STUDY GUIDE QUIZ 02 Econ 210

In economics, a firm that faces no competitors is referred to as _____________.

a monopoly

__________________________ arises where many firms are competing in a market to sell similar but differentiated products.

Monopolistic competition

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.

fixed costs; do not change

______________ include all of the costs of production that increase with the quantity produced.

Variable costs

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.

Diminishing marginal returns

In order to determine ____________, the firm's total costs must be divided by the quantity of its output.

average cost

In order to determine the average variable cost, the firm's variable costs are divided by _______________________.

the quantity of output

The term _____________ is used to describe the additional cost of producing one more unit.

marginal cost

The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.

economies of scale

In microeconomics, the term _____________________ is synonymous with economies of scale.

increasing returns to scale

The term 'constant returns to scale' describes a situation where _____________.

expanding all inputs does not change the average cost of production.

In microeconomics, the term ___________________ is synonymous with decreasing returns of scale.

diseconomies of scale

If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.

decreasing returns to scale

In the US economy, nearly half of all the workers employed by private firms work at _____________.

26,000 firms with fewer than 100 employees.

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.

Total revenue

___________ include all spending on labor, machinery, tools, and supplies purchased from other firms.

Total costs

Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees?

63%

According to the definition of profit, if a profit-maximizing firm will always attempt to produce its desired level of output at the lowest possible cost, then it will __________.

do so regardless of what type of competition exists in a market.

The ______________ of all firms can be broken down into some common underlying patterns.

cost structure

The term _______________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.

price taker

__________ refers to the additional revenue gained from selling one more unit.

Marginal revenue

If a firm's revenues do not cover its average variable costs, then that firm has reached its ________________.

shutdown point

In economics, the term 'shutdown point' refers to the point where the _____________.

average variable cost curve crosses the total revenue curve.

A manufacturer would likely make an ___________________ in a market following the long-run process of beginning and expanding production in response to.

entry; an incentive to add to profits

When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is _____________.

preparing to exit operations.

An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________.

economic profit; including its opportunity costs.

Economic profit can be derived from calculating total revenues minus all of the firm’s costs, _____________.

including its opportunity costs.

A perfectly competitive industry is _____________.

a hypothetical extreme.

The fact that a consumer is not required to buy the goods that a given firm produces, as well as the fact that the consumer might want the goods a firm produces, but may choose to buy from other firms instead _______________.

are two stark realities any business firm must recognize.

It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price, ___________.

could likely result in a notable loss of sales to competitors.

If a perfectly competitive firm is a price taker, then _____________.

pressure from competing firms will force acceptance of the prevailing market price.

If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, ____________ will most likely influence the decisions of purchasers.

price of competing products

In the _______________, the perfectly competitive firm will seek out _______________.

short run; the quantity of output where profits are highest.

Idaho farmers can sell as large a quantity of their potato crop as they wish, _____________.

provided each is willing to accept the prevailing market price.

In the _____________, the perfectly competitive firm will react to profits by __________________.

long run; increasing its production.

Firms operating in a market situation that creates ______________________ sell their product in a market with other firms who produce identical or extremely similar products.

perfect competition.

Why are some producers forced to sell their products at the prevailing market price?

they are very small players in the overall market.

In the ________________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where __________________________.

short run; losses are smallest.

In the ______________, the perfectly competitive firm will react to losses by ______________________.

short run; reducing production or shutting down.

The largest cattle rancher in a given region will be unable to have a _____________ sufficient numbers of smaller cattle ranchers provide sources of competition.

monopoly.

Which of the following is most unlikely to present a barrier to entry into a market?

market forces.

Deregulation occurs when a government eliminates or scales back rules relating to all but one of the following. Which one is it?

natural monopoly.

Government _____________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for _______________.

patent; a limited time.

The US government has registered ________ on behalf of business firms to protect a particularly distinct element each has selected for its ability to aid consumers to easily _____________.

800,000 trademarks; identify the source of goods.

The form of legal protection intended to prevent reproduction of original works is referred to as _________ law.

copyright.

In the business world, a __________ is recognized as a legally acceptable way for any business to keep knowledge of its particular methods of production from being known by competing firms.

trade secret.

