Econ Unit 2&3
From the above total cost curve we know that fixed cost must be:
$1,000 (remember fixed costs are the same across all units, even if there are no units being produced, which is how you can figure out the answer to this question) The answer is where the line starts on the graph
By filling in the blanks it can be determined that the marginal cost of the third unit of output is: Q--------TC-------MC 0--------$200-----n/a 1--------$900-----$700 2----------?-------$900 3-------$3,000------?
$1,200
A business owner had the following revenue/expenses in their first year of business: $50,000 Building Rent $200,000 Revenue $10,000 taxes $25,000 Wages paid to employees $40,000 in foregone wages from previous job Using the above information, what is accounting profit for this company?
$115,000
Based on the above graph, how much should they charge per unit to maximize profits?
$120 per unit (look where MR and MC intersect and go straight up on graph to see a high price so monopolists can make money)
A perfectly competitive firm will shut down if the price of its product is below:
$30 (where the AVC curve and the MC curve intersect) (this is also the lowest intersection on the graph)
Using the above graph, how much should the monopolistic firm charge per dose of the vaccine? (look at where MR=MC then look at the top price charged accordingly)
$35 This is a monopoly - remember monopolies will produce where MR=MC, but they will set their price at the top of their customers willingness to pay. They will do this by looking at where that MR=MC quantity intersects the demand curve, in this case, they produce at 300 doses per hour, and they will price at $35 per dose. For a monopolist, draw a line up from MR=MC to figure out the profit maximizing price. This is why they have "price setting power"
A business owner had the following revenue/expenses in their first year of business: $50,000 Building Rent $200,000 Revenue $10,000 taxes $25,000 Wages paid to employees $40,000 in foregone wages from previous job Using the above information, how much did the business owner incur in implicit costs (opportunity costs)?
$40,000
A business owner had the following revenue/expenses in their first year of business: $50,000 Building Rent $200,000 Revenue $10,000 taxes $25,000 Wages paid to employees $40,000 in foregone wages from previous job Using the above information, what is economic profit for this company?
$75,000
A business owner had the following revenue/expenses in their first year of business: $50,000 Building Rent $200,000 Revenue $10,000 taxes $25,000 Wages paid to employees $40,000 in foregone wages from previous job Using the above information, how much did the business owner incur in explicit costs?
$85,000
What is the marginal revenue of the 2nd and 3rd unit of output for this monopoly?
10;-10 (it can be negative) Q#40
Anna enjoys eating Pringles. The total utility of the first five cans of Pringles are 12, 30, 42, 49, and 51. What is the marginal utility of the 3rd and 5th can of pringles?
12;2
Raymond is consuming pieces of pizza, the marginal utility of the first 4 units of consumption are 5, 8, 4, and 2 respectively. What is the total utility associated with consuming the 4th slice of pizza?
19
If both shirts and shoes are $10 each, what is the MU per dollar for the first unit of shoes? Quantity one shows 20 for the first unit of shoes
2
Naomi enjoys drinking mochas, if total utility for the first two mochas is equal to 10 and the total utility from the third mocha is 13 . What is her marginal utility of the third cup of coffee?
3
What is the profit-maximizing level of production for this firm?
300 doses per hour Response Feedback: Again, where MR=MC is the profit maximizing level of production for all firms. (where MR and MC intersect)
If the units of variable input in a production process are 1, 2, 3, 4, and 5, and the corresponding total outputs are 30, 34, 37, 39, and 40, respectively. The marginal product of the second input is:
4
Using the above graph, how much should the monopoly produce to maximize profits?
4 units per hour (where MR intersects MC)
According to the above graph, what is the profit-maximizing output of this firm?
400 units per day (where MR=MC)
Which of the following best defines the income effect?
A change in consumption of a good that results from a change in purchasing power (real income)
Assume a government policy charges steel producers a fee per ton of steel produce, where the fee is determined by the amount of pollutants discharged. What will this tax lead to?
A decrease in the market equilibrium quantity of steel produced An increase in the equilibrium price of steel
A monopoly is defined as:
A market controlled by one seller with a good or service that has no close substitutes
We call a good non-excludable when:
A person has access to a good or service without having to pay for it
A credit score:
Acts like a scorecard that shows how responsible you are with the money thats lent to you
Which of the following was used as an example of price-leadership?
Airline Baggage Fees
Social benefits is defined as:
All external and private benefits
Explain the short run profit maximization (loss minimization) rule for firms. Express this rule algebraically as an equality in your answer. What should a firm do in terms of output if MR>MC? What about if MR<MC? Explain your answer in detail.
