ECON 201 Final

Question 1

A perfectly elastic demand

Answer 1

curve is a marker of a purely competitive seller (horizontal)

Question 2

Define average, total, and marginal revenue of a purely competitive seller

Answer 2

average revenue is the price per unit for each firm in pure competition.

Total revenue is the price multiplied by the quantity sold

Marginal revenue is the change in total revenue and will also equal the unit price in conditions of pure competition

Question 3

A purely competitive seller will shut down…

Answer 3

TC > TR

Question 4

MR = MC (pure competition)

Answer 4

profit maximization rule

Question 5

a purely competitive firm will shut down in the short run when

Answer 5

If P/MR falls below Minimum AVC meaning no way for the company to produce and not be at a loss

Question 6

shut down for a purely competitive firm can be …

Answer 6

temporary

Question 7

Long Run equilibrium in purely competitive markets are (3 things)

Answer 7

Production will occur at firms minimum average total cost
price will equal minimum average total costs
Firms will enter and exit the market as a determinant of supply

Question 8

A pure monopoly firms exists when..

Answer 8

when a single firm is the sole producer of a product with no close substitutes

Question 9

What kind of Profit is a pure monopoly trying for

Answer 9

total unit profit.

Question 10

Monopolists can experience economic profit in the … and losses in the

Answer 10

long run … short run

Question 11

What is price discrimination

Answer 11

when a given product is sold at more than one price and the price differences are not based on cost differences

Question 12

What are the three forms of price discrimination

Answer 12

charge a customer in a single market the max price he or she is willing to pay
Charging each customer one price for the first set of units purchased, and lower price for subsequent units
charge one group one price and another one another price.

Question 13

Economies of scale (what graph line and what does it mean)

Answer 13

ATC and it is the barriers to entry that arise in starting a business.

Question 14

Monopolistically competitive firms are defined as… ( 3 things)

Answer 14

large number of sellers
collusion is nearly impossible
first act interdependently

Question 15

monopolistically competitive firms will leave the industry when…

Answer 15

demand shifts below the break-even line (normal profit) in the long run.

Question 16

Allocative Efficiency occurs when…

Answer 16

price = marginal costs (the right amount of resources are allocated to the product)

Question 17

Productive Efficiency occurs when..

Answer 17

price = minimum average total costs, (production occurs using the least-cost combo of resources

Question 18

Economic efficiencies in Monopolistic Competition (2 things)

Answer 18

Price is higher than minimum ATC at an output of Q,

Price is greater than the MC failing to achieve allocative efficiency

Question 19

In an individual firm the labor demand line is represented by a

Answer 19

horizontal line

Question 20

Derived Demand for resources depends on (2 thing)

Answer 20

Marginal product of the resource (MP)

Price of the product it produces (P)

Question 21

Marginal revenue product represents… (and show formula)

Answer 21

change in total revenue resulting from unit change in resource input
MRP = change in total revenue/change in resource quantity

Question 22

Profit maximizing rule

Answer 22

marginal revenue = marginal costs

Question 23

should hire additional labor as long as

Answer 23

mrp =mrc

Question 24

mutual interdependency, what is it and who does it apply to

Answer 24

each firms profit depend on its own price and that of other producers. oligopoly

Question 25

Economies of scale for a oligopoly

Answer 25

tech or market share

Question 26

economic efficiency of an oligopolistic industry do (or) do not realize allocate and productive efficiency because

Answer 26

(do not) price will exceed marginal cost and therefore output will be less than the minimum average-cost output level.

Question 27

Price discriminating monopoly will charge elastic demand buyers (more/less) than inelastic demand buyers

Answer 27

less

Question 28

In the long run monopolistic competitive firms will produce at ____ and have a _____

Answer 28

mr=mc and demand is = ATC

normal profit

Question 29

Total cost (formula)

Answer 29

sum of total fixed and total variable costs at each level of output

Question 30

implicit costs

Answer 30

money payments the self-employed resources could have earned in their best alternative employments. In tests

Question 31

Economies of scale explain the ____ ______ slope curve in the ____ run

Answer 31

downward ATC

long

Question 32

explicit costs

Answer 32

shit you paid for

Question 33

coefficient of price elasticity

Answer 33

is greater than 1 it elastic

if less than 1 it is inelastic

Question 34

To produce efficient outcomes

Answer 34

the market demand curve must reflect the willingness to pay of every person receiving benefits from the product being sold
market supply must be accurate

Question 35

Consumer surplus

Answer 35

the difference between what a consumer would pay vs what they actually pay.

Question 36

The price of milk is regulated by

Answer 36

the agricultural act of 2014

Question 37

substitution effect

Answer 37

buyers have an incentive to substitute a product based on the price. all about a better deal

Question 38

Monopolistic competitive will leave the industry …

Answer 38

when it is unprofitable in the long run

Question 39

game theory is the study of

Answer 39

how people behave

Question 40

long run equilibrium (pure comp) three things happen

Answer 40

p(and MR) = MC = minimum ATC

Question 41

Marginal revenue curve pure comp vs pure monop

Answer 41

pure comp - marginal revenue lines up with demand

pure monop - lie below the demand curve