Eng 200 Midterm 200

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Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve. If the monopolist is seeking maximum profits, it should

charge a higher price

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4k units of its output at $300 per unit, its accounting profits were

$200,000 and its economic profits were zero

The demand schedule or curve confronted by the indicidual purely competitive from is

perfectly elastic

the loss of a purely competitive firm which shuts down in the short run

is equal to its total fixed costs

in a purely competitive industry

there may be economic proits in the short run, but not in the long run

An important economic problem associated with pure monopoly is that, at the profit maximizing outputs, resources are

underallocated because price exceeds marginal cost

diseconomies of scale arise primarily because

of the difficulties inolved in managing and coordinating a large business enterprise

a price discriminating pure monopolist will attempt to charge each buyer

the maximum price each would be willing to pay

suppose that a pure monopolist can sell 10 units of output at $5 per unit and 11 units at $4.90 per unit. the marginal revenue of the eleventh unit is

$3.90

monopolistic competition and oligopoly are alike in that

nonprice competition is common to both

creative destruction is

the process by which new firms and new products replace existing dominant firms and products

monopolistic competition means

many firms producing differentiated products

a pure monoplist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing

an economic profit that could be increased by producing more output

the first successful commercial introduction of a new product refers to

innovation

In the short run the sure-screen t-shirt company is producing 500 units of output. its average cariable costs are $2.00 and its average fixed costs are $.50. The firm's total costs

are $1,250

In an oligopolistic market

products may be standardized or differentiated

economic profits are calculated by subtracting

explicit and implicit costs from total revenue

in the incerted-u theory

R&D expenditures first rise as a percentage of firms' sales as industry concentration increases, but then fal as higer industry concentration occurs

To economists the main difference between the short run and the long run is that

in the long run all resources are vaiable, while in the short run at least on resource is fixed

which of the following is a unique feature of oligopoly

mutual interdependence

the kinked-demand curve model of oligopoly is useful in explaining

why oligopolistic prices might change only infrequently

as it relates to the R&D decision, the interest-rate-cost-of-funds curve

is the marginal cost element in the MB = MC decision framwork

which of the following is a true statement

innovation normally follows incention and precedes diffusion

the mr = mc rules

applies both to pure monopoly and pure competition

the law of diminishing reutrns indiicates that

as extra units of a variable resource are added to a fixed resource, marginal product will decling beyond some point

If the serveral oligopolistic firms that comprise an industry behave collusively, the resulting price and output will most likely resemble those of

pure monopoly

which of the following supports of the contention that pure conpetitors have a weak incentive to engage in R&D?

entry to purely competitive industries is easy and thus profit from innovation is quickly competed away

As it relates to R&D, the imitation problem is that

a firm's rivals may be able to copy its new product or process innovation, reducing its return on R&D

Pure monopoly means

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

A firm finds that its MR= MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should

produce because the resulting loss is less than its TFC

The vertical distance between a firm's ATC and AVC curves represents:

AFC, which decreases as output increases

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