All firms maximize profits (or minimize losses) when they produces a level of output at which the marginal revenue for the last unit sold is equal to the marginal cost of producing that unit. Algebraically, profits (losses) are maximized (minimized) when MR=MC. If MR and MC are not equalized the firm can increase profits (decreases losses) by either increasing output when MR>MC or decreasing output when MR<MC.
Which of the following best describes an oligopoly?
All of the above represent oligopolies
______ is the act of buying a commodity in one market at a lower price and selling it in another market at a higher price.
Arbitrage
As the firm expands, which of the following cost measures decrease?
Average Fixed Costs
From the above question, what happens as a result? of Phil and Craigs actions?
Because they both lowered their prices, they continue to share customers equally, and earn less revenue
Where does the marginal revenue lie in a monopolistically competitive market? (Hint: you may be able to figure out the answer to this question using the above graph)
Below the demand curve
Which of the following is an explicit cost?
Both A & B are explicit costs
What is the most likely result of the Prisoners Dilemna? (recall that they cannot cooperate)
Both parties end up confessing
If a consumer spends all their income on two goods: X & Y. If the price of good X is $10, and the price of good Y is $9. The consumers MUx = 15 and MUy = 12. What should they do?
Buy more of Good X and less of Good Y
If Phil and Craig have a meeting and agree to charge the same high price, they have formed a:
Cartel
Suppose you are an economist hired to consult monopolists on how to make more profits. This monopolist is currently charging $10. What would you suggest they do to make higher profits?
Decrease price and increase output. (intersection with MC and D are much lower on the graph so the price of $10 is too high)
In economic terms, if a government taxes a firm that pollutes, what will happen? (Remember your shifters of supply and demand!)
Decrease the supply of the good produced
As units of a good is consumed, the marginal utility generally _________ and total utility _________
Decreases; Increases
In the above graph of a kinked demand curve, what does D1 and D2 depict? the price is fixed at $50 with a horizontal line D1 is a straight downward sloping line D2 is a more vertical line intersecting D1 through the middle
Demand curve applicable to any price increase above $50; demand curve applicable to any price decrease below $50
When a new firm enters the market, what happens to the demand curve of any existing firms in the market?
Demand curves shift leftward
Suppose that in a perfectly competitive market, firms are making positive economic profits. In the long run, we can expect to see:
Economic profits become zero
Competitive markets for pollution rights:
Enable those who value them most to pollute
The Paradox of Value:
Explains the idea that the value of a good is subjective, and depends on your current situation.
How do you calculate average fixed costs?
FC/Q
A monopolistically competitive firm is a price taker
False
Cartels are generally legal in the United States
False
Firms with kinked demand curve models can predict that rivals will match their price increases
False
In the presence of externalities, the socially optimal point of production is where Marginal Private Benefit equals Marginal Private Cost
False
In the short run, monopolistically competitive firms charge a price equal to MC
False
Monopolists are price takers
False
The marginal revenue curve for a price-taking firm is downward sloping
False
The social marginal cost curve is lower than the private marginal cost curve
False
All but WHICH ONE of the following is a characteristic of monopolistic competition?
Few sellers
Consider two firms, assume both firms believe the other will compete and undercut their prices in order to attract more demand. What would you expect would happen to the price each firm will charge for their product?
Firm A will end up charging a lower price, and Firm B will end up charging a lower price
Why are cartel agreements generally difficult to maintain?
Firms are not able to enforce the price and outputs of other firms in the cartel, which leads to firms cheating on price
Which of the following best describes a cartel?
Firms coming together to either fix prices, control supply, or both
Which of the following is not a characteristic of a perfectly competitive market?
Firms have price setting power.
Why do economists view pollution as an economic issue?
Firms that pollute don't pay the full social cost of producing their goods
Using the above graph, if equilibrium price is $50 and one firm attempts to lower prices, what action do we expect other oligopolies to take?
Firms will follow the price decrease, and move along D2
Which of the following examples was used to demonstrate a market with low barriers to entry?
Food trucks
What is the purpose of a cartel?
Have the power to act like a monopoly
Douglas is spending all of his income on Goods X & Goods Y. He is currently in a state where MUx/Px = MUy/Py. What should he do?
