Microeconomics 2 Final Exam - Custom Scholars
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Microeconomics 2 Final Exam

question
profit maximization
the assumption that firms select an output level so as to maximize profit (yeah, it's an obvious question)
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survivor principle
the observation that in the competitive markets, firms that do not approximate profit-maximizing behavior fail, and the survivors are those firms that, intentionally or not, make the appropriate profit-maximizing decisions.
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price taker
a firm or consumer who cannot affect the prevailing price through production and consumption decisions.
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average revenue
total revenue divided by the output (WRITE ENTIRE PHRASE)
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AR
the prevailing market price is the...
question
AR
symbol for average revenue
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marginal revenue
the change in total revenue when there is a one-unit change in output (WRITE ENTIRE PHRASE)
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MR
symbol for marginal revenue
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MR
When the average revenue is constant (and its curve is thus flat and horizontal), AR =
question
total revenue
price times the quantity sold (TYPE FULL PHRASE)
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TR
symbol for total revenue
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total profit
the difference between total revenue and total cost (TYPE FULL PHRASE)
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π
symbol for total profit
question
π
TR - TC =
question
average profit per unit
total profit divided by the number of units sold (WRITE ENTIRE PHRASE)
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π/q
symbol for average profit per unit
question
largest
Profit is maximized at the output where total revenue exceeds total cost by the (smallest/largest) possible amount.
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MR
In terms of per-unit curves, the output that miximizes profit in the short run is where MC =
question
decreases
If MC > MR, a firm's profit will increase if it (decreases/increases) output.
question
MR
In general, the rule for profit maximization is for MC =
question
AVC
In the short run, as long as AR = BLANK, then it is in the firm's interests to continue operation even if it is at a loss.
question
short-run firm supply curve
a graph of the systematic relationship between a product's price and a firm's most profitable output level.
question
P
MC = MR =
question
shutdown point
The minimum level of AVC is the...
question
decreases
A lower input price (decreases/increases) the MC.
question
outwards
If the MC decreases, it shifts (inwards/outwards).
question
short-run industry supply curve
the horizontal sum of individual firms' marginal cost curves.
question
zero economic profit
the point at which total profit is zero since price equals the average cost of production
question
yes
Should a firm continue operating at zero economic profit?
question
equilibrium
At long-run market BLANK, there is zero economic profit.
question
zero economic profit
LMC = LMR at... (DON'T WRITE "EQUILIBRIUM")
question
yes
If firm's cost curves differ, do they all still make long-run zero economic profit?
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opportunity costs
If one's firm production factors increase in value while another's don't, they still remain in long-run zero market equilibrium since the BLANK of the first firm goes up. (PLURAL)
question
long-run industry supply curve
The long-run relationship between price and industry output, which depends on whether input prices are constant, decreasing, or increasing as the industry expands or contracts. (DON'T FORGET THE HYPHEN)
question
constant-cost industry
an industry in which expansion of output does not bid up input prices, the long-run average production cost per unit remains unchanged, and the long-run industry supply curve is horizontal. (DON'T FORGET THE HYPHEN)
question
increasing-cost industry
an industry in which expansion of output leads to higher production costs and the long-run supply curve slopes upwards. (DON'T FORGET THE HYPHEN)
question
decreasing-cost industry
A highly unusual (possibly non-existent) situation in which the long-run supply curve is downward sloping. (DON'T FORGET THE HYPHEN)
question
no
The constant-cost industry refers to the fact that a firm's cost curves do not shift. Does that mean that every firm has a horizontal LAC curve?
question
no
Is the long-run supply curve derived by summing LMC curves of an industry's firms?
question
technology
The LS curve assumes BLANK is constant.
question
no
In reality, is an industry likely to fully attain a position of long-run equilibrium?
question
owners of inputs
As we move up a long-run cost curve, who benefits? (PLURAL, UNLESS THE ANSWER IS "NO ONE")
question
equalize
The tendency towards zero economic profit means that the rate of return on invested resources will tend to BLANK across industries.
question
LS
In deriving the BLANK curve, one assumes that a short-run equilibrium was first established and then long run forces came into play. (JUST TYPE ABBREVIATION/SYMBOL)
question
zero
Economic profit is BLANK all along a competitive industry's long-run supply curve. (TYPE ENTIRE WORD OR PHRASE)
question
uniform
If firms produce a homogeneous product, then there will be a BLANK price.
question
π
TR - C =
question
monopoly
A market with a single seller.
question
monopoly power
some ability to set price above the marginal cost
question
price maker
a monopoly that supplies the total market and can choose any price along the market demand curve that it wants
question
price taker
a firm in a competitive market
question
AR
The demand curve is the same as the BLANK curve.
