Econ Final
why does the federal government grant patents
to encourage firms to spend money on the research and development necessary to create new products. If other firms could freely copy, then it is unlikely that any firm would spend as much money on these advances.
how do you calculate amount of revenue
change in output x constant price
a monopoly differs from all other firms in that its demand curve is what
the market demand curve
A merger between U.S. Steel and General Motors would be an example of a
vertical merger
What is the value of the Herfindahl-Hirschman Index?
1700
Define economic discrimination.
Economic discrimination is paying a person a lower wage or excluding a person from an occupation on the basis of an irrelevant characteristic such as racerace.
what is economic surplus
Economic surplus provides a way of characterizing the economic efficiency of a market. Economic surplus is the sum of consumer surplus and producer surplus.
Let MPL = marginal product of labor, P = output price, and W = wage, then the equation that represents the condition where a competitive firm would hire another worker is what
P × MPL > W
what is marginal product of labor
The additional output a firm produces as a result of hiring one more worker:
what were to happen if a company opened more hotels
The demand for hotel workers is derived from the demand for hotel rooms. When the price of hotel rooms falls (the price of the product falls), the marginal revenue product falls, decreasing the demand for hotel workers, and lowering the wage of hotel workers.
What happens to the equilibrium wage and quantity of labor if output price rises?
The equilibrium wage and the equilibrium quantity of labor rise.
Which of the factors listed below does not cause the demand curve for labor to shift?
a change in the wage
A monopoly is a firm that is the only seller of a good or service that does not have
a close substitute.
A monopoly is
a firm that is the only seller of a good or service that does not have a close substitute.
If labor supply is unchanged, an increase in labor demand will ________ the equilibrium wage and ________ the number of workers employed.
increase, increase
Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If the last worker hired increases output by three units per hour, then to maximize profits the firm should
lay off some of its workers.
If a theatre company expects $250,000 in ticket revenue from five performances and $288,000 in ticket revenue if it adds a sixth performance, the
marginal revenue of the sixth performance is $38,000
As the wage increases, what happens
the demand for labor curve does not shift, but the quantity demanded of labor decreases.
A firm's primary interest when it hires an additional worker is what
the extra revenue the firm realizes from hiring that worker.
What happens as a firm increases the number of workers that it hires
Both the marginal product of labor and the marginal revenue product of labor decrease.
Is the fact that one group in the population has higher earnings than other groups evidence of economic discrimination?
No. Differences in earnings between groups could be due to worker productivity or worker preferences.
Consider the market for pilots. What is likely to happen to the equilibrium wage and quantity of pilots if the government enforces a lower mandatory retirement age, say from age 65 to age 62?
The equilibrium wage rises and the equilibrium quantity of pilots falls.
What is the difference between the marginal product of labor and the marginal revenue product of labor for a firm in a perfectly competitive market?
The marginal revenue product of labor is equal to the marginal product of labor multiplied by the product price.
what is the Law of diminishing returns
The principle that at some point adding more of an input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline.
how does a monopoly maximize profit
a monopoly will choose the level of output at which the marginal revenue from selling that unit equals its marginal cost of production. The demand curve then indicates the profit-maximizing price, and the difference between that price and the firm's average total cost indicates its per-unit profit. Total profit equals per-unit profit multiplied by the profit-maximizing level of output.
A horizontal merger is a merger
between firms in the same industry, while a vertical merger is a merger between firms at different stages of the production of a good.
how is marginal product of labor calculated
change of total output/change of labor
The Sherman Act prohibited what
collusive price agreements among rival sellers.
what happens when a perfectly competitive industry becomes a monopoly
consumer surplus decreases and producer surplus will increase and deadweight loss will increase
when wage decreases, the level of employment
decreases
why is the demand for labor called a derived demand
demand for labor is derived from the firm's output choice.
This means that its marginal revenue curve is _____________ sloping and _______ its demand curve when the market demand curve slopes downward. This is because when a monopoly reduces the price of its product, it sells more units but receives less revenue for each unit it sold previously.
downward, below
A monopoly is characterized by all of the following
entry barriers are high. there are no close substitutes to the firm's product the firm has market power.
A patent or copyright is a barrier to entry based on
government action to protect a producer.
A compensating differential is (give an example)
higher wages are paid to compensate workers for unpleasant aspects of a job, such as when jobs are dangerous, dirty, or dishonorable.
In situations where new technologies are considered complementary to workers, demand for these workers will ________, resulting in ________ in the equilibrium wage.
increase; an increase
A merger between firms at different stages of production of a good
is a vertical merger.
what is consumer surplus
is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays
what is producer surplus
is the difference between the lowest price a firm would be willing to accept and the price it actually receives.
The demand for labor is described as a derived demand because what
it is derived from the demand for products that use labor in the production process.
when a monopoly _______ the price of its product, it sells more units and receives ________ revenue for each unit it sold previously.
reduces, less
If the labor supply curve shifts to the leftleft, then the equilibrium wage will _______ and employment will________
rise, fall
The labor supply curve shows what
shows the relationship between the wage rate and the quantity of labor supplied.
Let MRP equal the marginal revenue product of labor and W equal the wage rate. When should a firm hire more workers to increase profit?
when MPR>W
A monopolist's profit-maximizing price and output correspond to the point on a graph
where marginal revenue equals marginal cost and charging the price on the market demand curve for that output.
