Chapter 5

Question 1

What is perfect competition?

Answer 1

A market strucuture characterized by many buyers and sellers of a standard product and easy entry to and exit from the industry.

Question 2

What is monopolsitic competition?

Answer 2

Monopolistic competition is the market structure charactersized by many buyers and sellers of slightly different products, and easy entry to and exist from the industry.

Question 3

What is oliogoppoly?

Answer 3

A oligopoly is a market structure charactersized by only a few businesses offering standard or similar products and restricted entry to the industry.

Question 4

What is a monopoly?

Answer 4

A monopoly is a market sturcture charactered by only one business supplying a product with no close subsititues and strcicitred entry to the industry.

Question 5

What are entry barriers?

Answer 5

Entry barriers are economic or insitutional obstables to businesses entering an industry.

Question 6

What is a natural monopoly?

Answer 6

A natural monopoly is a market in which one business is economically viable because of increasing returns to scale.

Question 7

What is predatory pricing?

Answer 7

Predatory pricing is a unfair business practice of temporailiy lowering prices to drive out competitiors in an industry.

Question 8

What is market power?

Answer 8

Market power a business’s ability to affect the price of the product it sells.

Question 9

What is business’s demand curve?

Answer 9

A business’s demand curve is a demand curve faced by an individul’s business, as opposed to an entire market.

Question 10

What is average revneue?

Answer 10

Average revenue is a business’s total revenue per unit of output.

Question 11

What is marginal revenue?

Answer 11

Marginal revenue is the extra total reveunue earned from an additional unit of output.

Question 12

What is profit-maximizing output rule?

Answer 12

Profit-maxizining output rule: produce at the level of output where marginal revenue and marginal cost intersect.

Question 13

What is the breakeven point?

Answer 13

The breakeven point is the profit maxing output where price (or average revenue), equals average cost.

Question 14

What is the shutdown point?

Answer 14

The shutdown point is the level of output where price (or average revenue) equals mininum average variable cost.

Question 15

What is business’s supply cruve?

Answer 15

A business’s supply curve is a curve that shows the quanitity of output supplied by a business at every possible price.

Question 16

What is marginal-cost pricing?

Answer 16

Marginal-cost pricing is the practice of selling the price that consumers are willing to pay as equal to marginal cost.

Question 17

What is marginal productivity theory?

Answer 17

Marginal producutvity theory is the theory that businesses use resources on the basis of how much extra profit these resources provide.

Question 18

What is marginal revenue product?

Answer 18

The marginal revenue product is the change in total revenue assoicated with employing each new unit of a resource.

Question 19

What is the marginal resource cost?

Answer 19

The marginal resource cost is the extra cost of each additional unit of a resource.

Question 20

What is business’s labour demand curve?

Answer 20

The business’s labour demand curve is a graph that shows the possible cominbations of workers demanded by a business at each possible wage.

Question 21

What is business’s labour supply curve?

Answer 21

A business’s labour supply curve is a graph showing the possible cominbations of workers suppliyed to a business at each possible wage.

Question 22

What is profit-maximizing employement rule?

Answer 22

The profit-maximziing employment rule states a business should use a resource up to the point where the resource’s marginal revenue product equals its marginal resource cost.

Question 23

What is a labour market demand curve?

Answer 23

The labour market demand curve is a graph showing the possible cominbations of workers demanded in a certain labour market at each possible wage.

Question 24

What is a labour market supply curve?

Answer 24

The labour market supply curve is a graph that shows the possible combinations of workers supply their labour in a certain labour market at each possible wage.