Perfect Competition and Costs

• In perfect competition, the market demand curve slopes downward, while demand for an individual seller's product is perfectly elastic.
• When new technologies are substitutes for workers, demand for workers decreases, resulting in a decrease in the equilibrium wage.
• If the marginal cost curve is below the average variable cost curve, average variable cost is decreasing.
• If production displays diseconomies of scale, the long-run average cost curve slopes upward.
• Rent that could have been earned on a building owned and used by the firm is an implicit cost of production.
• If MR > MC for the last unit of a good produced by a perfectly competitive firm, then producing it added more to total revenue than it added to total cost.
• A constant cost perfectly competitive market exists in long-run equilibrium
• There are 1,000 firms, each producing 400 units of output
• The current price is $60.
• A sudden increase in demand causes the price to rise to $64
• The average total cost of production will be the same as before the price increase
• If the supply of another input decreases, the marginal product of labor can increase, increasing the demand for labor.
• Price elasticity of demand measures the percentage change in quantity demanded due to a percentage change in price.
• A minimum wage set above the equilibrium wage decreases the quantity of labor demanded and increases the quantity of labor supplied.

Positive Production Externalities

• If positive production externalities are present in a market, the marginal social cost of production is lower than the marginal private cost.
• An increase in the output level does not reduce profit
• Cost efficiency: resources are allocated such that goods can be produced at their lowest possible average cost.
• In a perfectly competitive market, when demand increases, quantity supplied increases in the short run, and supply increases in the long run.
• Perfect competition produces a socially optimal allocation of resources in the long run because marginal cost equals price.
• The market demand curve shows the marginal benefit that consumers place on each unit of the product.
• If an increase in income decreases the demand for a product, the product is inferior and the income elasticity of demand is negative.
• An economic agent internalizes an externality when they account for the full costs and benefits of their actions.
• A natural monopoly is characterized by a decreasing average-cost curve extending beyond the market's size.
• The demand for labor is derived from the demand for the goods and services the labor helps produce.
• Diseconomies of scale occur mainly because of the difficulties involved in managing and coordinating a large business enterprise.
• The law of diminishing marginal returns explains why the average total cost and marginal cost curves are U-shaped in the short run.
• To maximize profit, the firm will produce Q2.
• A movement from X to Y could occur because of an influx of immigrant labor.
• If the price of pens falls and the price of yellow paint falls, the equilibrium price of wooden pencils will fall, and the change in equilibrium quantity is uncertain.
• The income effect decreases the quantity of labor supplied due to the greater demand for leisure caused by a higher income.
• For a natural monopoly to exist, a firm's long-run average cost curve must exhibit economies of scale throughout the relevant range of market demand.
• In evaluating the degree of economic efficiency in a market, the smaller the difference between marginal cost and price, the smaller the deadweight loss in a market.
• If price decreases by law from a market equilibrium value of $17 to $15, producer surplus will decrease and there will be some lost surplus.
• The vertical difference between curves F and G measures average fixed costs.
• When the production of a good generates negative externalities, the social cost of production is greater than the private cost of production.
• A minimum wage above the equilibrium wage will decrease the quantity of labor demanded and increase the quantity of labor supplied.
• The monopolist should cut back production to increase profits
• Colin places $325 value on his motorcycle helmet.
• When the competitive firm's value of the marginal product of labor intersects the market-wage level, the firm has found the profit-maximizing quantity of labor to hire.
• For a competitive firm, the marginal revenue product decreases eventually as quantity increases.