question
horizontal
A competitive firm has a (horizontal/negative) demand curve.
question
negative
A monopoly has a (horizontal/negative) demand curve)
question
no
The demand curve's slope depends on the market setting, but does the output-decision rule for maximizing profit?
question
monopoly
If price must be lowered to sell more output, the firm is a BLANK.
question
TC
In a monopoly, profit is maximized at the output where TR exceeds BLANK by the largest possible amount.
question
TR
In a monopoly, profit is maximized at the output where BLANK exceeds TC by the largest possible amount.
question
η
symbol for the elasticity of demand
question
1/η
For a monopoly, (P-MC)/P =
question
P
For a monopoly, MC/[1-(1/η)] =
question
supply
In simple terms, a monopoly has no BLANK curve.
question
no
If the LAC curve lies entirely above the D curve, can a monopoly make a profit?
question
elastic
A monopoly's demand curve is (elastic/inelastic/unit elastic) where MR is positive.
question
unit elastic
A monopoly's D curve is (elastic/inelastic/unit elastic) where MR is zero.
question
inelastic
When a monopoly's demand curve is (elastic/inelastic/unit elastic where MR is negative.
question
D
For monopolies, the slope of the MR curve is, in absolute value, exactly twice the slope of the BLANK curve. (JUST TYPE LETTER)
question
elastic
A profit-maximizing monopolist will always be selling at a price where demand is (elastic/inelastic/unit elastic).
question
Learner index
a means of measuring a firm's monopoly power that takes the mark-up of price over marginal cost expressed as a percentage of a product's price.
question
(P-MC)/P
The Learner Index of Monopoly Power formula
question
no
If a market demand curve is perfectly elastic, do any individual supplies have any monopoly power?
question
true
The monopoly power possessed by one firm is limited the greater the number of rival firms. True or false?
question
demand
Among the factors that determine the extent of a firm's monopoly power are the elasticity of the market BLANK curve and the elasticity of the supply by other firms, and the number of rival firms. (WRITE ENTIRE WORD)
question
supply
Among the factors that determine the extent of a firm's monopoly power are the elasticity of the market demand curve and the elasticity of the BLANK by other firms, and the number of rival firms. (WRITE ENTIRE WORD)
question
barrier to entry
any factor that limits the number of firms operating in a market and thereby serves to promote monopoly power
question
a situation in which an incumbent firm's production cost (its LATC) is lower than potential rivals' production costs at all relevant output levels.
question
economies of scale
a situation in which a firm can increase its output more than proportionally to its total input cost.
question
natural monopoly
an industry in which production cost is minimized if one firm supplies the entire output. this occurs in economies of scale
question
product differentiation
a means by which consumers perceive the product sold by an incumbent firm to be superior to that offered by prospective rivals.
question
regulatory barriers
barriers to entry created by the government through vehicles such as patents, copyrights, franchises, and licenses.
question
barriers of entry
The four types of BLANK are absolute cost advantage, economies of scale, product differentiation, and regulatory barriers. (PLURAL)
question
higher
In general, prices are (lower/higher) where there are bans on advertising.
question
true
If a possible new entrant can come into the market at a specific price, the monopoly cannot ever charge more than this price (and be successful). True or false?
question
constant
A horizontal supply curve means that there is BLANK average cost.
question
monopoly
For the same demand and cost conditions, price will be higher and output lower under a (monopoly/free-market competition).
question
Graphically, the area of the excess of value over cost associated with a monopoly increasing output is the societal BLANK due to the restriction of output.
question
static analysis
a form of economic analysis that looks at the efficiency of a market at any one point in time.
question
dynamic analysis
a form of economic analysis that looks, over time, at the efficiency of a market.
question
innovation
A major factor of BLANK is that a firm that creates a new product knows it will (at least temporarily) receive a monopoly for it.
question
dynamic
In general, monopolies appear to help society more when viewing through (dynamic/static) analysis.
question
antitrust laws
a series of codes and amendments intended to promote a competitive market environment. (PLURAL)
question
R
For a monopoly, P * Q =
question
price discrimination
The practice of charging different prices for the same product when there is no difference to the producer in supplying the product.
question
first-degree price discrimination
a policy in which each unit of output is sold for the maximum price a consumer will pay. (DON'T WRITE PERFECT)
question
perfect
Another word for first-degree price discrimination is BLANK price discrimination
question
second-degree price discrimination
the use of a schedule of prices such that the price per unit declines with the quantity purchased by a particular consumer. (DON'T WRITE BLOCK PRICING)
question
block pricing
another word for second-degree price discrimination
question
block
BLANK pricing creates a step-like price curve.
