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Econ Exam 2

Question	Answer
In a market with perfectly competitive firms, the market demand curve is usually ______ and the demand curve facing each individual firm ______	downward sloping; horizontal
For a perfectly competitive firm, marginal revenue equals average revenue because the	firm's demand curve is horizontal
The competitive firm has no influence over price because	its output is so insignificant relative to the market as a whole
at a perfectly competitive firm's short run equilibrium level of output	P=MR=MC
A firm in short run equilibrium always earns positive profits if	P>AC
A firm earns a profit of exactly zero at its optimal output level in the short run only if	P=AC
A perfectly competitive firm should continue to expand output until	marginal revenue equals marginal costs
The perfectly competitive firm's short run shutdown rule is to shut down immediately if	TR
The firm will shut down in the short run if	P
if a firm shuts down int the short run, its losses are equal to	total fixed costs
The short run supply curve of the perfectly competitive firm is the firm's	MC curve above the minimum point on the AVC curve
In the short run, if the price falls below minimum AVC, the quantity supplied by the firm will be	zero
The short run supply curve of the perfectly competitive industry is found by summing the	MC curves about the AVC of the individual firms in the industry
Firms entering a perfectly competitive industry will cause the price of a product to	fall
perfectly competitive firms ______ earn zero economic profit in long run equilibrium because _____	Always; forms enter whenever their economic profit is positive and exit whenever it is negative, so in long run equilibrium economic profit must always be 0.
a perfectly competitive firm would be willing to remain in the industry in the long run at zero economic profit because	revenue is equal to all costs, including the opportunity cost of capital and labor.
A long run supply curve of an industry equals the industry's	long run average cost curve
A perfectly competitive industry in long run equilibrium is describes as efficient because firms	produce at the low point on their average cost curve
A pure monopoly is	only one supplier, with no close substitutes, and exists when entry and survival of potential competitors is extremely unlikely
What are examples of entry barriers	legal restrictions, patents, control of scarce resources or inputs
Sunk costs mean	that the costs involved cannot be recouped for a considerable period of time.
A natural monopoly is defined as an industry in which one firm	can produce the entire industry output at a lower average cost than a larger number of firms could.
The marginal revenue curve for a monopolist is	always below the demand curve
A monopoly firms supply curve	does not exist
Compared to perfect competition, monopoly	provides less output, charges higher prices, and results on higher costs.
Providing medical serves for smaller fees to the poor than the rich is an example of	price discrimination
A price discriminating firm will always maximize profit by following the condition that	MRa=MRb=MC
Forms that engage in price discrimination	will earn more profit than those who do not discriminate
Monopolistic competition is characterized by	many firms selling slightly different products
Monopolistic competitors and perfect competitors are like in	zero economic profit in the long run
Monopolistic competition is different from perfect competition in that every manufacturer	has a small monopoly, and differentiates the product
The demand curve for a monopolistic competitor slopes down because	there are close by not perfect substitutes for the product
the force that leads to zero economic profits for monopolistically competitive firms in the long run is	entry by new firms
what is the long run effect on the demand cure of a monopolistically competitive firm when more firms enter the market?	demand curve shifts to the left
A firm in a monopolistically competitive market makes no economic profit in the long run because	long run price will be equal to long run average cost
to maximize profit a monopolistically competitive form produces at the output level at which	MR=MC
A monopolistically competitive firm in the long run will have a demand curve tangent to what	its AC curve
According to the excess capacity theorem, if every firm under monopolistic competition expanded its output then what would happen to its cost per unit of output	it would dec.
What is an oligopoly	dominated by a few sellers
The difficulty in analyzing oligopolistic behavior arises from the	interdependent nature of oligopolistic decisions
If a firm decides to ignore the reactions of its rivals to its policies, the appropriate model to analyze its behavior is	monopoly
in an economists view a cartel usually offers to society	none of the cost benefits of a large scale production and all of the allocative inefficiencies of monopoly
cartels usually succumb to divisive forces caused by	members cheating by giving secret discounts
When one firm raises its prices and other firms fallow this is called.	price leadership
a sales maximizing firm produces the output level at which	MR=0
according to the kinked demand curve model an oligopolist may face	more elastic demand if she raises her price than if she lowers her price
the theory of the kinked demand curve is used to explain	sticky prices in oligopolies
when firms are faced with making strategic choices in order to maximize profit, economists typically use	game theory to model behavior
the prisoners dilemma provides insights into the	difficulty of maintaining cooperation
the likely outcome of the standard prisoners dilemma is that	both confess
in a game the dominant strategy is by definition	the best strategy for a player to follow, regardless of the strategies followed by other players.
what is the reason that players can solve the prisoners dilemma and reach the most profitable outome	the players have played the game many times

Created by: dtr24

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