained from a one unit increase in labor. - The marginal product of labor is equal to the 10 units of output. - Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 132). Then the marginal product of the 13th worker is decreasing marginal product. - If a production function shows declining marginal product of an input as the quantity of the input increases, then the production function exhibits amount by which total cost rises when output is increased by one unit. - Marginal cost tells us the product of an extra worker is less than the previous worker's marginal product. - Diminishing marginal product suggests that the marginal In the long run, - inputs that were fixed in the short run become variable. long-run average total costs fall as output increases. - Economies of scale occur when both buyers and sellers - Who is a price taker in a competitive market? Price exceeds marginal revenue. - Which of the following statements regarding a competitive market is not correct? double. - If a firm in a competitive market doubles its number of units sold, total revenue for the firm will a. price. b. average revenue.

c. total revenue divided by output.

All of the above are correct. - Firms operating in competitive markets produce output levels where marginal revenue equals equal to marginal revenue. - For a firm in a perfectly competitive market, the price of the good is always a one-unit increase in output will increase the firm's profit. - If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then profit is maximized. - The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which increase its output. - If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should a. new firms to enter the market. b. the market price to fall. c. its profits to fall. All of the above are correct. - Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect the portion of its marginal cost curve that lies above its average variable cost. - The short-run supply curve for a firm in a perfectly competitive market is shut down if P < AVC. - Competitive firms that earn a loss in the short run should exit if P < ATC - Which of the following represents the firm's long-run condition for exiting a market? drive down profits of existing firms in the market. - When new firms have an incentive to enter a competitive market, their entry will profits will rise. - If there is an increase in market demand in a perfectly competitive market, then in the short run Implicit costs - As a general rule, when accountants calculate profit they account for explicit costs but usually ignore

barriers to entry - Which of the following is a characteristic of a monopoly? government-created monopolies. - Patent and copyright laws are major sources of society is better served by having one firm supply the product - When a firm experiences continually declining average total costs, lower its price. - In order to sell more of its product, a monopolist must less than price, whereas marginal revenue is equal to price for a perfectly competitive firm. - For a monopolist, marginal revenue is deadweight loss. - The economic inefficiency of a monopolist can be measured by the (ii) only - Economic welfare is generally measured by (i) profit. (ii) total surplus. (iii) the price consumers pay for the product. free entry - Which of the following is a characteristic of monopolistic competition? both a monopoly and a competitive firm. - A monopolistically competitive market has characteristics that are similar to competition and monopoly - Which of the following pairs illustrates the two extreme examples of market structures? price making ability. - Imperfectly competitive firms are characterized by tap water - Which of the following goods are not likely to be sold in monopolistically competitive markets? (i), (ii), and (iii) - Monopolistic competition is characterized by which of the following attributes? (i) free entry (ii) product differentiation (iii) many sellers product differentiation - Which of the following conditions distinguishes monopolistic competition from perfect competition? price and quantity just as a monopoly does. - A monopolistically competitive firm chooses its

new firms will enter the market. - If firms in a monopolistically competitive market are earning positive profits, then price exceeds marginal cost. - A monopolistically competitive market could be considered inefficient because the market for tennis balls - In which of the following markets are strategic interactions among firms most likely to occur? oligopolistic markets. - We must be knowledgeable of how people behave in strategic situations if we are to understand cooperation and self interest. - A distinguishing feature of an oligopolistic industry is the tension between duopoly. - The simplest type of oligopoly is as a single monopolist. - As a group, oligopolists would always be better off if they would act collectively a firm will have chosen its best strategy, given the strategies chosen by other firms in the market. - When an oligopoly market reaches a Nash equilibrium, collusion. - An agreement among firms regarding price and/or production levels is called price effect disappears. - When an oligopoly grows very large, the There are a very large number of firms. - Other things the same, in which case is the quantity produced the highest? . undesirable, because it leads to output levels that are too low and prices that are too high. - From society's standpoint, cooperation among oligopolists is resale price maintenance. - The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called a monopoly firm reducing its price in an attempt to maintain its monopoly. - Predatory pricing refers to package products to sell at a combined price closer to a buyer's total willingness to pay. - The practice of tying is used to...