question
third-degree price discrimination
a situation in which each consumer faces a single price and can as much as desire at that price, but the price differs among categories of consumers. (DON'T WRITE MARKET SEGMENTATION)
question
market segmentation
Another word for third-degree price discrimination
question
monopoly power
In order to use price discrimination, a firm must possess some degree of...
question
resale
arbitrage of a product among market segments
question
resale
In order to use price discrimination, BLANK must be impossible.
question
marginal revenues
In market segmentation, the firm divides output between the market segments so that the BLANK are equal. (WRITE FULL PHRASE, PLURAL)
question
MC
the most profitable output occurs where ΣMR intersects BLANK.
question
ΣMR
Symbol for the sum of different market segment's marginal revenue
question
intertemporal price discrimination
a form of third-degree price discrimination in which different market segments are willing to pay different prices, depending on the time at which they purchase a good
question
third
Intertemporal price discrimination is a type of (first/second/third)-decree price discrimination
question
dumping
A form of price discrimination where a firm charges a higher price in its domestic market than it charges abroad.
question
time
Intertemporal price discrimination creates multiple price curves for different BLANK frames
question
no
Does intertemporal price discrimination only apply when cost is constant?
question
peak pricing
a pricing policy in which different prices are charged for peak and off-peak periods.
question
two-part tariff
a form of second-degree price discrimination in which a firm charges consumers a fixed fee per time period for the right to purchase a product at a uniform per-unit price.
question
second
A two-part tariff is a form of (first/second/third)-degree price discrimination.
question
budget lines
a two-part tariff creates multiple BLANK (PLURAL)
question
D
a perfectly competitive firm maximizes price where MC = P =
question
P
a perfectly competitive firm maximizes price where MC = D =
question
DWL
question
DWL
1/2(Price of Monopoly - Price of Competitive Firm)(Quantity of competitive firm - Quantity of Monopoly) =
question
no
If AVC < P, will a firm shutdown in the short-run?
question
yes
If AVC > P, will a firm shutdown in the short-run?
question
yes
If ATC > P, will a firm exit in the long run?
question
no
If ATC < P, will a firm exit in the long run?
question
TR
P * TQ =
1 of 124
question
profit maximization
the assumption that firms select an output level so as to maximize profit (yeah, it's an obvious question)
question
survivor principle
the observation that in the competitive markets, firms that do not approximate profit-maximizing behavior fail, and the survivors are those firms that, intentionally or not, make the appropriate profit-maximizing decisions.
question
price taker
a firm or consumer who cannot affect the prevailing price through production and consumption decisions.
question
average revenue
total revenue divided by the output (WRITE ENTIRE PHRASE)
question
AR
the prevailing market price is the...
question
AR
symbol for average revenue
question
marginal revenue
the change in total revenue when there is a one-unit change in output (WRITE ENTIRE PHRASE)
question
MR
symbol for marginal revenue
question
MR
When the average revenue is constant (and its curve is thus flat and horizontal), AR =
question
total revenue
price times the quantity sold (TYPE FULL PHRASE)
question
TR
symbol for total revenue
question
total profit
the difference between total revenue and total cost (TYPE FULL PHRASE)
question
π
symbol for total profit
question
π
TR - TC =
question
average profit per unit
total profit divided by the number of units sold (WRITE ENTIRE PHRASE)
question
π/q
symbol for average profit per unit
question
largest
Profit is maximized at the output where total revenue exceeds total cost by the (smallest/largest) possible amount.
question
MR
In terms of per-unit curves, the output that miximizes profit in the short run is where MC =
question
decreases
If MC > MR, a firm's profit will increase if it (decreases/increases) output.
question
MR
In general, the rule for profit maximization is for MC =
question
AVC
In the short run, as long as AR = BLANK, then it is in the firm's interests to continue operation even if it is at a loss.
question
short-run firm supply curve
a graph of the systematic relationship between a product's price and a firm's most profitable output level.
question
P
MC = MR =
question
shutdown point
The minimum level of AVC is the...
question
decreases
A lower input price (decreases/increases) the MC.
question
outwards
If the MC decreases, it shifts (inwards/outwards).
question
short-run industry supply curve
the horizontal sum of individual firms' marginal cost curves.
question
zero economic profit
the point at which total profit is zero since price equals the average cost of production
question
yes
Should a firm continue operating at zero economic profit?
question
equilibrium
At long-run market BLANK, there is zero economic profit.
