English 1010
Assuming the restaurant uses its resources in a profit-maximizing way, and that each worker works 5 days each week, what is the current weekly wage rate in the labor market?
275
What is the ratio of the marginal revenue product of capital to the price of capital (MRPC/PC)?
3
What is the profit-maximizing output?
4
What factors determine the elasticity of resource demand?
Ease of resource substitutability, elasticity of product demand, and the ratio of resource costs to total costs
Will there be entry or exit?
Entry; Left
Because they can control product price, monopolists can guarantee profitable production by simply charging the highest price consumers will pay.
False
The pure monopolist seeks the output that will yield the greatest per-unit profit.
False
Suppose another industry has a Herfindahl index of 4,000. Are firms in this industry likely to have more or less market power?
More
Which of the following best describes the efficiency of monopolistically competitive firms?
Neither allocatively efficient nor productively efficient
How often do perfectly competitive firms engage in price discrimination?
Never
If this firm keeps increasing its output level, will ATC per bag ever increase?
No
Is the firm using the least-costly combination of inputs?
No, because MRPC/PC > MRPL/PL
The market equilibrium wage is currently $12 per hour among hairdressers. At that wage, 17,323 hairdressers are currently employed in the state. The state legislature then sets a minimum wage of $11.50 per hour for hairdressers. If there are no changes to either the demand or supply for hairdressers when that minimum wage is imposed, the number of hairdressers employed in the state will be:
unchanged.
An excess of price over marginal cost is the market's way of signaling the need for more production of a good.
True
The monopolist has a pricing policy; the competitive producer does not.
True
With respect to resource allocation, the interests of the seller and of society coincide in a purely competitive market but conflict in a monopolized market.
True
An increase in the price of substitute resource D.
Uncertainty as to the outcome
What are the basic areas you would want covered in the work agreement?
Wages and fringe benefits Hours of work Seniority and job protection Grievance procedure
Which of the following statements is true?
When advertising either leads to increased monopoly power or is self-canceling, economic inefficiency results.
Are there economies of scale at all levels of output?
Yes
Are there economies of scale in production?
Yes
Review your answers to parts b, c, and d. Does the level of demand determine this industry's market structure?
Yes
Should Cindy hire a 12th worker?
Yes
Will the firm want to exit the industry?
Yes
Consider an oligopoly industry whose firms have identical demand and cost conditions. If the firms decide to collude, then they will want to collectively produce the amount of output that would be produced by:
a pure monopolist.
Can these two firms do better?
yes
Compare the elasticity of a monopolistic competitor's demand with that of a pure competitor and a pure monopolist.
less; more
Hospital administrators sometimes complain about a "shortage" of nurses. This shortage is the result of:
low wages that occur in the monopsonized market and could be eliminated if nurses earn wages closer to their MRP.
The main problem with imposing the socially optimal price (P = MC) on a monopoly is that the socially optimal price:
may be so low that the regulated monopoly can't break even.
This statement recognizes that the products of monopolistically competitive firms
may give them some monopoly power, given strong consumer preferences for their product, but consumers will substitute away if prices become too high relative to similar products offered in the market.
Facepalm, Instarant, and Snaphat are rival firms in an oligopoly industry. If kinked-demand theory applies to these three firms, Facepalm's demand curve will be:
more elastic above the current price than below it.
Oligopoly differs from monopolistic competition in that
oligopoly has few firms, whereas monopolistic competition has many firms
The difference between monopolistic competition and pure monopoly is that compared to monopolistic competition, pure monopoly has
one firm, a unique product, price control, and entry barriers.
The pure monopolist's demand curve is not
perfectly inelastic, because MR is negative when demand is inelastic, so MR = MC < 0.
Monopolistically competitive firms frequently prefer nonprice competition to price competition because
price competition can lead to lower economic profits or even loss.
In an oligopoly, each firm's share of the total market is typically determined by:
product development and advertising.
