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To the economist, total cost includes:

explicit and implicit costs, including a normal profit.

unlike a private good, a public good:

has benefits available to all

positive externality or spillover benefit occurs when:

the benefits associated with a product exceed those accruing to people who consume it

At the optimal quantity of a public good:

marginal benefit equals marginal cost

a demand curve for a public good is determined by:

summing vertically the individual demand curves for the public good

for which good would you sum individual demand curves vertically to obtain the total demand curve

courts of law

producer surplus

is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price

at the output level defining allocative efficiency

the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output.

the price of elasticity of demand coefficient measures:

buyer responsiveness to price change

the demand for a product is inelastic with respect to price if

consumers are largely unresponsive to a per unit price change

the larger the coefficient of price elasticity of demand for a product, the

smaller the resulting price change for an increase in supply.

the price elasticity of demand of a straight line demand curve is:

elastic in high price ranges and inelastic in low price ranges

the main determinant of elasticity of supply is the

amount of time the producer has to adjust inputs in response to a price change

the larger the positive cross elasticity coefficient of demand between products x and y:

the greater their substitutability

we would expect the cross elasticity of demand between dress shirts and ties to be:

negative, indicating complementary goods

when a firm does more of something they get better at it. this is called

source of economies of scale

economists use the term imperfect competition to describe:

those markets which are not purely competitive

which industry structure is the entry of new firms most difficult

pure monopoly

a one firm industry is known as

pure monopoly

what statement applies to a purely competitive producer

it will not advertise its product

a purely competitive seller is

a price taker

the demand schedule or curve confronted by the individual purely competitive firm is:

perfectly elastic

for a purely competitive seller, price equals

average revenue
marginal revenue
total revenue divided by output

the demand curve in a purely competitive industry is_____, while the demand to a single firm is ___

downsloping, perfectly elastic

firms seek to maximize:

total profit

The MR=MC rule applies:

to firms in all types of industries

suppose the price of your product is less than minimum AVC. You should

close down because by producing, your losses will exceed your total fixed costs

a purely competitive firm should produce in the short run if its total revenue is sufficient to cover its

total variable costs

in the short run a purely competitive firm will always make an economic profit if

P>ATC

if a purely competitive firm is producing at some level less than the profit maximizing output

marginal revenue exceeds marginal cost

the short run supply curve for a purely competitive industry can be found by:

summing in horizontally the segments of the MC curves lying above the AVC curve for all firms

If a purely competitive firm is producing at the P=MC output and realizing an economic profit at that output:

ATC being minimized

when a purely competitive firm is in long run equilibrium

price equals marginal cost

assume a competitive firm is maximizing profit at some output at which long run average total cost is at a minimum. then:

there is no tendency for the firm's industry to expand or contract

a decreasing cost industry is one in which:

input prices fall or technology improves as the industry expands

if an industry's long run supply curve is downsloping

it is a decreasing cost industry

Allocative efficiency is achieved when the production of a good occurs where:

P=MC

the term productive efficiency refers to:

the production of a good at the lowest average total cost

if for a firm P=minimum ATC=MC, then:

both allocative efficiency and productive efficiency are being achieved.

pure monopoly means

a single firm producing a product for which there are no close substitutes

pure monopolists may obtain economic profits in the long run because:

of barriers to entry

Patents

are also called trademarks

all of these are barriers to entry

economies of scale
the ownership of essential raw materials
patents

For a nondiscriminating imperfectly competitive firm

marginal revenue will become zero at that output where total revenue is at a maximum

With respect to the pure monopolist's demand curve it can be said that:

price exceeds marginal revenue at all outputs greater than 1.

the pure monopolist's demand curve

identical with industry demand curve

when total revenue is increasing:

marginal revenue is positive

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that:

total revenue is increasing

Imperfectly competitive producers

-do not compete with one another
-can alter their output by changing price
-find that, when they reduce price, their total revenue increases by less than the new price.

the supply curve of a pure monopolist

does not exist because prices are not "given" to a monopolist

to maximize profit a pure monopolist must:

maximize the difference between total revenue and total cost

X inefficiency refers to a situation in which a firm:

fails to achieve the minimum average total costs attainable at each level of output

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