Microeconomics: Exam 4 - Custom Scholars
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# Microeconomics: Exam 4

question
total revenue
_______ _________ is the full amount of total sales of goods and services. It is calculated by multiplying the total amount of goods and services sold by their prices.
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total cost
_______ ______ is the sum of all the fixed and variable costs.
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production function
A ________ _________ shows the relationship between the quantity of inputs used to produce a good and the quantity of output of that good.
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marginal product
The _________ _________ of any input is the increase in output arising from an additional unit of that input, holding all other inputs constant.
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Diminishing marginal product
_________ ______ _______ is the marginal product of an input declines as the quantity of the input increases (other things equal).
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Marginal cost
_______ _______ is the increase in total cost that results from producing one more unit.
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Fixed costs
______ _______ are those costs that do not vary with the quantity of output produced.
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Variable costs
________ ______ change, depending on the quantity of output produced.
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average fixed cost
The ________ ______ _______ tells us the fixed cost per unit, when producing a certain amount of output.
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average variable cost
The ________ _______ _____ tells us the variable cost per unit, when producing a certain amount of output.
question
average total cost
The ________ _______ _______ tells us the total "cost per unit" when producing a certain amount of output.
question
profit
_______ equals total revenue minus total cost.
question
Accounting profit
_______ _____ is calculated by subtracting total explicit costs from total revenue.
question
Accounting Profit equation
Accounting Profit = Total revenue — Total explicit costs
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Economic profit equation
Economic Profit = Total revenue — Total Cost
question
Economic profit
______ _______ is calculated by subtracting total cost from total revenue, where total cost includes both explicit and implicit costs.
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efficient scale
_________ ________ is the quantity that minimizes ATC. (Average Total Cost)
question
economies of scale
A firm exhibits _________ ___ ________ when ATC decreases as Q increases.
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Implicit costs
_______ _____ are those costs that do not require a cash outlay
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Explicit costs
__________ ______ are those costs that require an outlay of money
question
profits.
Economists assume that the goal of the firm is to maximize total
question
lease payments for the land on which a firm's factory stands.
An example of an explicit cost of production would be the
question
implicit cost
The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is an
question
the manner in which costs are defined
The difference between accounting profit and economic profit relates to
question
quantity of output obtained from an additional unit of that input.
The marginal product of an input in the production process is the increase in
question
diminishing marginal product
As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters
question
quantity of output produced and the total cost of production.
A total-cost curve shows the relationship between the
question
less
When MC is ________ than ATC, ATC is falling.
question
greater
When MC is _______ than ATC, ATC is rising.
question
equals
MC ________ ATC at the firm's efficient scale of production.
question
fixed costs plus variable costs
total cost is equal to
question
divided
average fixed cost is equal to fixed costs ___________ by quantity
question
divided
average variable cost is equal to variable costs ___________ by quantity
question
variable cost
is equal to average variable cost times quantity
question
average total cost
is equal to total cost divided by quantity
question
marginal cost
is equal to change in total cost divided by change in quantity
question
Marginal cost equals average total cost.
Which of the following is true at the output level where the average total cost is at its minimum?
question
fixed
As output increases, average _______ cost gets smaller and smaller.
question
Constant returns to scale
a firm exhibits constant returns to scale when ATC stays the same as Q increases.
question
Diseconomies of scale
a firm exhibits diseconomies of scale when ATC increases as Q increases.
question
time horizon under consideration.
The nature of a firm's cost (fixed or variable) depends on the
question
how many workers to hire
In the short run, a firm that produces and sells house paint can adjust
question
specialization of labor
The most likely explanation for economies of scale is
question
economies of scale
If long-run average total cost decreases as the quantity of output increases, the firm is experiencing
question
long-run average total costs rise as output increases.
