Exam 15: Entry, Exit, and Long-Run Profitability

The average cost curve has a U shape because the _____ dominates at low levels of quantity, and the _____ dominates at high levels of quantity.

Which of the following is NOT a government action that results in a barrier to entry in a product market?

Suppose your local Walmart has explicit financial costs of $5 million per year and implicit opportunity costs of $174,000 per year. If the store earned an economic profit of $202,000 last year, the store's accounting profit was:

Which of the following does NOT occur in a market when one or more sellers exits the market?

The land you own has the only known source of macinannea root, needed to make a special anti-inflammatory itch lotion. In this case, your monopoly results from:

Michelle owns the largest florist shop in her town. Each week, she orders a truckload of flowers from the flower wholesaler. The other two florists in town order only one-third as many flowers. Because Michelle's order fills the delivery truck, the wholesaler sells flowers to her at a lower price than the other florists must pay. How will this situation impact potential new entrants?

Gino's Pizzeria bought a new delivery van last year for $10,000. It can now sell the van for $8,500. To buy this year's model of the same van, Gino would have to pay $11,000. What is the implicit opportunity cost of capital (assuming there is no interest to pay)?

When the typical seller in a market suffers economic losses, then:

(Figure: The Cost Curves for Charlie's Cookie Confections) Use Figure: The Cost Curves for Charlie's Cookie Confections. The curve labeled Y represents the firm's _____ cost curve.

Corinne is offered a job with a salary of $70,000, which she turns down to start her own business. She uses $20,000 of her own savings to help start the business, savings that had been providing her a return of $1,000 per year. Over her first year in business, Corinne collects total revenue of $180,000 and must cover explicit costs of $105,000. During her first year in business, Corinne's accounting profit is _____, and her economic profit is _____.

Assume that there is free entry and exit in the management consulting market. How profitable can Mario expect his new consulting business to be in the long run?

Samuel's company is in the following situation: What is the price at Samuel's company? Total cost Total revenue Direct financial cost Implicit opportunity cost Quantity \ 102,000 \ 142,000 \ 40,000 \ 62,000 7,100

Costs that do not require a monetary outlay but instead reflect the dollar value of benefits forgone are:

Sellers in a market will become less profitable when:

When the typical seller in a market has economic profits, then:

Which scenario is MOST likely to cause firms to exit an industry?

Total cost divided by the quantity produced is:

When a seller raises the switching costs of its customers:

Neville is a lawyer at a large law firm where he earns a salary of $170,000 per year. He is thinking of leaving the firm to set up his own law office. To do this, he would need to invest $140,000 of his savings, which currently earns 5% in interest each year. He estimates that if he starts a law office, his annual revenue will be $510,000, and his explicit financial costs will be $300,000. How much would Neville earn in economic profits or losses if he starts his own law office?

For a firm in the short run, if the firm produces the quantity at which _____, the firm is earning _____.