Microeconomics 2
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- Name the percentage of U.S. firms, average size, and percentage of total business revenues of a proprietorship.
- 73%, 50,000, 5.1
- Name the percentage of U.S. firms, average size, and percentage of total business revenues of a partnership.
- 7%, 540,000, 5.5
- Name the percentage of U.S. firms, average size, and percentage of total business revenues of a corporation.
- 20%, 3 mil, 89.4
- How much a company has paid stockholders in the past year in dollars per share.
- Dividend
- dividend divided by stock price at closing
- Yield %
- price of stock divided by earnings per share
- PE
- number of shares traded per day in hundreds
- Vol 100s
- The time line that the first Hi/Lo includes
- past year
- The time frame that the second Hi/Lo includes
- past day
- net change in price from previous day's closing price
- Net Change
- Name two solutions to the Moral-Hazard Problem.
- Collateral, Incentive-Compatible contract
- How do you calculate average fixed cost?
- fixed cost over output level
- How do you calculate average variable cost?
- total variable cost over output level
- how do you calculate total cost?
- Fixed cost plus variable cost
- What are two ways to calculate average total cost?
- average fixed cost plus average variable cost; total cost over output level
- Where does average cost take its minimum value?
- at Marginal Cost=Average Cost
- What curve plummets quickly, then evens out?
- fixed cost
- what curve looks like a "J"?
- average variable cost
- what curve looks like a "U"?
- average total cost
- What is an envelope of all short run cost curves for different plant levels?
- Long run cost curves
- At low output levels, long run average cost falls as output rises
- economies of scale
- at high output levels, long run average cost rises as output rises
- Diseconomies of scale
- Name three causes of economies of scale.
- specialization, dimiensional factor, improved equipment
- Name one cause of diseconomies of scale.
- difficulty of management
- What does the long run average cost curve look like?
- a stretched out "U", with a long minimum point
- lowest output level where the constant returns to scale region
- minimum efficient scale
- In the long run average cost curve, what is the name of the minimum point of the "U" called?
- scale region
- high competition, room for many efficiently sized plants
- Small minimum efficiency scale
- low competition, no room for many efficiently sized plants
- large minimum efficiency scale
- give an example of an industry with a small minimum efficiency scale and an industry with a large minimum efficiency scale.
-
Small MES-pizza parlor
Large MES-aircraft producer - all sellers are price takers, no one can influence market price
- perfect competition
- In a perfect competition, if marginal revenue is greater than marginal cost, what should the firm do?
- produce more
- If the marginal revenue is less than the marginal cost in a perfect competition, what should the firm do?
- produce more
- When are profits maximized in a perfect competition?
- when marginal revenue is equal to marginal cost
- Name two ways to calculate profit.
-
total revenue minus total cost;
(Price-ATC) x Output sold - At the profit maximizing rate of output in a perfect competition, what is the break-even price?
- price equals average total cost
- At the profit maximizing rate of output in a perfect competition, what is the shut-down price?
- Price equals average variable cost
- the horizontal summation of all individual firms' supply curves
- market supply
- the intersection of market demand and market supply
- market price
- Name the chain of events that occurs in a perfect competition when price is greater than average total cost.
- new firms develop, supply increases, market price decreases
- Name the chain of events that occurs when price is less than average total cost in a perfectly competition.
- firms exit, supply decreases, market price increases
- In the long run in perfect competition, what does equilibrium earn?
- its normal rate of return
- Name three barriers to entry of a monopoly.
- ownership of essential resources by a single firm, economies of scale, legal and governmental restrictions
- Do monopolies have large or small minimum efficiency levels?
- large
- What demand curve is the demand curve for monopolists the same as?
- market demand curve
- In a monopoly, what is always less than the price? What does this mean?
- marginal revenue; if the monopoly sells one more unit, the average price of the unit decreases
- can marginal revenue be negative?
- yes
- How does a monopoly maximize profits?
- by equalizing marginal revenue and marginal cost