He is currently maximizing his utility and is in equilibrium
George consumes two goods, Pistachios and Coke. If George wishes to maximize his utility on a fixed budget and MUp/Pp < MUc/Pc, what should he do? (If this is confusing, revisit page 159 in your text) MUp = Marginal Utility of Pistachios MUc = Marginal Utility of Coke
He should consume more coke and less pistachios
The products of perfectly competitive firms are assumed to be:
Homogeneous (identical)
The kinked demand curve illustrates:
How competitors will match price decreases, but not increases
Which of the following best defines the Coase Theorm?
If property rights are assigned to either party involved, a solution to the externality issue will be achieved
Suppose Apple, Samsung, and LG make smart-phones that all sell for approximately the same price. If Apple offers a $100 rebate on all new iphone purchases, what can we expect Samsung and LG to do?
Immediately offer discounts to match Apple's
Utils are not measurable (i.e. pg 159 in Tucker: 2 flans = 48 utils) and only demonstrate consumer choice theory. They illustrate diminishing marginal utility and the concept of total utility. Economists use two effects to explain the law of demand instead. Name each effect, describing the concept and how it relates to the law of demand. Include either a real-world example or a personal example illustrating each concept.
Income effect: When real income changes, the quantity demanded will change. For example, if a person's normal good is wheat bread and the price per loaf lowers by $1, then the person will be able to buy more and in turn be more richer because they will purchase the same amount of bread without spending the extra dollar. Substitution effect: When there is a change in the quantity demanded for a good after it's substitute good changes in price. For example, if milk and orange juice are substitutes, and milk raises in price, the quantity demanded for orange juice will increase. The income effect and the substitution effect combine and cause the quantity demanded to increase if say the normal good price falls. (Teacher answer) Income Effect: Consumer's real purchasing power for the good, and hence the consumer's willingness and ability to purchase the good, is inversely related to the good's price, which is consistent with the consumer's law of demand, which aggregates to the market law of demand. e.g. As the price of salmon has soared over the years, people have bought less of it. Substitution effect: If a good's price changes, so does its relative price to substitute goods, and the consumer tends to substitute goods accordingly. e.g. If the price of toasted muesli cereal decreases, I'll be willing to buy more of it in place of Cherrios and Raisin Bran.
Suppose this firm is currently producing 12 units of output. What would you suggest the firm do in order to maximize profits?
Increase output to 16. MC=$5 MR=$9
Suppose a monopolist is currently producing where MC<MR, what would you suggest this firm does to maximize profits?
Increase output until MC=MR
What does IRA stand for?
Individual Retirement Account
Most of the "costs" associated with negative externalities are imposed on:
Individuals other than consumers of the polluting product
Assume this firm is perfectly competitive and is price is fixed at $35 per unit. The firm is currently operating where MR=MC. What should this firm do?
It should continue to operate at its current output (the intersection is on a horizontal line; below ATC and above AVC)
All but WHICH one of the following is a way that monopolists maintain large market shares?
Keeping prices low and customer loyalty high
Suppose you produce sandwiches that used to be in a perfectly competitive market, but now you are producing in a monopoly. What can you expect to happen?
Less sandwiches will be sold, and at a higher price
Monopolies will maximize their profits when
MR=MC
What is the profit maximization rule for firms in monopolistic competition structure?
MR=MC
Which of the following must be true if average total cost is falling?
Marginal cost must be less than average total cost.
According to Utility Theory, what happens as an individual consumes more of a product?
Marginal utility will diminish
Which of the following is a difference between monopolistic competition and perfect competition?
Monopolisitically competitve firms face a downward sloping demand curve; perfectly competitve firms face a horizontal demand curve
What is the best explanation behind the economic criticism of unregulated monopolists?
Monopolists restrict output, and as a result, they fail to produce units that are valued more than the marginal cost of producing them
The kinked demand curve is:
More inelastic to the right of the kink
The term "mutual interdependence" applies to
Oligopolists
Which of the following describes the market structure of a monopoly?
One firm that is a price maker
What is the least risk lowest return investment you can have?
Online savings accounts with a guaranteed rate of return
The Sherman Law:
Outlawed monopolization or attempted monopolization
What is the LR equilibrium conditions for a perfectly competitive firm?
P = ATC = MR = MC
In the example of crash course nesting dolls, what happens when Craig lowers his prices?
Phil will likely compete by dropping his prices
In the short run, when the price of a good is a constant, the marginal revenue per unit of output for a perfectly competitive firm is the same as:
Price
If an oligopoly is the dominant firm that sets prices for the industry. This firm has:
Price leadership
Priscilla considers Dr. Pepper and Apple Juice as substitutes. Suppose that the price of apples, a factor of production in apple juice, drastically increases, and increase the price of apple juice. What will most likely happen according to the substitution effect?
