ECON 211 Final sample exam mistakes

What effect do new firms entering a competitive market have on market price?

They lower the market price.

What happens at the equilibrium price for buyers and sellers?

Buyers can buy all they want and sellers can sell all they want at that price.

How does the willingness and ability of a firm to increase quantity supplied relate to time period?

A firm is more willing and able to increase quantity supplied when the time period is long.

What is producer surplus?

The amount a seller is paid minus the cost of production.

What is the effect on consumer surplus when a nation allows international trade?

There is an increase in consumer surplus.

Can economic profit exceed accounting profit?

No, economic profit will never exceed accounting profit.

What occurs when MC equals ATC?

ATC is minimized.

What does it mean when MC is greater than ATC?

ATC is rising.

When do economies of scale occur?

When a firm’s LRATC is decreasing as output increases.

What is a characteristic of a natural monopoly?

ATC declines over large regions of output.

How does MR for a monopolist compare to price versus a competitive market?

For a monopolist, MR is less than price; for perfect competition, MR equals P.

What happens to MR when the price effect is greater than the output effect for a monopolist?

MR is negative.

At the profit-maximizing quantity of output for a monopolistically competitive firm, what is the relationship between price and MC?

Price exceeds MC.

What is the long-term outcome if the price is smaller than ATC for a firm?

The firm will exit the market.

When does a profit-maximizing monopolistically competitive firm equalize MR and MC?

In both the short run and long run.

Which types of market structures charge a price that exceeds MC?

Only a monopoly and monopolistic competition.

What is the result of perfect price discrimination on deadweight loss (DWL)?

It eliminates DWL.

How is price constrained when a firm operates under monopoly?

Its price is constrained by demand.

What happens to price and quantity if duopolists stop colluding?

The price would fall, and quantity would rise.

What additional information do extensive form games include compared to normal form games?

The order of play.