1141 Questions & Blanks

Question 1

The four basic factors of production

FOP

Answer 1

capital
labor
management
natural resources

Question 2

The four basic factors of production must be __________________, are used in conjunction with one another, may be ____________, and must be organized so that maximum _____________________.

Answer 2

purchased at market price
combined in varying proportions
output is obtained at minimum cost

Question 3

The terms ____________ refer to the degree of flexibility a firm has in changing its level of output

Answer 3

short run and long run

Question 4

To an economist, capital includes _________________

Answer 4

tools, machines, and buildings

Question 5

The division of labor is a vital part of the labor factor of production because ______________________

Answer 5

it increases production by allowing workers to specialize in one kind of work

Question 6

_______ includes the actual running of the firm

Answer 6

Administration

Question 7

A _________ usually supervises and coordinates managers.

Answer 7

president or CEO

Question 8

Opportunity costs are also called _________

Answer 8

implicit costs

Question 9

Accounting costs are also called __________

Answer 9

explicit costs

Question 10

___________ include the amount the entrepreneur’s labor is worth to his company, the amount he could earn at another company, the amount he could earn by leasing the building and/or land, and the amount he could earn by investing in another industry.

Answer 10

Opportunity costs

Question 11

____________ include raw materials, fuel, labor, equipment, buildings, and machinery.

Answer 11

Accounting costs

Question 12

________ include interest, insurance, taxes, rent, and executive salaries.

Answer 12

Fixed costs

Question 13

________ include labor, raw materials, and utilities

Answer 13

Variable costs

Question 14

____________ continue to decline as production increases.

Answer 14

Average fixed costs

Question 15

____________ at first decline as output increases, but at some point they begin to rise

Answer 15

Average variable costs

Question 16

The _____________________________ states that, as more and more of a variable input is added to an existing fixed input, at some point the additional output obtained from the additional input will decline.

Answer 16

law of diminishing marginal utility

Question 17

___________ is the additional output produced by each additional worker.

Answer 17

Marginal product

Question 18

___________ is the amount produced by each worker

Answer 18

average output

Question 19

Diminishing marginal returns begin where average output begins to ___________

Answer 19

decline

Question 20

A knowledge of its _________ is helpful to a firm in deciding whether to change output

Answer 20

marginal cost

Question 21

Average fixed, variable, average total, and marginal costs are considered ____________

Answer 21

short run

Question 22

_____________ describes the lower production costs incurred by a larger company.

Answer 22

Diseconomies of scale

Question 23

_____________ are realized by larger firms because of mass production

Answer 23

Decreasing unit costs

Question 24

At the point at which a firm experiences _____________________, it no longer has the lowest unit production costs, its managers may lose touch with the workers and with various aspects of the operation, and it is too large to operate efficiently.

Answer 24

Diseconomies of scale

Question 25

In the long run, average costs initially fall because of ____________, remain constant for a time, and then rise because of _____________.

Answer 25

Economies of scale

Diseconomies of scale

Question 26

___________ would not occur if production relationships were only technical

Answer 26

Diseconomies of scale

Question 27

When a firm grows too large, ________ may lead to diseconomies of scale

Answer 27

increased monitoring costs

decreased morale

Question 28

The relationship between long-run and short-run average costs is called the _________________ because of the way it looks on a graph

Answer 28

envelope relationship

Question 29

If a perfectly competitive market did exist, its characteristics would include

Answer 29

a great many sellers who act independently of each other
no interference with market forces affecting supply, demand, and price
standardized products
freedom of new firms to enter or leave the industry at will
market price unaffected by one firm changing its output
production factors that can be shifted from one firm to another

Question 30

In the short run, only ______________ may be changed.

Answer 30

variable production costs

Question 31

A/an _____________ is one in which a single producer affects price by changing output

Answer 31

imperfectly competitive market structure

Question 32

The three types of imperfectly competitive market structures:

Answer 32

monopoly
oligopoly
monopolistic competition

Question 33

A monopoly may exist because a _______ may be a legal barrier to entry into a market, ___________ may prevent entry into the market, or a firm may produce a _________ that is a natural barrier into the market.

Answer 33

patent
social or historical constraints
unique product

Question 34

The industry demand curve, which slopes downward, is the same as the _______________

Answer 34

monopoly demand curve

Question 35

A monopoly must accept a lower market price if it:

Answer 35

increases its output

Question 36

____________ determine the point at which a monopoly will make the greatest profit

Answer 36

Marginal revenue and marginal cost

Question 37

Prices are higher and output is lower for a _____________ than a _________________

Answer 37

monopoly

firm in a competitive market

Question 38

An oligopoly is more like a ________ and a monopolistic competition is more like a ___________.

Answer 38

monopoly

perfectly competitive market

Question 39

The fact that an individual firm cannot change its __________ without affecting other firms in the industry is one of the most important characteristics of an oligopoly

Answer 39

price

Question 40

Because it cannot _______, an individual firm in an oligopoly cannot predict its _____________________

Answer 40

predict what its competitors will do

demand schedule, marginal revenue, and output level at which MR = MC

Question 41

__________ does not usually exist in an oligopoly because of __________

Answer 41

Price competition

fear of a price war

Question 42

Collusion between firms in an oligopoly establishes prices that are ______________ and are usually _______________

Answer 42

higher than those in a perfect competition

above the minimum point of the ATC curve

Question 43

A firm in an oligopoly has a ___________ because of its expectations of the reactions of other firms in the industry.

Answer 43

kinked demand curve

Question 44

The demand curve for _________ in an oligopoly is more elastic than the demand curve for _____________

Answer 44

a single firm

the entire industry

Question 45

The elements of competition that exist in an oligopoly include the facts that ____________

Answer 45

new firms may enter the market
all firms may advertise to increase sales
technological advances may increase profits by reducing costs

Question 46

Characteristics of a monopolistic competition include the facts that products are ___________

Answer 46

differentiated
firms act independently
there are multiple levels of competition
entry of new firms in the long run is easy, so there are no long-run profits

Question 47

No firm in a monopolistic competition considers ____________ when making a decision

Answer 47

the others’ reactions

Question 48

A firm in a monopolistic competitive market structure produces at a _________ than one in a _______________

Answer 48

lower point

perfectly competitive market structure

Question 49

Because firms may not be attempting to ___________ and because the ____________ may not be considered a cost, no economic model can accurately represent “real-world” firms.

Answer 49

maximize profits

decision-maker’s salary

Question 50

MC = MR = P

Answer 50

except in oligopoly