Exam 3

Question 1

The property whereby long-run average total cost increases as the quantity of output increases.

Answer 1

Diseconomies of Scale

Question 2

The property whereby long-run average total cost decreases as the quantity of output increases.

Answer 2

Economies of Scale

Question 3

The relationship between quantity of inputs used to make a good and the quantity of output of that good.

Answer 3

Production Function

Question 4

The increase in output that arises from an additional unit of input.

Answer 4

Marginal Product

Question 5

Total cost divided by the quantity of output.

Answer 5

Average Total Cost

Question 6

Fixed cost divided by the quantity of output.

Answer 6

Average Fixed Cost

Question 7

The increase in total cost that arises from an extra unit of production.

Answer 7

Marginal Cost

Question 8

The property whereby long-run average total cost stays the same as the quantity of output changes.

Answer 8

Constant Returns to Scale

Question 9

The quantity of output that minimizes average total cost.

Answer 9

Efficient Scale

Question 10

Variable cost divided by the quantity of output.

Answer 10

Average Variable Cost

Question 11

The property whereby the marginal product of an input declines as the quantity of the input increases.

Answer 11

Diminishing Marginal Product

Question 12

A market with many buyers and sellers trading identical products so that each buyer and seller is a price taker.

Answer 12

Competitive Market

Question 13

The change in total revenue from an additional unit sold.

Answer 13

Marginal Revenue

Question 14

Total revenue divided by quantity sold.

Answer 14

Average Revenue

Question 15

The profit maximization rule states that competitive firms should choose the level of production where ______ ______ equals ______ ______ .

Answer 15

Marginal Revenue

Marginal Cost

Question 16

The business practice of selling the same good at different prices to different customers.

Answer 16

Price Discrimination

Question 17

A regulatory scheme where regulators force the monopolist to break even and earn zero economic profit (this is not efficient).

Answer 17

Average Cost Pricing

Question 18

A regulatory scheme where regulators force the monopolist to produce efficiently and where the price is below average total cost.

Answer 18

Marginal Cost Pricing

Question 19

A monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms.

Answer 19

Natural Monopoly

Question 20

A law passed in 1890 by the U.S. government that makes attempts to make monopolized industries illegal in the U.S.

Answer 20

Sherman Anti-Trust Act

Question 21

A law passed in 1914 by the U.S. government that defines specific business practices that are illegal (like collusion and tying contracts).

Answer 21

Clayton Anti-Trust Act

Question 22

A market structure in which many firms sell products that are similar but not identical.

Answer 22

Monopolistic Competition

Question 23

The difference between price and marginal cost.

Answer 23

Markup

Question 24

A situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen.

Answer 24

Nash Equilibrium

Question 25

An agreement about firms in a market about quantities to produce or prices to charge.

Answer 25

Collusion

Question 26

A strategy that is best for a player in a game regardless of the strategies chosen by the other players.

Answer 26

Dominant Strategy

Question 27

A group of firms acting in unison.

Answer 27

Cartel

Question 28

The marginal product of an input times the price of the output.

Answer 28

Value of the Marginal Product

Question 29

The increase in the amount of output from an additional unit of labor.

Answer 29

Marginal Product of Labor

Question 30

The relationship between the quantity of inputs used to make a good and the quantity of output of that good.

Answer 30

Production Function

Question 31

True or False

The marginal cost curve is a positive linear curve.

Answer 31

True