Microeconomics Final Review
Terms in this set (54)
If the marginal cost curve is below the average variable cost curve, then
average variable cost is decreasing
A characteristic of the long run is
all inputs can be varied
In the short run, if marginal product is at its maximum, then
marginal cost is at its minimum
If, when a firm doubles all its inputs, its average cost of production decreases, then production displays
economies of scale
When the average total cost is $16 and the total cost is $800, then the number of units the firm is producing is
Average fixed costs of production
fall as long as output is increased
Unlike a perfectly competitive firm, for a monopolistically competitive firm
price does not equal marginal revenue for all output levels.
In the long run, if price is less than average cost,
there is an incentive for firms to exit the market.
Which of the following characteristics is not common to monopolistic competition and perfect competition?
Firms take market prices as given.
Assuming that the total market size remains constant, a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because
some of its customers have switched to purchasing the products of new entrants in the market.
A monopolistically competitive firm that is earning profits will, in the long run, experience all of the following except
a decrease in the number of rival products.
For a monopolistically competitive firm, marginal revenue
is less than the price.
Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that
firms earn normal profits
Consumers benefit from monopolistic competition by
being able to choose from products more closely suited to their tastes.
If a typical monopolistically competitive firm is making short-run losses, then
as some firms leave, the remaining firms will experience an increase in the demand for their products.
The key characteristics of a monopolistically competitive market structure include
many small (relative to the total market) sellers acting independently.
A monopolistically competitive firm faces a downward-sloping demand curve because
of product differentiation.
If a firm faces a downward-sloping demand curve,
it must reduce its price to sell more units
A monopolistically competitive firm maximizes profit where
price > marginal cost
In monopolistic competition there is/are
many sellers who each face a downward-sloping demand curve.
What is the profit-maximizing rule for a monopolistically competitive firm?
to produce a quantity such that marginal revenue equals marginal cost
In the short run, a profit-maximizing firm's decision to produce should be guided by whether
its total revenue covers its variable cost.
Which of the following is true for a firm with a downward-sloping demand curve for its product?
Price equals average revenue but is greater than marginal revenue
If the demand curve for a firm is downward-sloping, its marginal revenue curve
will lie below the demand curve
A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until
the firm's demand curve is tangent to its average total cost curve.
Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?
Production is at minimum average total cost.
A major difference between monopolistic competition and perfect competition is
that products are not standardized in monopolistic competition unlike in perfect competition.
Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. As a result of this change
If a monopolist's marginal revenue is $35 per unit and its marginal cost is $25, then
to maximize profit the firm should increase output
Firms that face downward-sloping demand curves for their output in the product market are called
a firm that has some control over the price of the product it sells.
A monopoly firm is the only seller of a good or service that
does not have a close substitute.
Which of the following is true for a monopolist?
Being the only seller in the market, the monopolist faces the market demand curve
If the OpenTable Website was a natural monopoly, its
average total cost curve would still be declining when it crossed the demand curve.
To have a monopoly in an industry there must be
barriers to entry so high that no other firms can enter the industry.
a firm that is the only seller of a good or service that does not have a close substitute
a perfectly competitive firm's supply curve is its
marginal cost curve above its minimum average variable cost
large number of relatively small buyers and sellers, standardized product, very easy market entry and exit
a buyer or seller that is unable to affect the market price
perfectly elastic demand curve
consumers are willing to buy as much as the firm is willing to sell at the going market price
The production function shows
the maximum output that can be produced from each possible quantity of inputs
If the total cost of producing 20 units of output is $1,000 and the average variable cost is $35, what is the firm's average fixed cost at that level of output?
A characteristic of the long run
all inputs can be varied
The marginal product of labor is defined as
the additional output that results when one more worker is hired, holding all other resources constant.
If average total cost is $50 and average fixed cost is $15 when output is 20 units, then the firm's total variable cost at that level of output is
If in a perfectly competitive industry, the market price facing a firm is below its average total cost but above average variable cost at the output where marginal cost equals marginal revenue
some existing firms will exit the industry.
When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell
nothing at all; the firm shuts down
For a perfectly competitive firm, which of the following is not true at profit maximization?
Market price is greater than marginal cost.
If total variable cost exceeds total revenue at all output levels, a perfectly competitive firm
should shut down in the short run
An individual seller in perfect competition will not sell at a price lower than the market price because
the seller can sell any quantity she wants at the prevailing market price.
If a firm shuts down in the short run
its loss equals its fixed cost.
The price of a seller's product in perfect competition is determined by
market demand and market supply
If a perfectly competitive firm's price is above its average total cost, the firm
is earning a profit
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