Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
50 Cards in this Set
- Front
- Back
Which of the following represents a long-run adjustment?
|
construction of a new assembly plant by a car manufacturer.
|
|
The short-run average total cost (ATC) curve of a firm will tend to be U-shaped because
|
at low levels of output, AFC will be high, while at high levels of output, MC will be high as the result of diminishing returns.
|
|
A downward-sloping portion of a long-run average total cost curve is the result of
|
economies of scale.
|
|
An activity known as shirking is least likely to occur when
|
the earnings of workers are closely tied to the worker's output.
|
|
Under what conditons is an automobile company likely to buy an input from another firm (as they do with tires), rather than produce the input themselves (as they typically do with engines)?
|
when it is relatively easy to measure the quantity and the quanlity of the input
|
|
A disadvantage of team production compared to contracting out is that
|
the problem of shirking must be more carefully addressed with team production.
|
|
Interest foregone on financial capital invested in a firm represents an economic cost
|
because funds invested in the firm could be earning interest elsewhere.
|
|
The difference between a firm's total revenue and total costs when all explicit and implicit costs are included is the firm's
|
economic profit
|
|
When an economist says a firm is earning zero economic profit, this implies that the firm
|
is earning as high a rate of return now as could be earned in other industries.
|
|
Ben quit his job as an economics professor to become a golf professional. He gave up his $30,000 salary and invested his retirement fund of $50,000 (which was earning 10 percent interest) in this venture. After all expenses, his net winnings were $35,000. Ben's economic profits were
|
zero
|
|
During the short-run period of the production process, a firm will be
|
able to vary some of its factors of production.
|
|
Paul's plumbing is a small business that employs 12 people. Which of the following is most likely to be a fixed cost for Paul's Plumbing?
|
the tax and insurance payments on the property owned by the firm
|
|
Average fixed cost
|
will always decrease as output expands.
|
|
If a firm produces nothing, which of the following costs will be zero?
|
variable cost
|
|
The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average,
|
The average is increasing
|
|
If two workers can produce 22 units of output, and the addition of a third worker increases output to 30 units, the marginal product of the third worker is
|
8 units
|
|
If a firm doubles all of its inputs and its output triples, it is said to be experiencing
|
economies of scale
|
|
If the government levies a $1 excise tax on each unit of a good sold, what happens to the producer's cost curves?
|
The average total cost and marginal cost curves will shift up by the amount of the tax.
|
|
In a competitive price searcher market, the firms will
|
be able to choose their price, and the entry barriers
|
|
a profit maximizing price-searcher will expand output to the point where
|
marginal revenue equals marginal cost
|
|
competitive price searcher markets are common in
|
retail selling
|
|
in a competitive price searcher market, firms will set price
|
above marginal cost
|
|
When a frim exits a competitive price searcher market, the individual demand curves faced by all remaining firms in that market will
|
shift to the right
|
|
A price-taker firm can sell additional units of output without having to lower price,
|
while a price-searcher firm must lower its price in order to sell additional units.
|
|
the best example of a firm operating in a competitive price searcher market?
|
Border Grill, a local restaurant.
|
|
Price Quantity
$8 5 $7 6 $6 7 Suppose a price searcher firm faces the demand schedule illustrated above. What is the firm's marginal revenue from selling the seventh unit? |
0
|
|
In the long run, neither price takers nor competitive price searchers will earn economic profits because
|
competition between firms will force prices down to the level of production costs.
|
|
When economic losses are present in a market, firms will tend to
|
exit from the market.
|
|
Many small U.S. cities are served by only one or two airlines. If a price increase in these markets allows other airlines to quickly and easily enter the market and compete, economists would call these markets
|
contestable markets
|
|
An important varialble that is typicallly left out of economic models is
|
entrepreneurship.
|
|
Part of the entrepreneurial process in a competitive market economy involves
|
choosing the best structure, size, scope and production for the firm to produce a new product.
|
|
Some economists have argued that competitive price searcher markets are inefficient because
|
1. they do not produce at minimum of average total cost
2.price exceeds marginal cost. 3.excessive advertising is encouraged |
|
an advantage of competitive price searcher markets over price-taker markets is
|
greater product variety and convenience
|
|
firms that engage in price discrimination
|
will earn more profit than those that do not discriminate
|
|
price discrimination occurs when
|
a seller charges different prices to different customers for the same product or service.
|
|
The producer being a pure monopolist
|
is not a necessary condition for effective price discrimination
|
|
A firm that uses price discrimination to enhance its revenues will
|
charge a lower price to consumers with a more elastic demand for the firm's product.
|
|
best example of price discrimination
|
couponing
senior discounts student discounts |
|
sellers who must take the market price in order to sell their product.
|
price takers
|
|
because each price takers output is small relative to the total market,
|
price takers can sell all their output at the market price, but they are unable to sell any of their output at a price higher than the market price
|
|
In a price taker market, the firms all produce
|
identical products
|
|
In a price taker market, each seller is
|
small relative to the total market. thus the output of any single firm has little or no effect on the market price.
|
|
In a price taker market, each firm can sell all its output at the market price but
|
cannot sell any of its output at a higher price
|
|
firms that face a downward sloping demand curve for their product.
|
price searchers
|
|
price searchers-the amount the firm is able to sell is
|
inversely related to the price it charges
|
|
Rivalry or competitiveness between or among parties to deliver a better deal to buyers in terms of quality, price, and product information
|
Competition as a dynamic process
|
|
A market structure characterized by a large number of small firms producing an identical product in an industry (market area) that permits complete freedom of entry and exit
|
Pure competition
|
|
Obstacles that limit the freedom of potential rivals to enter and compete in an industry or market
|
barrier to entry
|
|
Price taker markets and purely competitive markets are really
|
alternative names for the same thing
|
|
#1 characteristic for a firm in a price market to be a price taker
|
all the firms in the market are producing an identical product
|