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Econ 2001.01 > Unit 3 > Flashcards

Unit 3 Flashcards

1
Q

Some businesses refer to their double or triple bottom line, saying that they value ___ or ___ impacts in addition to dollars.

A

social; environmental

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2
Q

The ___ is the amount that a firm receives from the sale of goods and services.

A

Total Revenue

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3
Q

The ___ is the amount that a firm pays for all of the inputs that go into producing goods and services.

A

Total Cost

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4
Q

A firm’s ___ is the difference between total revenue and total cost.

A

Profit

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5
Q

___ costs don’t depend on the quantity of output produced.

A

Fixed

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6
Q

___ costs depend on the quantity of output produced.

A

Variable

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7
Q

___ costs are opportunity costs of operations that require a firm to spend money.

A

Explicit

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8
Q

___ costs are opportunity costs of operations that represent forgone opportunities.

A

Implicit

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9
Q

___ profit is calculated as total revenue minus explicit costs.

A

Accounting

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10
Q

___ profit is calculated as total revenue minus explicit costs minus implicit costs.

A

Economic

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11
Q

The ___ is the relationship between the quantity of inputs and the quantity of outputs.

A

Production function

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12
Q

The ___ is the increase in output that is generated by an additional unit of input.

A

Marginal product

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13
Q

Holding other inputs constant, what is true about marginal product of a particular input as the quantity of that input increases.

A

Marginal product decreases

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14
Q

The ___ is the number of outputs produced per worker.

A

Average product

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15
Q

The ___ is the additional costs incurred by firms by producing one additional unit of output.

A

Marginal cost

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16
Q

When ___ are present, a firm will find that increasing the quantity of output enables it to lower ATC.

A

Economies of Scale

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17
Q

When ___ are present, a firm will find that increasing the quantity of output raises ATC.

A

Diseconomies of Scale

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18
Q

When ___ are present, there are various quantities of output at which a firm can operate without experiencing higher or lower ATC.

A

Constant returns to scale

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19
Q

A firm is operating on a(n) ____ when it can not lower ATC by increasing or decreasing scale; it is producing the quantity of outputs at which ATC is minimized.

A

Efficient scale

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20
Q

Marginal product is maximized when marginal cost is…

A

minimized

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21
Q

What are the four characteristics of a perfectly competitive market?

A
  1. Buyers and sellers can’t affect prices
  2. Goods are standardized
  3. Buyers and sellers have full information
  4. There are no transaction costs
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22
Q

___ is the ability to noticeably affect market prices.

A

Market Power

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23
Q

The ___ is the revenue generated per unit of output.

A

Average Revenue

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24
Q

The ___ is the revenue generated by selling an additonal unit of a good.

A

Marginal Revenue

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25
Q

For a firm in a competitive market, Marginal Revenue is equal to…

A

Price

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26
Q

In a perfectly competitive market, as long as ___, production of an additional unit will increase profits.

A

MR > MC

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27
Q

In a perfectly competitive market, the profit-maximizing quantity is the one at which…

A

MR = MC

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28
Q

In a perfectly competitive market, Profit =

A

(Price - ATC) x Q

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29
Q

A firm in a perfectly competitive market should shut down if…

A

P < AVC (Short Run)

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30
Q

A firm in a perfectly competitive market should exit the market if…

A

P < ATC (Long Run)

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31
Q

A(n) ___ is a firm that faces no competition at all and is therefore able to have total control over how much it charges for its products.

A

Monopoly

32
Q

What are the four main barriers to entry in a monopoly?

A
  1. Scarce resources
  2. Economies of scale: Increase in output = Decrease in ATC (High fixed costs)
  3. Government intervention
  4. Aggressive tactics
33
Q

A(n) ___ is a market in which a single firm can produce, at a lower cost than multiple firms, the entire quantity of output demanded.

A

Natural Monopoly

Example: electricity, drinking water, natural gas

34
Q

The ___ describes the increase in total revenue due to the money brought in by the sale of additonal units.

A

Quantity effect

35
Q

The ___ describes the decrease in total revenue that occurs because the increase in quantity requires lower price.

A

Price effect

36
Q

A monopoly will produce the quantity at which…

A

MR = MC

37
Q

What are the five possible public policy responses to a monopoly?

A
  • Antitrust laws
  • Public ownership
  • Regulation (price controls)
  • Vertical splits: Split an industry “vertically” and introduce competition into parts of it.
  • No response
38
Q

In a competitive market, MR _ P, whereas in a monopoly, MR _ P.

A
  • Competitive: MR = P
  • Monopoly: MR < P
39
Q

___ is the practice of charging customers different prices for the same good.

A

Price discrimination

40
Q

The U.S. government has used the ___ and ___ Antitrust Acts to prevent monopolies from forming in the first place.