Diseconomies of scale occur when
question
perfectly competitive market
A ________ ________ _______ is a market with many buyers and sellers trading identical products, so that each buyer and seller is a price taker. Firms can freely enter or exit perfectly competitive markets.
question
marginal revenue
__________ ________ is the change in total revenue from an additional unit sold.
question
total revenue
_______ _______ is the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold,
question
average revenue
______ _______ is how much revenue a firm receives for the typical unit sold, computed as the total revenue divided by the quantity sold. This always equals the price, for all types of firms.
question
shutdown
A ________ is a short-run decision by the firm not to produce anything during a specific period of time because of current market conditions.
question
exit
An _____ is a long-run decision by the firm to not produce any output for the rest of time, and leave the market completely.
question
sunk cost
A ____ _____ is a cost that has already been committed and cannot be recovered.
question
positive economic profit
A firm is earning ______ ______ ______ if the total revenue they are earning is greater than their total cost of production (i.e. TR>TC). In a perfectly competitive market, new firms will enter if current firms are earning positive economic profit.
question
negative economic profit
A firm is earning _______ _______ _______ (i.e. incurring economic losses) if the total revenue they are earning is less than their total cost of production (i.e. TR<TC). In a perfectly competitive market, firms will eventually exit the market if they are earning negative economic profit.
question
zero economic profit
A firm is earning ______ _____ _____ if the total revenue they are earning is equal to their total cost of production (i.e. TR=TC). In a perfectly competitive market, firms will neither enter nor exit if firms are earning zero economic profit.
question
long run equilibrium
_______ ____ ________ occurs when no new firms are entering, and no existing firms are exiting the market. This only occurs when zero economic profit is being earned by each firm.
question
profit
________ is total revenue minus total cost (i.e. Profit = TR-TC). Can also be calculated as Profit = (P-ATC) x Q where P stands for the price, ATC is the average total cost, and Q is the quantity of output being produced.
question
characteristics of perfect competition
-Many buyers and sellers
-Identical (or nearly identical) goods being offered for sale
-Free market entry and exit for firms
question
Total Revenue Equation
Price x Quantity
question
average revenue equation
total revenue/quantity
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marginal revenue equation
change in total revenue / change in quantity
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equal
price is always going to be ______ to average revenue
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greater
If MR is _________ than MC, then increase Q to raise profit.
question
less
If MR is _________ than MC, then decrease Q to raise profit.
question
equal
If MR is _______ to MC, then Q is at maximum profit.
question
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 _______.
question
marginal revenue equals marginal cost.
At the profit-maximizing level of output, _______.
question
profit is maximized.
The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which _______.
question
shutdown
a firm will __________ in the short run if the revenue per unit (aka the price) is less than the variable cost per unit (aka the AVC).
question
exit
a firm will _______ the market (and eventually go out of business) if the revenue per unit is less than the cost per unit.
question
Zero economic profit
_______ _____ _______ occurs when the price of a good is equal to the firm's average total cost (P = ATC). In other words, when the revenue per unit equals the cost per unit.
question
When profit-maximizing firms in competitive markets are earning profits, _______.
When profit-maximizing firms in competitive markets are earning profits, _______.
question
price is greater than average variable cost.
In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the _______.
question
Less than average variable cost.
In the short run, a firm operating in a competitive industry will shut down if price is _______.
question
its fixed costs but not its variable costs.
A firm that shuts down temporarily has to pay _______.
question
average total cost exceeds the price.
In the long run, a firm will exit a competitive industry if _______.
question
monopoly
A ________ is a firm that is the sole seller of a product without any close substitutes.
question
natural
A ________ monopoly is a type of monopoly that arises because a single firm can supply a good or service to an entire market at a lower cost than could two or more firms.
question
market power
_______ _______ is the ability of a single economic actor (like a monopolist) to have a substantial influence on market prices.
question
output effect
__________ _______ is the effect that increasing output has on total revenue for the monopolist. When more output is sold, Q is higher, which increases total revenue (where TR=PxQ).
question
Price effect
______ _______ is the effect that decreasing price has on total revenue for the monopolist. When the price falls, P is lower, which decreases total revenue (where TR=PxQ).
question
price discrimination
________ __________ is the business practice of selling the same good at different prices to different customers.
question
perfect price discrimination
______ _______ ______ is a situation in which the monopolist knows exactly each customer's willingness to pay and can charge each customer a different price.
