Competency 3 OA Review C211 Econ
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Questions and Answers

What can be concluded if implicit costs are positive?

  • Explicit costs must also be positive.
  • Accounting profit is negative.
  • Economic profit is negative.
  • Economic profit is positive. (correct)

    • How does accounting profit relate to economic profit if explicit costs are positive?

  • Accounting profit is independent of economic profit.
  • Accounting profit is less than economic profit.
  • Accounting profit is equal to economic profit. (correct)
  • Accounting profit is greater than economic profit.

    • Which statement is true regarding economic profit if explicit costs are considered?

  • Economic profit is always greater than accounting profit.
  • Economic profit can be negative.
  • Economic profit is less than explicitly calculated profit.
  • Economic profit exceeds accounting profit. (correct)

    • If only explicit costs are accounted for, what happens to the measurement of economic profit?

    <p>Economic profit is calculated the same as accounting profit.</p> Signup and view all the answers

    What does a greater economic profit than accounting profit imply?

    <p>Implicit costs are accounted for.</p> Signup and view all the answers

    What happens to inputs that are fixed in the short run?

    <p>They become variable.</p> Signup and view all the answers

    Which type of inputs are rarely used according to the content?

    <p>C.variable inputs.</p> Signup and view all the answers

    What is true about D.inputs that were fixed in the short run?

    <p>They remain fixed.</p> Signup and view all the answers

    What can be inferred about the nature of variable inputs?

    <p>They can be easily changed over time.</p> Signup and view all the answers

    How are inputs that were fixed in the short run characterized?

    <p>They shift to variable status immediately.</p> Signup and view all the answers

    Why might fixed inputs be important in short term production?

    <p>They ensure production remains consistent.</p> Signup and view all the answers

    What is a key characteristic of variable inputs?

    <p>They can adjust based on changes in demand.</p> Signup and view all the answers

    In the context provided, how do variable inputs differ from fixed inputs?

    <p>Variable inputs can change over time whereas fixed inputs do not.</p> Signup and view all the answers

    What preference does individual c express regarding bundle E?

    <p>c prefers bundle E because it lies on a higher indifference curve.</p> Signup and view all the answers

    In perfect and monopolistic competition, what is true about each firm?

    <p>Each firm has many competitors.</p> Signup and view all the answers

    What is a characteristic of demand faced by firms in perfect competition?

    <p>Firms face a perfectly elastic demand curve.</p> Signup and view all the answers

    Why might an individual choose bundle E over another bundle with fewer donuts?

    <p>More donuts typically equate to greater satisfaction.</p> Signup and view all the answers

    What distinguishes a monopolistically competitive firm from a perfectly competitive firm?

    <p>Monopolistically competitive firms have more price-setting power.</p> Signup and view all the answers

    How does product differentiation function in monopolistic competition?

    <p>It creates a unique brand identity valued by consumers.</p> Signup and view all the answers

    Which statement accurately describes the role of many competitors in both market structures?

    <p>It drives down prices due to competitive pressures.</p> Signup and view all the answers

    What is a potential misconception about firms in perfect competition?

    <p>All firms can charge any price they want.</p> Signup and view all the answers

    What limitation does a factory face when operating in the short run?

    <p>It cannot adjust the quantity of fixed inputs.</p> Signup and view all the answers

    In the context of production, how do total cost and variable cost typically relate to each other?

    <p>Total cost generally exceeds variable cost.</p> Signup and view all the answers

    Which of the following is true regarding the impact of mergers on competition?

    <p>Mergers can be allowed even if they decrease competition.</p> Signup and view all the answers

    What is often a characteristic of industries with higher fixed inputs?

    <p>They tend to have higher total costs.</p> Signup and view all the answers

    When a factory cannot adjust fixed inputs, which term best describes the situation?

    <p>Short-run production</p> Signup and view all the answers

    What can be said about the costs associated with fixed inputs in the short run?

    <p>They remain constant regardless of output.</p> Signup and view all the answers

    In which of these scenarios would a merger be deemed acceptable under competition regulations?

    <p>When it decreases competition regardless of production costs.</p> Signup and view all the answers

    Which of the following typically distinguishes total cost from variable cost?

    <p>Total cost includes fixed costs.</p> Signup and view all the answers

    What happens to a competitive firm's revenue if it sells an additional unit of output?

    <p>It increases by an amount less than the price.</p> Signup and view all the answers

    In the context of a competitive firm, how is the revenue generated from selling an additional unit characterized?

    <p>It is equal to the marginal cost of production.</p> Signup and view all the answers

    Which statement best describes a competitive firm's pricing strategy when increasing output?

    <p>Price decreases with each additional unit sold.</p> Signup and view all the answers

    How does revenue change as output increases for a competitive firm?

    <p>It increases but at a decreasing rate.</p> Signup and view all the answers

    What is the relationship between the price a competitive firm charges and the revenue gained from selling an additional unit?

    <p>Revenue is always less than the price charged.</p> Signup and view all the answers

    What can be said about a competitive firm's revenue behavior as it approaches maximizing output?

    <p>Revenue tends to plateau or slow down.</p> Signup and view all the answers

    When a competitive firm increases its output, what aspect of revenue is critical to understand?

    <p>Marginal revenue is critical to decision making.</p> Signup and view all the answers

    Which of the following correctly describes how competitive firms determine pricing for additional output?

    <p>They consider both marginal cost and market demand.</p> Signup and view all the answers

    What determines the price in a competitive market?

    <p>Demand determining the price of output</p> Signup and view all the answers

    In an oligopoly, how is output typically managed?

    <p>A cartel sets production quotas for all firms</p> Signup and view all the answers

    What is a characteristic of monopolistically competitive firms?

    <p>There are many firms competing with differentiated products</p> Signup and view all the answers

    How does a monopolistically competitive firm set its output?

    <p>Determined by the demand for its product</p> Signup and view all the answers

    Which statement is true regarding price and output in different market structures?

    <p>Price in monopolistic competition is flexible based on consumer demand</p> Signup and view all the answers

    What explains the price-setting behavior of firms in a cartel?

    <p>Firms agree to set the price to maximize their joint profits</p> Signup and view all the answers

    In which scenario do firms have the least control over pricing?

    <p>In a perfectly competitive market</p> Signup and view all the answers

    What factor primarily influences a monopolist's pricing strategy?

    <p>The demand for its unique product</p> Signup and view all the answers

    Study Notes

    Profit Maximization

    • Profit is maximized where marginal revenue (MR) equals marginal cost (MC).

    Monopoly

    • A monopolist faces a downward-sloping demand curve.
    • Average revenue is less than marginal revenue.
    • Marginal revenue is less than the price of the product.
    • A monopoly can earn positive profits because it can maintain a price such that total revenues exceed total costs.
    • In a competitive market, firms minimize total costs. Firms have no price-setting power, and government antitrust laws regulate competition. Producers sell nearly identical products.

    Competitive Market Characteristics

    • Firms minimize total costs.
    • Firms do not have price-setting power.
    • Government antitrust laws regulate competition.
    • Producers sell nearly identical products.

    Price Discrimination

    • Price discrimination adds to social welfare in the form of increased total surplus. It decreases consumer surplus and increases producer surplus.

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    Description

    This quiz covers critical concepts in economics focused on profit maximization, monopoly characteristics, competitive market dynamics, and price discrimination. Test your understanding of how these elements interact and impact market structures. Ideal for economics students and enthusiasts alike.

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