Priscilla will purchase more Dr. Pepper and less Apple Juice
Monopolists will maximize profits by
Producing where MR=MC
Why does the demand curve in monopolistic competition slope downward?
Product differentiation
All but WHICH ONE of the following is apart of the four market structures discussed in the perfect competition video?
Profit Maximization
What does Coase's analysis of externalities emphasize the importance of?
Property rights
All but WHICH one of the following would be considered "excludable" Grocery store items Public Parks Phone and Internet Services Use of farmland
Public parks
All but WHICH one of the following was used in the video as an example of an Oligopoly?
Strawberry market
When consumption of a good increases from a reduction in price that makes the good cheaper in relation to other goods is known as:
Substitution effect
To increase society's total welfare, a firms production process that produces a negative externality (like pollution) should be:
Taxed
The long run is a period of time when:
That is long enough to permit changes in all the firms inputs, both variable and fixed
Provide a definition of the Coase Theorem. How does this theorem provide insight into environmental and economic efficiency? How does the Coase Theorem go about dealing with negative externalities?
The Coase Theorem claims that limited governmental action in solving externality issues amongst markets is key. In environmental and economoic efficiency, this Theorem helps outline how it can get tricky for government to get involved in negotiations between markets. For an example of negative externalities, if nearby pollution from factories are killing farmer's crops, and there are initial property rights established, the markets should be able to negotiate without further government interaction. If government were to step in and say the factories had to stop polluting the farms, then the factories would lose money or go out of business. Therefore, the markets should work together to develop a system that doesn't put anyone out of business. This would eliminate transaction costs for the markets by not involving the government.
Why is OPEC be considered a cartel? (make sure you apply what you learned from this chapter!). What are some of the characteristics of OPEC? How is the price of U.S. oil effected by the decisions made by OPEC?
The Organization of Petroleum Exporting Countries is considered a cartel because they control about 70% of the world's oil production so they are able to charge high prices or choose whatever price they want. They are made up of 12 oil producing countries that all work together under the OPEC. They are considered a cartel because their goal is to set prices for oil across the world. They are the dominant firm because of their world-wide business, thus leading the U.S. to follow suit with OPECs prices.
Marginal Utility is defined as:
The additional satisfaction a person derives from consuming an additional unit of a good
Which example was used to illustrate a legal form of price discrimination?
The airline industry charging less for passengers who book tickets early and charging more for passangers book late
A "util" represents a unit of measurement for
The amount of happiness someone obtains from consuming a good or service
Which of the following best describes the rebound effect?
The benefits of energy efficiency might be reduced as individuals change their behavior
If an industry that produces pollution or waste is perfectly competitive (say a livestock farm for example), which of the following statements is true regarding competitive price and quantity?
The competitive price is lower and the quantity is higher than the socially optimal point for the firm
Transactions costs:
The cost associated with the negotiating and enforcing of contracts
Which of the following statements is true regarding Hardin's view of The Tragedy of the Commons:
The individual will use the commons beyond the socially efficient point
The issue of the tragedy of the commons is best defined as:
The issue of what happens when many people share a limited resource; and how self-interest is pitted against the common good
The Paradox of Value helps explain:
The law of diminishing marginal utility
Why does a monopoly face a downward sloping demand curve?
The market demand curve is the monopolists demand curve
Price discrimination is:
The practice of charging different consumers different prices for exactly the same product
Which of the following scenarios best represents a monopolistically competitive market?
The restaurant industry, where there are a large number of producers with differentiated products and low barriers to entry
Game theory is defined in the video as
The study of strategic decision making
Which of the following best describes social cost?
The sum of external and private costs
What is one of the key features of the tragedy of the commons described in the video?
The tragedy of the commons provides an opportunity for an individual to benefit him/herself while spreading out any negative effects across the larger population
Assume we have a coal firm that produces hazardous waste and dumps it into a local river, which of the following is occurring?
Their marginal social cost > marginal private cost
Which of the following is a characteristic of a competitive price taker
There are a large number of firms in the market, each producing a small share of total market output
What is one of the reasons monopolists can maintain monopoly power for so long?
There are high barriers to entry
Why are individuals unlikely to choose to pay a higher price for a low-emissions or electric vehicle?
They are better off "free-riding" on others attempts to reduce emissions
Why do cartel members have the incentive to cheat on one another?
They can hope to earn higher profits by setting prices lower than the agreed upon price
Why is it profitable for companies to engage in price discrimination?