question
antitust laws
_______ ________ are a group of statutes aimed at curbing monopoly power and promoting competition. They allow the government to prevent mergers, break up a large company into a group of smaller ones, and prevent companies from coordinating their activities in ways that make markets less competitive.
question
A competitive firm
_______ ______ ______ is a price taker, whereas a monopolist is a price maker.
question
a monopoly
___ _________ can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.
question
not in the best interest of society, one that fails to maximize total economic well-being, inefficient
Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often
question
entry is limited
Which of the following is not a characteristic of a competitive market?
question
dairy farming
Which of the following industries is most likely to exhibit the characteristic of free entry?
question
buyers will go elsewhere
When firms are said to be price takers, it implies that if a firm raises its price,
question
double
If a firm in a competitive market doubles its number of units sold, total revenue for the firm will
question
total revenue is constant
For a firm operating in a competitive industry, which of the following statements is not correct?
question
marginal revenue
a monopolist maximizes profit by producing the quantity where ______ ________ = Marginal Cost
question
supply
A monopoly does not have a _____ curve; quantity and price are determined by MC, MR, and the demand curve.
question
profit equation
(P-ATC) x Q
question
price always exceeds marginal revenue.
For a monopoly firm,
question
how a monopolist maximizes profit
producing an output level where marginal revenue equals marginal cost, and charging a price that is greater than marginal revenue
question
a monopolist produces
less than the socially efficient quantity of output but at a higher price than in a competitive market.
question
produces an output level less than the socially optimal level.
The deadweight loss associated with a monopoly occurs because the monopolist
question
Synergies
strategic relationships between media and information companies
question
selling the same good at different prices to different customers.
Price discrimination is the business practice of
question
separate customers according to their willingness to pay.
Price discrimination requires the firm to
question
higher than if the firm charged just one price because the firm will capture more consumer surplus.
A monopolist's profits with price discrimination will be
question
eliminate consumer surplus and deadweight loss, and maximize profits
If a monopolist can practice perfect price discrimination, the monopolist will
1 of 104
question
total revenue
_______ _________ is the full amount of total sales of goods and services. It is calculated by multiplying the total amount of goods and services sold by their prices.
question
total cost
_______ ______ is the sum of all the fixed and variable costs.
question
production function
A ________ _________ shows the relationship between the quantity of inputs used to produce a good and the quantity of output of that good.
question
marginal product
The _________ _________ of any input is the increase in output arising from an additional unit of that input, holding all other inputs constant.
question
Diminishing marginal product
_________ ______ _______ is the marginal product of an input declines as the quantity of the input increases (other things equal).
question
Marginal cost
_______ _______ is the increase in total cost that results from producing one more unit.
question
Fixed costs
______ _______ are those costs that do not vary with the quantity of output produced.
question
Variable costs
________ ______ change, depending on the quantity of output produced.
question
average fixed cost
The ________ ______ _______ tells us the fixed cost per unit, when producing a certain amount of output.
question
average variable cost
The ________ _______ _____ tells us the variable cost per unit, when producing a certain amount of output.
question
average total cost
The ________ _______ _______ tells us the total "cost per unit" when producing a certain amount of output.
question
profit
_______ equals total revenue minus total cost.
question
Accounting profit
_______ _____ is calculated by subtracting total explicit costs from total revenue.
question
Accounting Profit equation
Accounting Profit = Total revenue — Total explicit costs
question
Economic profit equation
Economic Profit = Total revenue — Total Cost
question
Economic profit
______ _______ is calculated by subtracting total cost from total revenue, where total cost includes both explicit and implicit costs.
question
efficient scale
_________ ________ is the quantity that minimizes ATC. (Average Total Cost)
question
economies of scale
A firm exhibits _________ ___ ________ when ATC decreases as Q increases.
question
Implicit costs
_______ _____ are those costs that do not require a cash outlay
question
Explicit costs
__________ ______ are those costs that require an outlay of money
question
profits.
Economists assume that the goal of the firm is to maximize total
question
lease payments for the land on which a firm's factory stands.
