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Micro- Midterm 2

Microeconomics Midterm 2- Part 2/2

QuestionAnswer
If a firm increases their inputs by 9% and outputs increase by 5%, the firm is experiencing Decreasing returns to scale
What is true for a purely competitive firm in short-run equilibrium? The firm's marginal revenue is equal to its marginal cost
A purely competitive firm will be willing to produce even at a loss in the short run, as long as: The negative profits are smaller than its total fixed costs
If a purely competitive firm is currently facing a situation where the price of its product is lower than the AVC, but it believes that the market demand for its product will increase soon, then: The firm will shut down in the short run, but stay in the industry in the long run if it expects the product price to rise high enough soon
In long-run equilibrium, a purely competitive firm will operate where price is: Equal to MR, MC, and min ATC
What is true when a purely competitive market is at its long-run equilibrium? Total surplus is maximized
One defining characteristic of pure monopoly is that: The monopolist produces a product with no close substitutes
If a monopolist is producing at a level where marginal revenue is positive, the firm: Is operating on the elastic portion of its demand curve
Which phrase would be most characteristic of a pure monopoly? Sole seller
At the profit-maximizing level of output for a monopolist: Price is greater than marginal cost
Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit maximizing monopoly is determined by: Marginal cost= Marginal revenue
Allocative efficiency happens in a monopoly because at the profit-maximizing output level: P>MC
Created by: joebouhadana