Micro exam study guide

Q: Which of the following correctly lists the products in order from most advertised to least advertised?

dog food, communication satellites, corn

Q: In markets where restrictions on advertising have been used to curtail competition, the U.S. courts have generally

overturned laws that prohibit advertising.

Q: When a profit-maximizing firm in a monopolistically competitive market is producing the long-run equilibrium quantit

its demand curve will be tangent to its average total cost curve

Q: ...

it has a deadweight loss, just as monopoly does.

question

. . Which type of public policy toward monopolies is much more common in Europe than in the United states?

answer

public ownership

question

For a monopolist, when the output effect is greater than the price effect, marginal revenue is

answer

positive

question

Most firms have

answer

some monopoly pricing power

question

A natural monopoly arises when

answer

there are economies of scale over the relevant range of output

question

Amanda inherited the only local cable TV/Internet company in town after her father passed away.
The company has a local monopoly on the delivery of high-speed Internet service. The company is
completely unregulated by the government and is therefore free to operate as it wishes. Assume that
Amanda understands the true power of her new monopoly. Which of the following statements is (are)
correct?
(i) She will be able to set the price of high-speed Internet service at whatever level she wishes.
(ii) The customers will be forced to purchase high-speed Internet service at whatever price she
wants to set.
(iii) She will be able to achieve any profit level that she desires.

answer

. (i) only

question

The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called

answer

. resale price maintenance.

question

When a market is monopolistically competitive, the typical firm in the market can earn

answer

losses in the short run and zero profit in the long run.

question

Which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium

answer

P > ATC
P = ATC
P < ATC

question

Which of the following correctly lists the products in order from most advertised to least advertised?

answer

dog food, communication satellites, corn

question

In markets where restrictions on advertising have been used to curtail competition, the U.S. courts have generally

answer

overturned laws that prohibit advertising.

question

When a profit-maximizing firm in a monopolistically competitive market is producing the long-run
equilibrium quantit

answer

its demand curve will be tangent to its average total cost curve

question

...

answer

it has a deadweight loss, just as monopoly does.

question

Which of the following conditions is characteristic of a monopolistically competitive firm in short-run
equilibrium?

answer

P = AR
MR = MC
P > MC

question

A profit-maximizing firm in a competitive market is currently producing 200 units of output. It has
average revenue of $9 and average total cost of $7. It follows that the firm's

answer

a. average total cost curve intersects the marginal cost curve at an output level of less than 200 units.
b. average variable cost curve intersects the marginal cost curve at an output level of less than 200 units.
c. profit is $400.
d. All of the above are correct.

question

A local playground equipment company plans to operate out of its current factory, which is
estimated to last 30 years. All cost decisions it makes during the 30-year period

answer

are short-run decisions

question

Profit

answer

Total revenue minus total cost

question

explicit costs

answer

input costs that require an outlay of money by the firm

question

Implicit costs

answer

input costs that do not require an outlay of money by the firm

question

Economic Profit

answer

total revenue minus total cost, including both explicit and implicit costs

question

Accounting profit

answer

total revenue minus total explicit cost

question

True

answer

accounting profit is usually larger than economic profit.

question

Production Function

answer

the relationship between the quantity of inputs used to make a good and the quantity of output of that good

question

Diminishing marginal product

answer

the property whereby the marginal product of an input declines as the quantity of the input increases

question

Total costs

answer

FC+VC

question

Average Fixed cost

answer

FC/Q

question

Average Variable Cost

answer

VC/Q

question

Average total cost

answer

TC/Q

question

Marginal cost

answer

change in total cost/ change in quantity

question

Efficient scale

answer

the quantity of output that minimizes average total cost

question

Economies of scale

answer

the property whereby long-run average total cost falls as the quantity of output increases

question

Diseconomies of scale

answer

the property whereby long-run average total cost rises as the quantity of output increases

question

Constant returns to scale

answer

the property whereby long-run average total cost stays the same as the quantity of output changes

question

Shut down

answer

Total revenue < Variable cost

question

Sunk cost

answer

a cost that has already been committed and cannot be recovered

question

Exit in the long run

answer

Total revenue < Total cost

question

Entry rule

answer

Price > ATC

question

Firms profit

answer

(P-ATC) x Q

question

Monopolistic competition

answer

a market structure in which many firms sell products that are similar but not identical

question

collusion

answer

an agreement among firms in a market about quantities to produce or prices to charge

question

cartel

answer

a group of firms acting in unison

question

Nash equilibrium

answer

a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen

question

What might cause economies or diseconomies of scale?