An example of an explicit cost of production would be the
question
implicit cost
The amount of money that a wheat farmer could have earned if he had planted barley instead of wheat is an
question
the manner in which costs are defined
The difference between accounting profit and economic profit relates to
question
quantity of output obtained from an additional unit of that input.
The marginal product of an input in the production process is the increase in
question
diminishing marginal product
As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters
question
quantity of output produced and the total cost of production.
A total-cost curve shows the relationship between the
question
less
When MC is ________ than ATC, ATC is falling.
question
greater
When MC is _______ than ATC, ATC is rising.
question
equals
MC ________ ATC at the firm's efficient scale of production.
question
fixed costs plus variable costs
total cost is equal to
question
divided
average fixed cost is equal to fixed costs ___________ by quantity
question
divided
average variable cost is equal to variable costs ___________ by quantity
question
variable cost
is equal to average variable cost times quantity
question
average total cost
is equal to total cost divided by quantity
question
marginal cost
is equal to change in total cost divided by change in quantity
question
Marginal cost equals average total cost.
Which of the following is true at the output level where the average total cost is at its minimum?
question
fixed
As output increases, average _______ cost gets smaller and smaller.
question
Constant returns to scale
a firm exhibits constant returns to scale when ATC stays the same as Q increases.
question
Diseconomies of scale
a firm exhibits diseconomies of scale when ATC increases as Q increases.
question
time horizon under consideration.
The nature of a firm's cost (fixed or variable) depends on the
question
how many workers to hire
In the short run, a firm that produces and sells house paint can adjust
question
specialization of labor
The most likely explanation for economies of scale is
question
economies of scale
If long-run average total cost decreases as the quantity of output increases, the firm is experiencing
question
long-run average total costs rise as output increases.
Diseconomies of scale occur when
question
perfectly competitive market
A ________ ________ _______ is a market with many buyers and sellers trading identical products, so that each buyer and seller is a price taker. Firms can freely enter or exit perfectly competitive markets.
question
marginal revenue
__________ ________ is the change in total revenue from an additional unit sold.
question
total revenue
_______ _______ is the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold,
question
average revenue
______ _______ is how much revenue a firm receives for the typical unit sold, computed as the total revenue divided by the quantity sold. This always equals the price, for all types of firms.
question
shutdown
A ________ is a short-run decision by the firm not to produce anything during a specific period of time because of current market conditions.
question
exit
An _____ is a long-run decision by the firm to not produce any output for the rest of time, and leave the market completely.
question
sunk cost
A ____ _____ is a cost that has already been committed and cannot be recovered.
question
positive economic profit
A firm is earning ______ ______ ______ if the total revenue they are earning is greater than their total cost of production (i.e. TR>TC). In a perfectly competitive market, new firms will enter if current firms are earning positive economic profit.
question
negative economic profit
A firm is earning _______ _______ _______ (i.e. incurring economic losses) if the total revenue they are earning is less than their total cost of production (i.e. TR<TC). In a perfectly competitive market, firms will eventually exit the market if they are earning negative economic profit.
question
zero economic profit
A firm is earning ______ _____ _____ if the total revenue they are earning is equal to their total cost of production (i.e. TR=TC). In a perfectly competitive market, firms will neither enter nor exit if firms are earning zero economic profit.
question
long run equilibrium
_______ ____ ________ occurs when no new firms are entering, and no existing firms are exiting the market. This only occurs when zero economic profit is being earned by each firm.
question
profit
________ is total revenue minus total cost (i.e. Profit = TR-TC). Can also be calculated as Profit = (P-ATC) x Q where P stands for the price, ATC is the average total cost, and Q is the quantity of output being produced.
question
characteristics of perfect competition
-Many buyers and sellers
-Identical (or nearly identical) goods being offered for sale
-Free market entry and exit for firms
question
Total Revenue Equation
Price x Quantity
question
average revenue equation
total revenue/quantity
question
marginal revenue equation
change in total revenue / change in quantity
question
equal
price is always going to be ______ to average revenue
question
greater
If MR is _________ than MC, then increase Q to raise profit.
question
less
If MR is _________ than MC, then decrease Q to raise profit.
question
equal
If MR is _______ to MC, then Q is at maximum profit.
question
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 _______.
question
marginal revenue equals marginal cost.
