Econ Test 4

What is marginal revenue?

Change in total revenue (TR) / change in quantity (Q)

If the technology for producing a good enables one firm to meet the entire market demand at a lower price than two or more firms could, then that firm has a _________________.

natural monopoly

The demand curve for the product of a firm in a competitive market is ____________, and the demand curve for the product of a monopolist is ____________.

perfectly elastic, downward sloping

3

$9

Can a monopoly earn long-run economic profits?

Yes

$90

How do you identify the profit-maximizing output level for a monopolist on a graph?

Find where marginal cost (MC) meets marginal revenue (MR)

If the profit maximizing output level is below _____________ then it will suffer a loss.

the average total cost (ATC) OR where price=ATC

The environment provides services to people and it is limited (scarce)

Economic premise

someone who doesn’t contribute at all to the benefits they receive as part of the community

Free-rider

Legally or socially recognized rules that define who can use, control, and transfer “property” and under what conditions.

Property rights

What describes a barrier to entry?

Anything that protects a firm from the arrival of new competitors

The wine industry is characterized by thousands of vineyards selling a large variety of wines (Chardonnay, Sauvignon blanc, Pinot grigio  Merlot, Cabernet sauvignon, Pinot noir, etc, each based on different varieties of grapes). Even within the same varieties, wines will differ subtly in taste based on soils, climate, age, and the fermenting process. The wine industry could best be characterized as

monopolistically competitive

How do you calculate the Herfindahl–Hirschman Index of a market?

Add up the squared percentage numbers of the firm in the market

In the Herfindahl–Hirschman Index, a number less than 1000 is considered ____________, between 1000 and 1800 to be ______________, and higher than 1800 to be _______________.

competitive, moderately concentrated, highly concentrated