They can increase their total revenue by charging higher prices to those with inelastic demand, and lower prices to those with more elastic demand
In the video, why is each individual fisherman motivated to take as many fish as he can for himself?
To avoid losing out to others who use the resource, it's in each fisherman's best interest to take extra fish, which is acting in each of their own best interest.
Which of the following is the best example a perfectly competitive firm?
Tomato farmers
A rational consumer should not continue to consume more of a good when: Total utility is decreasing Marginal utility is diminishing Both A & B When the price is increasing
Total utility is decreasing Marginal utility is ALWAYS diminishing, but consumers should stop consuming the good when total utility begins to decrease (this would make marginal utility negative)
Apply the idea of the Tragedy of the Commons to a real world environmental example. Make sure you give a definition of the tragedy of the commons.
Tragedy of the Commons is apparent in many aspects of life because resources are scare and people let their greed drive them to harvest more than what is most beneficial for the common good. For example, for a common property resource such as hunting and fishing grounds, people feel the need to harvest as much as they can because someone else will take it. As a result, animals can easily be over harvested and humans have led to many fish stock crashes throughout history because of this idea.
A beautiful view that everyone can enjoy would be a good definition of "non-excludable"
True
A firm operating in perfectly competitive conditions will shut down in the SR if P < AVC
True
Advertising and product differentiation are examples of non-price competition
True
Alternative energy sources aren't cheap enough yet to incentivize people and companies to use them, so the majority of our energy is likely to come from cheaper non-renewable sources, at least for now
True
Because a perfectly competitive firm is a price taker, its demand curve for the firm's product is horizontal
True
In a perfectly competitive firm, P=MR=D D= Demand Curve
True
In perfect competition, firms are price takers
True
In the presence of externalities, the way economic efficiency is achieved when marginal private benefits are equal to marginal private costs
True
Pollution represents a market failure
True
The utility something has to you can be reflected by how much you'd be willing to pay for it
True
Unlike firms in perfect competition, monopolies have a downward sloping demand curve
True
How would you calculate average variable cost?
VC/Q
Imagine that you own a coffee hut, the marginal revenue of each cup of coffee is $2.50, at what point should you stop producing coffee to maximize profit?
When Marginal Cost = $2.50
When is a firm said to be a "natural" monopoly?
When is LRAC declines as output increases
How do we determine where the socially optimal level of output is? (for a firm)
Where marginal social benefit equals marginal social cost
One of the big advantages of having a Roth IRA is:
You can withdraw any of the money you contribute at any time without paying any taxes or penalties
An account that is a "Roth" simply means:
You have already paid taxes on whatever money you contribute
Economic price discrimination occurs when:
a seller charges different prices to consumers based on their willingness to pay.
a.) Identify each of the short run cost curves numbered 1 through 7 from both graphs. b.) Explain why curve #4 decreases as output expands. c.) Explain why the slope of curve #2 changes from negative (downward sloping) to positive (upward sloping) after it is intersected by curve #1
a) 1=MC, 2=ATC, 3=AVC, 4=AFC, 5=TC, 6=TVC, and 7=TFC. b) The AFC curve decreases as output expands because the fixed costs are spread over outputs. When the output increases, AFC decreases. c) The MC curve intersects the ATC curve when it's slope is negative and reaches its minimum, after it hits the minimum, the ATC curve then slopes upward. The MC curve intersected the ATC because making the next unit of output wasn't less than the ATC.
a.) What is the difference between economic profits and accounting profits? Express this difference algebraically in your answer. b.) Explain why making a distinction between the two is so important.
a) Economic profits are the total opportunity costs subtracted from the total revenue. While, accounting profits are the total explicit costs subtracted from the total revenue and they overstate profits. For example: total revenue could be $400,000 dollars with explicit costs of $350,000, which would leave an accounting profit of $50,000. But, the implicit costs could totally change the economic profits: such as missing out on a different salary or rental adding up to $60,000, thus equaling an economic profit of -$10,000. b) It is important to understand the difference between the two because Economic profits include the explicit AND the implicit costs while Accounting just accounts for the explicit costs. If someone just calculated the accounting profits and not the economic, a business may seem profitable when they actually aren't. Implicit costs are hard to calculate, but are very important for calculating actual economic profit. Correct Answer: a.) An economic profit includes implicit costs and accounting profit does not. Algebraically, Accounting Profit = Total Revenues - Total Explicit Costs Economic Profit = Total Revenues - Total Opportunity Costs, or Economic Profit = Total Revenues - (Total Explicit costs + Total Implicit Costs) b.) The distinction is important because by focusing only on explicit costs, accounting profits tend to understate the true costs of economic activity. Recall that all true costs are opportunity costs. In order to get an economically complete picture one needs to include both the explicit monetary costs and the more intangible implicit costs of foregone opportunities. For example it is entirely possible for a business owner to record positive profits in accounting terms while actually taking a loss in economic terms because they neglected to factor in the implicit (opportunity) cost of their time or alternate employment opportunities.
