Apec 1101 final
Terms in this set (50)
If the market equilibrium quantity is less than the socially optimal quantity, one can infer that:
The production of this good has a positive externality.
The optimal quantity of a negative externality is zero if Select one:
the marginal cost of reducing it is zero.
If some activity creates positive externalities as well as private benefits, then economic theory suggests that the activity ought to be:
It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. Operators of hydroelectric generating plants on the river find they must clean up the river's water before it flows through their equipment. Which of the following policies would be most appropriate for dealing with this problem?
Levy a tax on the producers of paper goods and use the tax revenues to clean up the river.
A public good:
cannot be provided to one person without making it available to others too.
Total fixed cost (TFC):
does not change as total output increases or decreases.
The ability of Intel to spread product development costs over a larger number of units of output arises from:
economies of scale.
If a firm decides to produce no output in the short run, its costs will be:
its fixed costs.
A natural monopoly exists when:
unit costs are minimized by having one firm produce an industry's entire output.
Fixed cost is:
any cost that does not change when the firm changes its output.
The law of diminishing returns results in:
a total product curve that eventually increases at a decreasing rate.
When total product is diminishing, marginal product is:
A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4.00 and the market price is $4.50. What should the firm do?
Increase output if the minimum possible average variable cost is $3.75.
Under which market model are the conditions of entry the most difficult?
Which is true for a purely competitive firm in short-run equilibrium?
The firm's marginal revenue is equal to its marginal cost.
A purely competitive firm will be willing to produce at a loss in the short run provided:
the loss is no greater than its total fixed costs.
The market model with the largest number of firms is:
If firms are losing money in a purely competitive industry, then in the long run this situation will shift the industry:
supply curve to the left, and the market price will increase
A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $5.00 and the market price is $5.00. What should the firm do?
Shut down if the minimum possible average variable cost is $5.25
In pure competition, marginal revenue is:
equal to product price.
In the long run, a profit-maximizing firm will choose to exit a perfectly competitive market when
total revenue is less than total cost
When a competitive firm triples the amount of output it sells,
its total revenue triples.
In pure competition, the demand for the product of a single firm is perfectly:
elastic because many other firms produce the same product.
In pure competition, the average revenue of a firm always equals:
T-Shirt Enterprises is selling in a purely competitive market. Its output is 300 units, which sell for $1 each. At this level of output, marginal cost is $1 and average variable cost is $1.50. The firm should:
produce zero units of output.
A purely competitive firm is producing at the point where its marginal cost equals the price of its product. If the firm increases its output, then total revenue will:
increase and profits will decrease.
When a purely competitive firm is in long-run equilibrium and is allocatively efficient
marginal cost equals marginal revenue.
A purely competitive firm does not try to sell more of its product by lowering its price below the market price because:
it can sell all it wants to at the market price.
When demand increases, in the short run the purely competitive firm:
will earn higher profits or experience smaller losses.
A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $3.00 and the market price is $2.50. What should the firm do?
Decrease output if the minimum possible average variable cost is $2.00
There is no control over price by firms in:
One major barrier to entry under pure monopoly arises from:
ownership of essential resources
A firm that emerges as the only seller in an industry with economies of scale is termed a(an)
Which antitrust act provided that parties could sue for and, if successful, collect triple damages from monopolistic firms?
A nondiscriminating monopolist will find that marginal revenue:
is less than average revenue or price
Suppose that a monopolist calculates that at present output and sales, marginal cost is $1.00 and marginal revenue is $2.00. He could maximize profits by:
decreasing price and increasing output
When compared with the purely competitive industry with identical costs of production, a monopolist will produce:
less output and charge a higher price
The supply curve for a pure monopolist:
does not exist because there is no fixed relationship between price and quantity supplied.
Assuming no economies of scale and identical costs, if the firms in a purely competitive industry were replaced by a profit-maximizing monopolist, the likely result would be:
an increase in price and reduced output.
Suppose a monopolist calculates that at present output and sales levels, marginal revenue is $1.00 and marginal cost is $2.00. He could maximize profits (or minimize losses) by:
increasing price and decreasing output.
Pure monopolists sell where
P > MC.
If a monopolist produces 100 units of output at a market price of $5 per unit with marginal revenue per unit equaling $4, we would expect that if the monopolist's good were provided under pure competition, quantity would be:
higher than 100 units, price would be lower than $5, and MR = price.
To practice long-run price discrimination, a monopolist must:
be able to separate buyers into different markets with different price elasticities.
Compared to the purely competitive firm, a pure monopoly
is able to use barriers to entry and maintain positive economic profits in the long run
Assume the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures as:
A monopolist calculates its marginal revenues to be $15 and her marginal costs to be $16. One can infer that it
should decrease output.
Suppose a single-price monopolist is considering becoming a price discriminating monopolist. If the firm does begin to price discriminate, it can expect to
increase both its output and its profit.
The practice of price discrimination is associated with pure monopoly because:
monopolists have the ability to control both output and price.
A monopoly is most likely to emerge and be sustained when:
economies of scale are large relative to market demand.
Suppose a monopolist produces output where total revenue is maximized. At that output, the price elasticity of demand for the monopolist's output is:
equal to one.
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