Principles of Microeconomics
Principles of Microeconomics ECON 201
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This 2 page Class Notes was uploaded by Alberto Balistreri on Saturday September 12, 2015. The Class Notes belongs to ECON 201 at West Virginia University taught by George Crowley in Fall. Since its upload, it has received 9 views. For similar materials see /class/202815/econ-201-west-virginia-university in Economcs at West Virginia University.
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Date Created: 09/12/15
1 The Law of Diminishing Returns indicates why A firm s MC will eventually increase as the firm expands output in the short run 2 The short run is a time period of insufficient length for the firm to change its Plant Size and Heavy equipment 3 Sunk or quotHistoricalquot costs are costs that Have already been incurred as the result of past decisions 4 The Average Variable Cost curve and Average Total Cost Curve become closer together as output increases because Average Fixed Cost which is the difference between them declines with output 5The firms Average Total Costs will be a min at the output level where the Marginal Cost Curve crosses the firms Average Total Cost curve 6 Economic Profits are generally than accounting Profits Lower 7 When a firm increases its plant size in the long run and its perunit costs fall this is called Economies of Scale It shown by the downward sloping portion of the LRATC curve 8 In a Price taker market Firms all produce identical products 9 A firm that must see its output at a market determined price is called a Price Taker Firm 10 To Maximize profits 3 firm should always produce the level of output where Marginal Cost Marginal Revenue 11 Ifa firm in a price taker market is earning zero economic profit it Is doing as well as typical firms in other markets 12 if the market price in a price taking industry was currently above the Average Total Cost of Production for firms in the industry New firms would enter the industry which would drive price down to the Average Total Cost of Production in the long run 13 The longrun supply curve is A horizontal line for a constant cost industry A collusion is An agreement among firms to keep output low and price high 14 To Maximize profit in a price takers market you should produce an output level at which MCMR 15 When MC ATC MRwhich is AKA P or d The firm will earn zero economic profit it s in long run equilibrium and firms will neither enter nor exit the market 16 What is a major difference bw a competitive price search and taker market Price takers produce Identical goods whereas competitive price searchers produce goods that a differentiated from the goods produced by their 17 MR curve lies below Demand curve for a competitive price searcher bc In order for a competitive price searcher to sell an extra unit it must cut the price on all units 18 If a price searcher firm can sell 4 units at a price of 6 or it can sell 5 units at a price of 5 the marginal revenue from the fifth unit is 1 20 A Market in which the costs of entry and exit are low is called a Contestable Market 21 In order for a firm to be able to engage in price discrimination it must be able to 1 Identify separate groups with different price elasticity of demand and 2 prevent resale of the produce between customer groups 22 If economic profits were present in a competitive price searcher industry Competition from new entrants would occur until the economic profits had been eliminated 23 A monopoly is best defined as 3 things 1 A single seller of a well defined product 2 no good substitutes 3 high barriers to entry 24 True of False An elastic demand for a product is a barrier that limits entry of potential competitors into a market False 25 When significant economies of scale are present in the production process an industry will turn toward monopoly bc One firm will be able to produce the entire market output at a lower cost than several smaller firms 26 How will the price and output ofan unregulated monopolist compare with the ideal levels that might be reached if the market was 39 Price will be higher amp Output will be lower 27 An Oligopoly market is A market situation in which only a small number of mutually interdependent rival sellers exists among few 28 Regulatory agencies sometimes fail to bring the price and output of a natural monopoly to the ideal level because The agencies do not always have the information concerning a firms true cost 29 Contestable Markets is where Firms can enter and exit with minimal risks 30 Derived Demand is The demand for a final product that a resource helps produce 31 The definition of Differentiated Products is Like products with similar quality design location ex Ex Ben n Jerry s vs Turkey Hill Ice cream 32 If ATC curve lies above Demand curve a firm will Lose Money
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