Elasticity
Costs
Perfect Competition
Monopoly
Mixed Bag
100
Price Elasticity of Demand = % Change in X/% Change in Y. Name X and Y.
X = Quantity Demanded Y = Price
100
What is FC + VC equal?
Total Cost (TC)
100
Name one characteristic of a PC firm.
Price Taker/Profit Maximizer/Identical Product/Many buyers and sellers/No barriers to entry or exit
100
The demand curve faced by a monopoly is ________ sloping.
Downward
100
A perfectly inelastic demand curve is drawn as a ______ line.
Vertical
200
When |E| > 1 we say demand is _______.
Elastic
200
What is the difference between economic and accounting profits?
Economics profits include both opportunity cost and explicit costs but accounting profits only include explicit costs.
200
The demand curve for a PC market is _________ but the demand curve for a PC firm is __________.
downward sloping; horizontal (perfectly elastic)
200
A monopoly sells _______ output than a PC market and charges a ________ price.
Fewer; higher
200
In a PC market the long run market price will always be equal to:
P = AC
300
When Price changes from $1 to $9, quantity demanded changes from 110 to 90. What is |E|?
|E| = 1/8
300
What is Total Cost divided by Quantity called?
Average Cost or Average Total Cost
300
For a PC firm, the profit max condition is ____.
MR = MC or P = MC
300
A monopoly will exit the market if...
Price falls below AC
300
What is a PC firms long run exit condition?
Exit if P < AC
400
When Price for a good falls, the Total Revenue collected by the sellers increases. The demand for the good must be_____.
Elastic
400
Define Marginal Cost
Change in Total Cost/Change in Output
400
PC firm will make profits as long a:
TR > TC or P > AC
400
A monopoly will continue to make profits in the LR because of:
barriers to entry
400
The "1st best" option for governments trying to regulate a natural monopoly is to set price equal to:
Marginal Cost
500
The steeper the demand curve the more _______ the demand for the good.
Inelastic
500
When is Average Cost at its minimum?
When AC = MC
500
A PC firm will shutdown in the short run if:
P < AVC
500
Why is the monopoly's MR curve downward sloping and not horizontal like a PC firm?
In order to sell more output a monopoly has to lower its price and sell all output at the lower price
500
Perfect Competition and Monopoly are two of the four types of market structures. Name the other two.
Oligopoly and Monopolistic Competition
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