At the profit-maximizing level of output, _______.
question
profit is maximized.
The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which _______.
question
shutdown
a firm will __________ in the short run if the revenue per unit (aka the price) is less than the variable cost per unit (aka the AVC).
question
exit
a firm will _______ the market (and eventually go out of business) if the revenue per unit is less than the cost per unit.
question
Zero economic profit
_______ _____ _______ occurs when the price of a good is equal to the firm's average total cost (P = ATC). In other words, when the revenue per unit equals the cost per unit.
question
When profit-maximizing firms in competitive markets are earning profits, _______.
When profit-maximizing firms in competitive markets are earning profits, _______.
question
price is greater than average variable cost.
In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the _______.
question
Less than average variable cost.
In the short run, a firm operating in a competitive industry will shut down if price is _______.
question
its fixed costs but not its variable costs.
A firm that shuts down temporarily has to pay _______.
question
average total cost exceeds the price.
In the long run, a firm will exit a competitive industry if _______.
question
monopoly
A ________ is a firm that is the sole seller of a product without any close substitutes.
question
natural
A ________ monopoly is a type of monopoly that arises because a single firm can supply a good or service to an entire market at a lower cost than could two or more firms.
question
market power
_______ _______ is the ability of a single economic actor (like a monopolist) to have a substantial influence on market prices.
question
output effect
__________ _______ is the effect that increasing output has on total revenue for the monopolist. When more output is sold, Q is higher, which increases total revenue (where TR=PxQ).
question
Price effect
______ _______ is the effect that decreasing price has on total revenue for the monopolist. When the price falls, P is lower, which decreases total revenue (where TR=PxQ).
question
price discrimination
________ __________ is the business practice of selling the same good at different prices to different customers.
question
perfect price discrimination
______ _______ ______ is a situation in which the monopolist knows exactly each customer's willingness to pay and can charge each customer a different price.
question
antitust laws
_______ ________ are a group of statutes aimed at curbing monopoly power and promoting competition. They allow the government to prevent mergers, break up a large company into a group of smaller ones, and prevent companies from coordinating their activities in ways that make markets less competitive.
question
A competitive firm
_______ ______ ______ is a price taker, whereas a monopolist is a price maker.
question
a monopoly
___ _________ can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.
question
not in the best interest of society, one that fails to maximize total economic well-being, inefficient
Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often
question
entry is limited
Which of the following is not a characteristic of a competitive market?
question
dairy farming
Which of the following industries is most likely to exhibit the characteristic of free entry?
question
buyers will go elsewhere
When firms are said to be price takers, it implies that if a firm raises its price,
question
double
If a firm in a competitive market doubles its number of units sold, total revenue for the firm will
question
total revenue is constant
For a firm operating in a competitive industry, which of the following statements is not correct?
question
marginal revenue
a monopolist maximizes profit by producing the quantity where ______ ________ = Marginal Cost
question
supply
A monopoly does not have a _____ curve; quantity and price are determined by MC, MR, and the demand curve.
question
profit equation
(P-ATC) x Q
question
price always exceeds marginal revenue.
For a monopoly firm,
question
how a monopolist maximizes profit
producing an output level where marginal revenue equals marginal cost, and charging a price that is greater than marginal revenue
question
a monopolist produces
less than the socially efficient quantity of output but at a higher price than in a competitive market.
question
produces an output level less than the socially optimal level.
The deadweight loss associated with a monopoly occurs because the monopolist
question
Synergies
strategic relationships between media and information companies
question
selling the same good at different prices to different customers.
Price discrimination is the business practice of
question
separate customers according to their willingness to pay.
Price discrimination requires the firm to
question
higher than if the firm charged just one price because the firm will capture more consumer surplus.
A monopolist's profits with price discrimination will be
question
eliminate consumer surplus and deadweight loss, and maximize profits
If a monopolist can practice perfect price discrimination, the monopolist will

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