micro ec chapter 7, 8, 9

47 terms by beautiful1215 

Create a new folder

Advertisement Upgrade to remove ads

Examples of barriers to entry include:

Patents.

In a competitive market where firms are earning economic losses, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus?

A higher price and fewer firms.

Marginal cost pricing results in the most desirable mix of goods and services from the consumer's standpoint because:

The prices consumers pay are a reflection of the value of the goods and services given up.

The entry of firms into a market:

Shifts the market supply curve to the right.

To maximize profits, a competitive firm will seek to expand output until:

Price equals marginal cost.

To determine the market supply, the quantities:

Supplied at each price by each supplier are added together

In a perfectly competitive industry, economic profit:

Will approach zero in the long run as prices are driven to the level of average production costs

A perfectly competitive market results in efficiency because:

Price is driven down to minimum ATC.

A firm should shut down production when:

P < minimum AVC.

Marginal cost pricing means that a firm:

Produces up to the output where P = MC for a given market price.

Which of the following is consistent with long-run equilibrium for a perfectly competitive market?

Maximum technical efficiency is achieved.

The demand curve for an individual monopolist:

Is the same as the market demand curve

According to the text, a convincing argument against concentration of market power is that:

The exercise of market power results in a higher price

Which of the following is a barrier to entry in a monopoly market?

A patent on a new product.

A monopolist has market power because it:

Faces a downward-sloping demand curve for its own output.

Contestable market theory relies on:

Potential entry.

A monopolist will find that its marginal revenue curve:

Lies below its demand curve and is steeper than its demand curve

Relative to a competitive market with the same cost and market demand, a monopolist will produce:

Less output at a higher price

If a monopolist is producing a level of output where MR is less than MC, then it should:

Lower its output

In long-run perfectly competitive equilibrium, marginal cost:

Equals the minimum of the ATC.

If long-run economic losses are being experienced in a competitive market:

Equilibrium price will rise as firms exit.

The exit of firms from a market, ceteris paribus:

Reduces the economic losses of remaining firms in the market.

Economic losses are a signal to producers:

That they are not using resources in the best way.

Which characteristic of competitive markets permits society to answer the WHAT-to-produce question efficiently?

Marginal cost pricing

The entry of firms into a market:

Reduces the profits of existing firms in the market.

If economic profits are earned in a competitive market, then over time:

Additional firms will enter the market.

Marginal cost is the increase in total cost associated with a one unit:

Increase in production.

Perfectly competitive firms cannot individually affect market price because:

There are many firms, none of which has a significant share of total output.

Which of the following is characteristic of a perfectly competitive market?

A large number of firms

(true or false) Because a perfectly competitive firm has no market power, its marginal cost curve is flat (i.e., horizontal).

false

Which of the following is true for a monopolist?

It must lower its price on all of its units in order to sell any additional units.

A monopolist has market power because it:

Faces a downward-sloping demand curve for its own output

The price charged by a profit-maximizing monopolist occurs:

At a price on the demand curve above the intersection where MR = MC.

In monopoly and perfect competition, a firm should expand production when

Marginal revenue is above marginal cost.

Suppose that a firm earn $20,000 in total revenue, has $15,000 in total explicit costs, and a total of $4,960 in total implicit costs. The firm's economic profit equals:

$40 (20,000 - 15,000 - 4,960)

A firm should shutdown (produce zero output and pay only fixed costs) only if the losses from continuing production exceed:

Fixed costs.

there is an increase in profit taxes then the average total costs will __________ and marginal costs will __________.

remain unchanged; remain unchanged

When the market price does not change, technological improvements that shift the ATC and MC curves downward always have the following effect on the economic profits of the firm:

Increased profits.

The sequence of events common to competitive markets evolves as follows: High prices and profits signal consumers' demand for more output, economic profit attracts new suppliers, the market supply curve shifts to the right as firms enter, prices slide down the market demand curve, and a new equilibrium is reached with increased output and lower prices. Throughout this process firms try to keep ahead of the profit squeeze by:

Reducing costs of production.

(true or false) Firms with market power face a downward sloping demand curve

true

price goes to

demand curve

While firms set output based on the profit maximizing rule, the monopolist sets price based on

The demand curve.

(tru/false)In general a monopoly receives larger profits than a comparable competitive industry, by reducing the quantity supplied and pushing prices up

true

Which of the following characterizes a competitive market?

downward-sloping demand curve for the market

For the perfectly competitive firm, the marginal revenue is always

Constant.

(true/false) Normal profit is zero when a firm's revenues just cover its economic cost.

false

In a contestable market

Entry occurs when prices rise above average total costs.

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions above and try again

Example:

Reload the page to try again!

Reload

Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

Star this term

You can study starred terms together

NEW! Voice Recording

Create Set