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53 Cards in this Set
- Front
- Back
Implicit costs involves direct cash payment for use of a resource |
False |
|
All other things constant, higher implicit costs result in lower accounting profit |
false |
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Which of the following is NOT an explicit cost? |
Value of a firm owner's time |
|
Opportunity of a resource includes |
Both explicit and implicit costs |
|
Difference between a firm's total revenue and what must be paid to attract resources from their best alternative use |
Economic profit |
|
John moved his office from the building he was renting downtown to the carriage house he now owns in the back of his house. How will his cost change? |
Explicit falls, Implicit rises |
|
Accounting profit = |
Economic profit + Implicit Cost |
|
The reasons economists assume that firms try to maximize economic profit is: |
Over time, firms that don't have profits will have difficulty securing financing to survive |
|
A firm's opportunity cost of using resources provided by the firm's owner are called |
implicit costs |
|
Unlike implicit cost, Explicit cost |
Actual cash payments |
|
If all of my savings are invested in my consulting company, an increase in the interest rate increases my implicit cost |
True
|
|
Opportunity Cost usually |
is involved in calculating economic profit |
|
Which of the following would not appear on a firm's accounting statement? |
Implicit Cost |
|
Zipco's accounting profit = |
Total Revenue - Explicit Costs |
|
If Baloney store earns more than a normal profit, its |
Economic Profit is positive |
|
Suppose a professor gives up her teaching job to devote her time to writing textbooks. IF Salaries of professors rise, |
Her economic profit from textbooks will fall |
|
In the short run, Producer Surplus = |
TR-VC |
|
Resources are efficiently allocated when production occurs at that point of which |
Marginal Cost |
|
Productive efficiency refers to |
Production of a good at lowest long-run average |
|
Production efficiency exists when the least cost combination of inputs is used to produce output |
True |
|
Economic Profits in a competitive industry are signals that |
attract new firms into the industry |
|
Whether the firm produces or shuts down in short run, fixed cost = |
Sunk Costs |
|
When an industry supply curve increases enough to erase economic profit |
Entry of new firms and expansion of existing firms stop |
|
In perfect competition, each firm's output is a large fraction of Total Market Supply |
False |
|
Which of the following is not necessarily a characteristic of perfect competition? |
Low Prices |
|
Perfectly competitive firms respond to changing market conditions by varying their |
Output |
|
Which of the following is likely to be present in a perfectly competitive market? |
Firms producing identical products |
|
Suppose Thelma and Louise both sell fried green tomatoes in a perfectly competitive market. If Louise increases her output |
The price Thelma can charge is unaffected |
|
Anything that prevents new firms from competing on an equal basis w/ existing firms is called a barrier to entry |
True |
|
A monopolist is |
A single seller of a product w/ no close substitutes |
|
Patents stimulate investment by |
giving investors incentive to incur upfront costs when developing new products |
|
Which of the following prevents potential competitors from entering into a monopolist market? |
Legal Restrictions |
|
Willy Stan obtains a patent on his new invention the bipod. After 20 years, he will |
Eventually earn no more than a normal profit |
|
Which of the following could not bar entry into an industry? |
Diseconomies of Scale |
|
After a corporate merger, Rebecca became a CEO of a monopoly firm. She was surprised to learn that one benefit of being a monopoly was that |
She was in a good position to capture the fruits of innovation |
|
Cell phone companies offer pricing plan alternatives in order to convert some consumer's surplus |
into profit |
|
If Ripco owns a building where it operates, then if the uses of the building preclude it from renting to anyone else |
it results in an opportunity cost |
|
Which of the following is not a characteristic of perfect competition? |
Low prices |
|
Market Structure |
Influences the forms of competition among firms |
|
Perfectly competitive firms are price takers because |
each firm is too small compared to the market to be able to affect price |
|
The demand curve for the output of a perfectly competitive firm is |
Perfectly elastic |
|
Adam's apples, a small firm supplying apples in a perfectly competitive market decides to cut its production in half this year. As a result |
The market price will not be affected |
|
A midwestern wheat farmer faces a horizontal demand curve because |
it is so small relate to the market as a whole that it has no impact on market price |
|
Which of the following is true of a monopoly? |
There are no close substitutes for the product being produced |
|
Innovation is the process of turning an invention into a marketable product |
True |
|
Patent laws promote technical progress in all of the following ways except one |
They allow other firms to copy successful products as soon as they are marketed |
|
Which of the following is not considered a barrier to entry? |
Diseconomies of scale |
|
Which of the following would not be considered a Natural Monopoly? |
Automobile Industry |
|
Jewelers are willing to hold large inventories of Diamonds because |
Given monopoly control of the market of Diamonds they are confident the price of Diamonds will not plummet rapidly |
|
A Monopolist demand curve is |
Identical to the market demand curve |
|
Average Revenue = Change in total revenue / Change in the quantity of output produced |
False |
|
If a firm's demand curve slopes downward, the firm's |
Marginal revenue will generally be less than price |
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Irving R. Associates is granted a patent for a new product for which there are no close substitutes. Which of the following must be true of the profit maximum quantity? |
Marginal Revenue is Positive |