unit 8 for economic test

Question 1

what is a monopoly

Answer 1

a monopoly is where just one seller that determines the quantity supplied and the market-clearing price

Question 2

what is an oligopoly

Answer 2

a few firms, the decisions of each influencing the payoffs of the others

Question 3

when is a firm a market price taker

Answer 3

a firm in a perfectly competitive market knows it has no influence over the market price for its product

Question 4

each firm is a profit maximiser and in a short run it chooses its output level by?

Answer 4

finding the maximum profit where output is greater than 0

Question 5

in order to maximise profits, firms should choose the level of output, y, where market price equals the marginal cost

Answer 5

.

Question 6

in the short run p=mc

Answer 6

.

Question 7

what does shutdown mean

what does exit mean

Answer 7

they are both different things

shutdown means producing no output(but the firm is still in the industry and suffers its fixed cost)

exiting means leaving the industry, which the firm can do only in the long run

Question 8

in the short run is the number of firms temporarily fixed ?

Answer 8

yes

Question 9

in the short run, neither exit nor entry can occur.

Answer 9

.

Question 10

in the long run every firm now in the industry is free to exit and firms now outside the industry are free to enter.

Answer 10

.

Question 11

what is an extrernality

Answer 11

an externality is a cost or a benefit imposed upon someone by actions taken by others

Question 12

give two examples of a positive externality

Answer 12

• a scientific advance
• improved driving habits that reduce accident risks

Question 13

give two examples of a negative externality

Answer 13

• air pollution (fossil fuels)
• noise pollution (near airports etc)

Question 14

practice question example of externalities now gen up

Answer 14

.

Question 15

practice long run mc graphs where profits are less equal and greater than 0

Answer 15

.

Question 16

Ac= mC

Answer 16

.