Product differentiation
provides an advantage in the market.
Advertising helps consumers and promotes efficiency by
providing information about new products, increasing sales and output, and lowering average total cost.
The demand curve facing a
purely competitive firm is perfectly elastic, because it may sell all that it wishes at the equilibrium price.
Suppose that a monopolist can segregate his buyers into two different groups to which he can charge two different prices. To maximize profit, the monopolist should charge a higher price to the group that has:
the lower elasticity of demand.
This is because
the union wage rate becomes the firm's MRC, which equals the MRP at Qc
What is the firm's economic profit?
0
You find out that if you set the price at $2 per bag, consumers will demand 10 million bags. How big will the firm's profit or loss be at that price?
0
The table below shows the total cost and marginal cost for Choco Lovers, a monopolistic firm producing different quantities of chocolate gift boxes. Fill in the blanks in the table.
0 31 0 50 - - 25 29 725 100 2 29 30 27 810 108 2 17 35 25 875 118 2 13 40 23 920 133 3 9 45 21 945 158 5 5 50 19 950 193 7 1
If you wished to regulate this monopoly by charging the socially optimal price, what price would you charge?
1
Suppose that, instead, the market quantity demanded at a price of $2.50 is only 75,000. How many firms will be in this industry?
1
Suppose that the market price for a bottle of vitamins is $2.50. At that price the total market quantity demanded is 75,000,000 bottles. How many firms will be in this industry?
1,000
The industry's Herfindahl index is
1,000
What is the MRP per driver per day?
1,000
What is the Herfindahl index for the hamburger industry in this town?
1,702
Suppose that demand is perfectly inelastic at 20 million bags, so that consumers demand 20 million bags no matter what the price is. What price should you charge if you want the firm to earn only a fair rate of return? Assume as always that TC includes a normal profit.
1.50
Calculate the total labor cost and the marginal resource cost, and then fill in the blanks in the labor supply table.
10 200 7 70 - 11 218 8 88 18 12 234 9 108 20 13 248 10 130 22 14 260 11 154 24 15 270 12 180 26
By how much per vehicle per day do firm profits fall after supervisors are introduced? Enter your answer as a positive value.
100
The marginal revenue product of capital?
12,000
Suppose that hiring a third worker at the campus coffee shop increases sales from $115 per hour to $130 per hour. What is the marginal product of labor per hour from adding that third worker?
15
What is the ratio of the marginal revenue product of labor to the price of labor (MRPL/PL)?
2
What is the Herfindahl index for this industry? Hint: To find the Herfindahl index, you will need to compute the percentage market share for each firm in the industry.
2,200
Now suppose that a union forces the company to place a supervisor in each vehicle at a cost of $300 per supervisor per day. The presence of the supervisor causes the number of packages delivered per vehicle per day to rise to 60 packages per day. What is the MRP per supervisor per day?
200
Profit-maximizing price
21
Suppose that the number of packages delivered per day cannot be increased beyond 60 packages per day but that the price per delivery might potentially be raised. What price would the firm have to charge for each delivery in order to maintain the firm's profit per vehicle after supervisors are introduced?
21.67 ± 0.02
A decline in the elasticity of demand for product X due to a decline in the competitiveness of product market X.
Decrease in elasticity
What is the monopolist's profit?
42
Profit-maximizing quantity
45
What is this firm's profit or loss?
460
You would then pick the number
51
Assuming that each worker is equally productive, what is the marginal revenue product per day of each additional worker?
55
Assuming the pub is using its resources in a profit-maximizing way, what is the marginal revenue product per day of the additional kegs?
56.25 ± .01
What is the marginal resource cost per day of the additional kegs?
56.25 ± .01
A four-firm concentration ratio of 60 percent means the largest four firms in the industry account for _____ percent of sales.
60
What is the profit-maximizing price for this monopolist?