The paradox of value (aka the Diamond Water Paradox) was pioneered by which famous economist?
adam smith
What is the major difference between monopolists and perfectly competitive firms?
all of these
A good that is non-rival but excludable is:
club goods
A good that is rival and non-excludable is:
common pool resources
Assume that an individual consumes only coffee and bagels and the coffee yields 12 "utils" and the bagel 6 "utils". If the price of a cup of coffee is $1 and the price of the bagel is $.50, we can conclude that the:
consumer is in equilibrium.
As more Swedish Fish are consumed each day, the marginal utility that someone gets from each additional Swedish Fish is:
decreasing (diminishing)
According to the utility model of consumer demand, the demand curve is downward-sloping because of the law of:
diminishing marginal utility
The marginal utility curve is:
downward sloping
An economist left her $100,000-a-year teaching position to work full-time in her own consulting business. In the first year, she had total revenues of $150,000 and business expenses of $100,000. She made a(n):
economic loss
What happens to the economic profit in a monopolistic competitive industry in the long run?
economic profit will be zero
When the long run average total cost curve is downward sloping, this means that there are:
economies of scale
The marginal rate of substitution
equals the slope of an indifference curve at any point on the curve. is the rate at which a consumer is willing to substitute one food for another good without a change in total utility. declines as more of a good is consumed.
A firm operating in perfectly competitive conditions will have positive economic profits in the long-run
false
A monopolists marginal revenue always above market price
false
If Jeanines total utility increases from 20 to 35 for the second unit of a good, her marginal utility of the second good is 55
false
Rivalry is the idea that if you use good or service, someone else can use that good or service as well
false
The law of diminishing marginal utility: The idea that the more of a particular good an individual consumes the more additional happiness it provides.
false
Total utility is maximized when marginal utility is greater than one
false
What is step 1 in building your credit score?
get a secured credit card
Utility is another word for:
happiness
Compared to a perfectly competitive firm with the same cost structure, a monopoly firm will charge a:
higher price and sell less
In the video, what good is used to help calculate total utility and marginal utility?
ice cream
The monopolist's demand curve is:
identical to the market demand curve.
The opportunity cost associated with the use of resources owned by a firm are:
implicit costs
What is the riskiest type of investments mentioned in the video?
investing in businesses
During the course of a month, a firm has enough time to hire or layoff workers, but it does not have enough time to expand its factory. In this situation, the firm:
is operating in the short run
Excludability is defined as:
is whether or not someone who didn't pay for a good is allowed to use or has access to that good
As an individual consumes more and more of a single good, what happens to marginal utility for consuming that good?
it diminishes
The change in total utility due to a one unit change in quantity consumed of a good is:
marginal utility
Assume a consumer purchases a combination of goods X and Y such that MUx / -Px = 20 units of utility per dollar and MUy / Py = 10 units of utility per dollar. To maximize utility, the consumers should buy:
more of X and less of Y.
When total utility is decreasing, we know that marginal utility is:
negative
What was stated as a way that Android and iPhone Compete?
non-price competition
Non-price competition, price leadership, and cartels are models in the ____ market structure(s).
oligopoly
For a monopolist:
price is greater than marginal revenue.
Goods that are rival and excludable are:
private goods
A good that is non-rivalrous and non-excludable is:
public goods
Assume that a firm's marginal cost exceeds marginal revenue. Under these conditions the firm should:
reduce output
Which of the following best describes utility?
satisfaction
Why is it that monopolies can earn an economic profit in the long run, but perfectly competitive firms usually cannot?
there are high barriers to entry
Because of the law of diminishing marginal utility, the marginal utility curve is downward sloping
true
The law of diminishing marginal utility helps explain why demand is downward sloping
true
The more of a good that is consumed, there will be a decrease in the additional happiness derived from each additional unit consumed
true
There is an economically efficient level of pollution
true
John's total utility for consuming guitar playing is at a maximum, what is his marginal utility given that total utility is maximized?
zero