question
zero economic profit
LMC = LMR at... (DON'T WRITE "EQUILIBRIUM")
question
yes
If firm's cost curves differ, do they all still make long-run zero economic profit?
question
opportunity costs
If one's firm production factors increase in value while another's don't, they still remain in long-run zero market equilibrium since the BLANK of the first firm goes up. (PLURAL)
question
long-run industry supply curve
The long-run relationship between price and industry output, which depends on whether input prices are constant, decreasing, or increasing as the industry expands or contracts. (DON'T FORGET THE HYPHEN)
question
constant-cost industry
an industry in which expansion of output does not bid up input prices, the long-run average production cost per unit remains unchanged, and the long-run industry supply curve is horizontal. (DON'T FORGET THE HYPHEN)
question
increasing-cost industry
an industry in which expansion of output leads to higher production costs and the long-run supply curve slopes upwards. (DON'T FORGET THE HYPHEN)
question
decreasing-cost industry
A highly unusual (possibly non-existent) situation in which the long-run supply curve is downward sloping. (DON'T FORGET THE HYPHEN)
question
no
The constant-cost industry refers to the fact that a firm's cost curves do not shift. Does that mean that every firm has a horizontal LAC curve?
question
no
Is the long-run supply curve derived by summing LMC curves of an industry's firms?
question
technology
The LS curve assumes BLANK is constant.
question
no
In reality, is an industry likely to fully attain a position of long-run equilibrium?
question
owners of inputs
As we move up a long-run cost curve, who benefits? (PLURAL, UNLESS THE ANSWER IS "NO ONE")
question
equalize
The tendency towards zero economic profit means that the rate of return on invested resources will tend to BLANK across industries.
question
LS
In deriving the BLANK curve, one assumes that a short-run equilibrium was first established and then long run forces came into play. (JUST TYPE ABBREVIATION/SYMBOL)
question
zero
Economic profit is BLANK all along a competitive industry's long-run supply curve. (TYPE ENTIRE WORD OR PHRASE)
question
uniform
If firms produce a homogeneous product, then there will be a BLANK price.
question
π
TR - C =
question
monopoly
A market with a single seller.
question
monopoly power
some ability to set price above the marginal cost
question
price maker
a monopoly that supplies the total market and can choose any price along the market demand curve that it wants
question
price taker
a firm in a competitive market
question
AR
The demand curve is the same as the BLANK curve.
question
horizontal
A competitive firm has a (horizontal/negative) demand curve.
question
negative
A monopoly has a (horizontal/negative) demand curve)
question
no
The demand curve's slope depends on the market setting, but does the output-decision rule for maximizing profit?
question
monopoly
If price must be lowered to sell more output, the firm is a BLANK.
question
TC
In a monopoly, profit is maximized at the output where TR exceeds BLANK by the largest possible amount.
question
TR
In a monopoly, profit is maximized at the output where BLANK exceeds TC by the largest possible amount.
question
η
symbol for the elasticity of demand
question
1/η
For a monopoly, (P-MC)/P =
question
P
For a monopoly, MC/[1-(1/η)] =
question
supply
In simple terms, a monopoly has no BLANK curve.
question
no
If the LAC curve lies entirely above the D curve, can a monopoly make a profit?
question
elastic
A monopoly's demand curve is (elastic/inelastic/unit elastic) where MR is positive.
question
unit elastic
A monopoly's D curve is (elastic/inelastic/unit elastic) where MR is zero.
question
inelastic
When a monopoly's demand curve is (elastic/inelastic/unit elastic where MR is negative.
question
D
For monopolies, the slope of the MR curve is, in absolute value, exactly twice the slope of the BLANK curve. (JUST TYPE LETTER)
question
elastic
A profit-maximizing monopolist will always be selling at a price where demand is (elastic/inelastic/unit elastic).
question
Learner index
a means of measuring a firm's monopoly power that takes the mark-up of price over marginal cost expressed as a percentage of a product's price.
question
(P-MC)/P
The Learner Index of Monopoly Power formula
question
no
If a market demand curve is perfectly elastic, do any individual supplies have any monopoly power?
question
true
The monopoly power possessed by one firm is limited the greater the number of rival firms. True or false?
question
demand
Among the factors that determine the extent of a firm's monopoly power are the elasticity of the market BLANK curve and the elasticity of the supply by other firms, and the number of rival firms. (WRITE ENTIRE WORD)
question
supply
Among the factors that determine the extent of a firm's monopoly power are the elasticity of the market demand curve and the elasticity of the BLANK by other firms, and the number of rival firms. (WRITE ENTIRE WORD)
question
barrier to entry
any factor that limits the number of firms operating in a market and thereby serves to promote monopoly power
question
a situation in which an incumbent firm's production cost (its LATC) is lower than potential rivals' production costs at all relevant output levels.