answer

Economies of scale often arise because higher production levels allow specialization among workers, which permits each worker to become better at a specific task. For instance, if Ford hires a large number of workers and produces a large number of cars, it can reduce costs using modern assembly-line production. Diseconomies of scale can arise because of coordination problems that are inherent in any large organization. The more cars Ford produces, the more stretched the management team becomes, and the less effective the managers become at keeping costs down.

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question

. . Which type of public policy toward monopolies is much more common in Europe than in the United states?

answer

public ownership

question

For a monopolist, when the output effect is greater than the price effect, marginal revenue is

answer

positive

question

Most firms have

answer

some monopoly pricing power

question

A natural monopoly arises when

answer

there are economies of scale over the relevant range of output

question

answer

. (i) only

question

The practice of selling a product to retailers and requiring the retailers to charge a specific price for the product is called

answer

. resale price maintenance.

question

When a market is monopolistically competitive, the typical firm in the market can earn

answer

losses in the short run and zero profit in the long run.

question

Which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium

answer

P > ATC
P = ATC
P < ATC

question

Which of the following correctly lists the products in order from most advertised to least advertised?

answer

dog food, communication satellites, corn

question

In markets where restrictions on advertising have been used to curtail competition, the U.S. courts have generally

answer

overturned laws that prohibit advertising.

question

When a profit-maximizing firm in a monopolistically competitive market is producing the long-run
equilibrium quantit

answer

its demand curve will be tangent to its average total cost curve

question

...

answer

it has a deadweight loss, just as monopoly does.

question

Which of the following conditions is characteristic of a monopolistically competitive firm in short-run
equilibrium?

answer

P = AR
MR = MC
P > MC

question

A profit-maximizing firm in a competitive market is currently producing 200 units of output. It has
average revenue of $9 and average total cost of $7. It follows that the firm's

answer

question

A local playground equipment company plans to operate out of its current factory, which is
estimated to last 30 years. All cost decisions it makes during the 30-year period

answer

are short-run decisions

question

Profit

answer

Total revenue minus total cost

question

explicit costs

answer

input costs that require an outlay of money by the firm

question

Implicit costs

answer

input costs that do not require an outlay of money by the firm

question

Economic Profit

answer

total revenue minus total cost, including both explicit and implicit costs

question

Accounting profit

answer

total revenue minus total explicit cost

question

True

answer

accounting profit is usually larger than economic profit.

question

Production Function

answer

the relationship between the quantity of inputs used to make a good and the quantity of output of that good

question

Diminishing marginal product

answer

the property whereby the marginal product of an input declines as the quantity of the input increases

question

Total costs

answer

FC+VC

question

Average Fixed cost

answer

FC/Q

question

Average Variable Cost

answer

VC/Q

question

Average total cost

answer

TC/Q

question

Marginal cost

answer

change in total cost/ change in quantity

question

Efficient scale

answer

the quantity of output that minimizes average total cost

question

Economies of scale

answer

the property whereby long-run average total cost falls as the quantity of output increases

question

Diseconomies of scale

answer

the property whereby long-run average total cost rises as the quantity of output increases

question

Constant returns to scale

answer

the property whereby long-run average total cost stays the same as the quantity of output changes

question

Shut down

answer

Total revenue < Variable cost

question

Sunk cost

answer

a cost that has already been committed and cannot be recovered

question

Exit in the long run

answer

Total revenue < Total cost

question

Entry rule

answer

Price > ATC

question

Firms profit

answer

(P-ATC) x Q

question

Monopolistic competition

answer

a market structure in which many firms sell products that are similar but not identical

question

collusion

answer

an agreement among firms in a market about quantities to produce or prices to charge

question

cartel

answer

a group of firms acting in unison

question

Nash equilibrium

answer

a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen

question

What might cause economies or diseconomies of scale?

answer

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Micro exam study guide

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