Intellectual property law is a body of law that includes _____________.

trademark, patent and trade secret legislation.

A ___________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve.

natural monopoly.

The use of sharp, temporary price cuts as a form of ________ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers.

predatory pricing.

Which of the following is most likely to be a monopoly?

local electricity distributor.

Which of the following will present the least amount of concern to a firm that has a monopoly over a particular industry?

the competitive actions of other business firms.

A firm that holds a monopoly position in the marketplace is __________.

a price maker.

Occasionally, ________________ may lead to pure monopoly; in other market conditions, they may limit competition ______________________.

barriers to entry; to a natural monopoly.

If the North American newsprint paper market has barriers to entry, then _____________.

entry will be blocked even if firms are earning high profits.

A natural monopoly occurs when the quantity demanded is ____________ the minimum quantity it takes to be at the bottom of the long-run average cost curve.

less than.

By 2007, US market deregulation has proven to be most toxic to the overall health of the US economy in the _________________.

banking sector.

If it was possible for one company to gain ownership control all of the uranium processing plants in the US, then _____________.

that firm could set up barriers to entry to discourage competition.

In the United States, a pharmaceutical company's exclusive patent rights last for _____________.

20 years.

The US laws dealing with original works of authorship allow the US Copyright Office to enforce protection for all but one of the following. Which one is it?

ancient Bible texts.

Copyright protection legislation provides protection for original works _____________.

during the author's life plus 70 years.

Roughly speaking, patent law covers ____________ and ___________ law protects an author's original books.

original inventive creations; copyright.

A monopolist is able to maximize its profits by _____________.

producing output where MR = MC and charging a price along the demand curve.

In the competitive market for figure skate blades, manufacturers offer an array of products that are _____________.

virtually identical on the competition spectrum.

_________________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.

An oligopoly.

____________ arises when firms act together to reduce output and keep prices high.

Collusion.

A _______________ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price.

cartel.

The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is _____________.

game theory.

If the CEO of I'MaBigBank is playing prisoner's dilemma then, from his perspective, the gains to be had from cooperation are _____________.

larger than the rewards from pursuing self-interest.

The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to _____________.

match price increases, but not price cuts.

Perfect competition and monopoly stand at ___________ of the spectrum of competition.

opposite ends.

If a perfectly competitive market involves many firms selling identical products, then, in the face of such competition, _____________.

each of these firms must act as a price-taker.

Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call _______________.

monopolistic competition.

As the name monopolistic competition implies, a firm’s decisions in this setting will in certain ways resemble ______________ and in other ways resemble ________________.

monopoly; perfect competition.

If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms, _____________.

they will be unable to earn higher-than-normal profits in the long run.

In the highly competitive setting in which oligopoly firms operate, which of the following are considered to be typical temptations each may face?

to cooperate to act as a single monopoly and all of the above.

Oligopoly firms acting individually may seek to gain profits _______________.

by having a mini-monopoly or through tough competition.

In a monopolistic competitive industry, firms can try to differentiate their products by _____________.

enhancing product’s physical aspects and all of the above.

Which of the following would be classified as a differentiated product produced by a monopolistic competitor?

Channel No. 5.

Monopolistic competitors in the food industry will often include a recyclable symbol on packaging used for their product as a means to _____________.

differentiate their product.

Product differentiation may occur in ____________ because ______________ created strong preferences for certain brands.

imperfect competition; advertising and consumer habits.

What role can advertising play with respect to differentiated products?

shapes perceived demand for a price taker.

Which of the following best identifies what the concept of differentiated products is closely related to?

the degree of product variety that is available.

The demand curve as perceived by a perfectly competitive firm is _______________.

flat.

The shape of the perceived demand curve for a perfectly competitive firm reflects that firm's ability to _____________.

sell any quantity it wishes at the prevailing market price.

If a perfectly competitive firm raises its price, the quantity demanded of its product ____________.

falls to zero.

If a monopoly or a monopolistic competitor raises their prices, the quantity demanded ____________.

will decline.

The perceived demand for a monopolistic competitor _____________.

takes competitors into account.