question
economies of scale
a situation in which a firm can increase its output more than proportionally to its total input cost.
question
natural monopoly
an industry in which production cost is minimized if one firm supplies the entire output. this occurs in economies of scale
question
product differentiation
a means by which consumers perceive the product sold by an incumbent firm to be superior to that offered by prospective rivals.
question
regulatory barriers
barriers to entry created by the government through vehicles such as patents, copyrights, franchises, and licenses.
question
barriers of entry
The four types of BLANK are absolute cost advantage, economies of scale, product differentiation, and regulatory barriers. (PLURAL)
question
higher
In general, prices are (lower/higher) where there are bans on advertising.
question
true
If a possible new entrant can come into the market at a specific price, the monopoly cannot ever charge more than this price (and be successful). True or false?
question
constant
A horizontal supply curve means that there is BLANK average cost.
question
monopoly
For the same demand and cost conditions, price will be higher and output lower under a (monopoly/free-market competition).
question
Graphically, the area of the excess of value over cost associated with a monopoly increasing output is the societal BLANK due to the restriction of output.
question
static analysis
a form of economic analysis that looks at the efficiency of a market at any one point in time.
question
dynamic analysis
a form of economic analysis that looks, over time, at the efficiency of a market.
question
innovation
A major factor of BLANK is that a firm that creates a new product knows it will (at least temporarily) receive a monopoly for it.
question
dynamic
In general, monopolies appear to help society more when viewing through (dynamic/static) analysis.
question
antitrust laws
a series of codes and amendments intended to promote a competitive market environment. (PLURAL)
question
R
For a monopoly, P * Q =
question
price discrimination
The practice of charging different prices for the same product when there is no difference to the producer in supplying the product.
question
first-degree price discrimination
a policy in which each unit of output is sold for the maximum price a consumer will pay. (DON'T WRITE PERFECT)
question
perfect
Another word for first-degree price discrimination is BLANK price discrimination
question
second-degree price discrimination
the use of a schedule of prices such that the price per unit declines with the quantity purchased by a particular consumer. (DON'T WRITE BLOCK PRICING)
question
block pricing
another word for second-degree price discrimination
question
block
BLANK pricing creates a step-like price curve.
question
third-degree price discrimination
a situation in which each consumer faces a single price and can as much as desire at that price, but the price differs among categories of consumers. (DON'T WRITE MARKET SEGMENTATION)
question
market segmentation
Another word for third-degree price discrimination
question
monopoly power
In order to use price discrimination, a firm must possess some degree of...
question
resale
arbitrage of a product among market segments
question
resale
In order to use price discrimination, BLANK must be impossible.
question
marginal revenues
In market segmentation, the firm divides output between the market segments so that the BLANK are equal. (WRITE FULL PHRASE, PLURAL)
question
MC
the most profitable output occurs where ΣMR intersects BLANK.
question
ΣMR
Symbol for the sum of different market segment's marginal revenue
question
intertemporal price discrimination
a form of third-degree price discrimination in which different market segments are willing to pay different prices, depending on the time at which they purchase a good
question
third
Intertemporal price discrimination is a type of (first/second/third)-decree price discrimination
question
dumping
A form of price discrimination where a firm charges a higher price in its domestic market than it charges abroad.
question
time
Intertemporal price discrimination creates multiple price curves for different BLANK frames
question
no
Does intertemporal price discrimination only apply when cost is constant?
question
peak pricing
a pricing policy in which different prices are charged for peak and off-peak periods.
question
two-part tariff
a form of second-degree price discrimination in which a firm charges consumers a fixed fee per time period for the right to purchase a product at a uniform per-unit price.
question
second
A two-part tariff is a form of (first/second/third)-degree price discrimination.
question
budget lines
a two-part tariff creates multiple BLANK (PLURAL)
question
D
a perfectly competitive firm maximizes price where MC = P =
question
P
a perfectly competitive firm maximizes price where MC = D =
question
DWL
question
DWL
1/2(Price of Monopoly - Price of Competitive Firm)(Quantity of competitive firm - Quantity of Monopoly) =
question
no
If AVC < P, will a firm shutdown in the short-run?
question
yes
If AVC > P, will a firm shutdown in the short-run?
question
yes
If ATC > P, will a firm exit in the long run?
question
no
If ATC < P, will a firm exit in the long run?
question
TR
P * TQ =

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