A

Sherman and Clayton

41
Q

Name the three main components of an Oligopoly.

A
  • Only a few firms
  • Strategic interactions between firm and rivals have major impact on success
  • Some barriers to entry
42
Q

A(n) ___ market is a market with many firms that sell goods and services that are similar, but slightly different.

A

Monopolistically competitive

43
Q

___ is the process of offering goods that are similar to competitors’ products but more attractive in some ways.

A

Product differentiation

44
Q

A monopolistically competitive firm is a price ___ (taker, maker)

A

maker

45
Q

In a monopolistically competitive firm, MR _ P.

A

<

46
Q

In a monopolistically competitive market, firms sell at P _ ATC.

A

=

47
Q

___ is when firms know more about true quality of products than consumers.

A

Asymmetric information

48
Q

A(n) ___ is a combination of characteristics that identify and differentiate a particular company or product.

A

Brand

49
Q

In an oligopoly, when the quantity effect outweighs the price effect, …

A

An increase in output will raise profit levels.

50
Q

In an oligopoly, when the price effect outweighs the quantity effect, …

A

The firm has no incentive to increase output

51
Q

___ is the act of working together to make decisions about price and quantity.

A

Collusion

52
Q

The ___ is the strategy that is always best for a player to choose, regardless of what other players do.

A

dominant strategy

53
Q

The ___ is the result when all players in a game have a different strategy.

A

Nash Equilbrium

When reached, no one has an incentive to break the equlibrium by changing their strategy.

54
Q

A(n) ___ is a number of firms that collude to make collective production decisions about quantities or prices.

A

Cartel

Ex: OPEC

55
Q

The ___ are the ingredients that go into making any good or service.

A

Factors of Production

Land, Labor, Capital

56
Q

___ are manufactured goods that are used to produce new goods.

A

Capital

57
Q

The demand for factors of production is referred to as…

A

derived demand

58
Q

The ___ is the increase in output that is generated by an additional unit of input.

A

Marginal product

59
Q

How is Value of Marginal Product (VMP), also referred to as Marginal Revenue Product (MRP), calculated?

A

Marginal product x Price of output

60
Q

A competitive firm should keep hiring workers as long as…

A

VMP >= MC of worker (wage)

61
Q

The ___ describes the increase in labor supply in response to higher wage that can be earned for each hour of work.

A

Price effect

62
Q

The ___ describes the decrease in labor supply due to greater demand for leisure caused by higher income.

A

Income effect

63
Q

Any event that increases VMP/MRP will ___ demand and vice versa.

A

increase

64
Q

If output prices go down, what happens to MRP and labor demand?

A

They decrease.

65
Q

What two factors determine labor supply?

A

Number of workers and opportunity cost of providing their labor.

66
Q

Changes that ___ opportunity cost of labor or ___ number of workers will decrease labor supply.

A

increase; decrease

67
Q

___ is the set of skills, knowledge, experience, and talent that determines the productivity of workers.

A

Human capital

68
Q

___ is what a producer pays to use a factor of production for a certain period or task.

A

Rental Price

69
Q

___ is what a producer pays to gain permanent ownership of a factor of production.

A

Purchase price

70
Q

___ are the gains that workers and owners of capital receive from supplying their labor/machinery in factor markets.

A

Economic Rent.

= Rental price of factor of production minus cost of supplying it.

71
Q

The ____ is the pattern of income that people derive from different factors of production.

A

Factor Distribution of Income

72
Q

A(n) ___ is when employers voluntarily choose to pay workers more, to increase their productivity.

A

Efficiency wage

73
Q

A(n) ___ is a market in which there is only one buyer but many sellers.

A

Monopsony

The employer can push wages lower than the competition level.

74
Q

In a perfectly competitive market, price takers exist because…

A. There are few sellers and many buyers

B. There are few sellers and buyers

C. There are many buyers and sellers

D. There are few buyers and many sellers

A

C

75
Q

In the long run, a profit-maximizing monopolistically competitive firm sells at a price that is:

A. Equal to ATC, but lower than MC

B. Equal to MC and MR

C. Equal to demand, but higher than ATC and MC

D. Equal to ATC. but higher than MC

A

D

76
Q

For a monopolist, average revenues:

A. Are always zero at the profit-maximizing quantity

B. Are maximized when total revenues are maximized

C. Are always equal to price

D. Equal price only at the profit maximizing quantity

A

C

77
Q

For a monopolist, at the profit-maximizing level of output:

A. MR > average revenue

B. Average revenue > P

C. P > MR

D. None of the above

A

C

Econ 2001.01 (13 decks)

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