Micro 2

Front 1

Which of the following represents a long-run adjustment?

Back 1

construction of a new assembly plant by a car manufacturer.

Front 2

The short-run average total cost (ATC) curve of a firm will tend to be U-shaped because

Back 2

at low levels of output, AFC will be high, while at high levels of output, MC will be high as the result of diminishing returns.

Front 3

A downward-sloping portion of a long-run average total cost curve is the result of

Back 3

economies of scale.

Front 4

An activity known as shirking is least likely to occur when

Back 4

the earnings of workers are closely tied to the worker's output.

Front 5

Under what conditons is an automobile company likely to buy an input from another firm (as they do with tires), rather than produce the input themselves (as they typically do with engines)?

Back 5

when it is relatively easy to measure the quantity and the quanlity of the input

Front 6

A disadvantage of team production compared to contracting out is that

Back 6

the problem of shirking must be more carefully addressed with team production.

Front 7

Interest foregone on financial capital invested in a firm represents an economic cost

Back 7

because funds invested in the firm could be earning interest elsewhere.

Front 8

The difference between a firm's total revenue and total costs when all explicit and implicit costs are included is the firm's

Back 8

economic profit

Front 9

When an economist says a firm is earning zero economic profit, this implies that the firm

Back 9

is earning as high a rate of return now as could be earned in other industries.

Front 10

Ben quit his job as an economics professor to become a golf professional. He gave up his $30,000 salary and invested his retirement fund of $50,000 (which was earning 10 percent interest) in this venture. After all expenses, his net winnings were $35,000. Ben's economic profits were

Back 10

zero

Front 11

During the short-run period of the production process, a firm will be

Back 11

able to vary some of its factors of production.

Front 12

Paul's plumbing is a small business that employs 12 people. Which of the following is most likely to be a fixed cost for Paul's Plumbing?

Back 12

the tax and insurance payments on the property owned by the firm

Front 13

Average fixed cost

Back 13

will always decrease as output expands.

Front 14

If a firm produces nothing, which of the following costs will be zero?

Back 14

variable cost

Front 15

The relationship between average and marginal variables can be stated as follows: if the marginal is greater than the average,

Back 15

The average is increasing

Front 16

If two workers can produce 22 units of output, and the addition of a third worker increases output to 30 units, the marginal product of the third worker is

Back 16

8 units

Front 17

If a firm doubles all of its inputs and its output triples, it is said to be experiencing

Back 17

economies of scale

Front 18

If the government levies a $1 excise tax on each unit of a good sold, what happens to the producer's cost curves?

Back 18

The average total cost and marginal cost curves will shift up by the amount of the tax.

Front 19

In a competitive price searcher market, the firms will

Back 19

be able to choose their price, and the entry barriers

Front 20

a profit maximizing price-searcher will expand output to the point where

Back 20

marginal revenue equals marginal cost

Front 21

competitive price searcher markets are common in

Back 21

retail selling

Front 22

in a competitive price searcher market, firms will set price

Back 22

above marginal cost

Front 23

When a frim exits a competitive price searcher market, the individual demand curves faced by all remaining firms in that market will

Back 23

shift to the right

Front 24

A price-taker firm can sell additional units of output without having to lower price,

Back 24

while a price-searcher firm must lower its price in order to sell additional units.

Front 25

the best example of a firm operating in a competitive price searcher market?

Back 25

Border Grill, a local restaurant.

Front 26

Price Quantity

$8 5

$7 6

$6 7

Suppose a price searcher firm faces the demand schedule illustrated above. What is the firm's marginal revenue from selling the seventh unit?

Back 26

0

Front 27

In the long run, neither price takers nor competitive price searchers will earn economic profits because

Back 27

competition between firms will force prices down to the level of production costs.

Front 28

When economic losses are present in a market, firms will tend to

Back 28

exit from the market.

Front 29

Many small U.S. cities are served by only one or two airlines. If a price increase in these markets allows other airlines to quickly and easily enter the market and compete, economists would call these markets

Back 29

contestable markets

Front 30

An important varialble that is typicallly left out of economic models is

Back 30

entrepreneurship.

Front 31

Part of the entrepreneurial process in a competitive market economy involves

Back 31

choosing the best structure, size, scope and production for the firm to produce a new product.

Front 32

Some economists have argued that competitive price searcher markets are inefficient because

Back 32

1. they do not produce at minimum of average total cost
2.price exceeds marginal cost.
3.excessive advertising is encouraged

Front 33

an advantage of competitive price searcher markets over price-taker markets is

Back 33

greater product variety and convenience

Front 34

firms that engage in price discrimination

Back 34

will earn more profit than those that do not discriminate

Front 35

price discrimination occurs when

Back 35

a seller charges different prices to different customers for the same product or service.

Front 36

The producer being a pure monopolist

Back 36

is not a necessary condition for effective price discrimination

Front 37

A firm that uses price discrimination to enhance its revenues will

Back 37

charge a lower price to consumers with a more elastic demand for the firm's product.

Front 38

best example of price discrimination

Back 38

couponing
senior discounts
student discounts

Front 39

sellers who must take the market price in order to sell their product.

Back 39

price takers

Front 40

because each price takers output is small relative to the total market,

Back 40

price takers can sell all their output at the market price, but they are unable to sell any of their output at a price higher than the market price

Front 41

In a price taker market, the firms all produce

Back 41

identical products

Front 42

In a price taker market, each seller is

Back 42

small relative to the total market. thus the output of any single firm has little or no effect on the market price.

Front 43

In a price taker market, each firm can sell all its output at the market price but

Back 43

cannot sell any of its output at a higher price

Front 44

firms that face a downward sloping demand curve for their product.

Back 44

price searchers

Front 45

price searchers-the amount the firm is able to sell is

Back 45

inversely related to the price it charges

Front 46

Rivalry or competitiveness between or among parties to deliver a better deal to buyers in terms of quality, price, and product information

Back 46

Competition as a dynamic process

Front 47

A market structure characterized by a large number of small firms producing an identical product in an industry (market area) that permits complete freedom of entry and exit

Back 47

Pure competition

Front 48

Obstacles that limit the freedom of potential rivals to enter and compete in an industry or market

Back 48

barrier to entry

Front 49

Price taker markets and purely competitive markets are really

Back 49

alternative names for the same thing

Front 50

#1 characteristic for a firm in a price market to be a price taker

Back 50

all the firms in the market are producing an identical product