Create an account
positive externality or spillover benefit occurs when:
the benefits associated with a product exceed those accruing to people who consume it
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
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 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
the demand schedule or curve confronted by the individual purely competitive firm is:
for a purely competitive seller, price equals
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
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
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
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 for a firm P=minimum ATC=MC, then:
both allocative efficiency and productive efficiency are being achieved.
all of these are barriers to entry
economies of scale
the ownership of essential raw materials
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.
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.
to maximize profit a pure monopolist must:
maximize the difference between total revenue and total cost
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