63
How many packages per day would each vehicle have to deliver in order to maintain the firm's profit per vehicle after supervisors are introduced?
65
What is the four-firm concentration ratio of the hamburger industry in this town?
75
Profit
787.00
What is the marginal revenue product of labor?
8,000
What is the equilibrium outcome and payoffs given these strategies?
80;80
What is the four-firm concentration ratio for this industry?
85
A four-firm concentration ratio of 90 percent means the largest four firms in the industry account for _____ percent of sales.
90
The four-firm concentration ratio for the town's watch-making industry is
90
If the top three sellers combine to form a single firm, what would happen to the four-firm concentration ratio and to the Herfindahl index?
94; 4334
Which of the following are products or services of oligopolists that you own or regularly purchase?
Automobiles, personal computers, and gasoline
The more profitable a firm, the greater its monopoly power.
Cannot be determined
Compare this demand curve with the one derived in a competitive market. Which curve is more elastic?
Competitive market
Using the diagram above, identify the demand curve for each of the following:
D3; D2; D1
What is the best strategy for Firm A?
High budget;High budget
A fall in the price of complementary resource E.
Increase in demand
A technological improvement in the capital equipment with which resource C is combined.
Increase in demand
An increase in the demand for product X.
Increase in demand
An increase in the number of resources substitutable for C in producing X.
Increase in elasticity
Why might you begin with a larger wage demand than you actually are willing to accept?
It gives scope for bargaining.
What is the logic of a union threatening an employer with a strike during the collective bargaining process?
It may do so if it thinks its demands are not being met.
Is the deadweight loss greater than or less than $60?
Less than
At that price, what will be the size of the firm's profit or loss?
Loss;10
Many of the lowest-paid people in society—for example, short-order cooks—also have relatively poor working conditions. Does this disprove the notion of compensating wage differentials?
No, the wage is low because the supply of unskilled workers is high relative to the demand for them.
Assuming identical long-run costs, as shown in the diagram, identify graphically the price and output that would result in the long run under monopolistic competition.
Point B
If consumers instead demanded 20 million bags at a price of $2 per bag, how big would the firm's profit or less be?
Profit;10
Does adding an additional worker or adding an additional tractor yield a larger increase in total revenue for each dollar spent?
Revenue is increased more by spending money on an additional tractor.
What does this decision reveal about how GM viewed its marginal revenue product (MRP) and marginal resource cost (MRC)?
The MRC of those 14,000 workers was greater than the MRP.
Property developers who build shopping malls like to have them "anchored" with outlets of one or more famous national retail chains, like Target or Nordstrom. Having such "anchors" is obviously good for the mall developers because anchor stores bring a lot of foot traffic that can help generate sales for smaller stores that lack well-known national brands. But what's in it for the national retail chains? Why should they become "anchors"? Choose the best answer from the following list.
The anchor stores may feel there is a first-mover advantage to becoming one of only a few anchor stores at a new mall.
Why didn't GM reduce employment by more than 14,000 workers or by fewer than 14,000 workers?
The company wanted to set the labor level where MRC equaled MRP to maximize profits.
Alice runs a shoemaking factory that uses both labor and capital to make shoes. Which of the following would shift the factory's demand for capital?
The wages that the factory has to pay its workers rise due to an economywide labor shortage. New shoemaking machines are twice as efficient as older machines. Many consumers decide to walk barefoot all the time.
What is the logic of an employer threatening the union with a lockout?
To force negotiation.
What is the role of the deadline in encouraging agreement in collective bargaining?
To force negotiation.
A principal is worried that her agent may not do what she wants. As a solution, she should consider:
all of the above
There is so much advertising in monopolistic competition and oligopoly because
brand distinction encourages consumer loyalty, which increases profits.
This is because all of these companies
choose a central location to maximize their share of customers.
You expect your opponent to choose the number 50 because
choosing this number lowers the chance of winning below 50-50.
The two numbers are so
close;each person maximizes his or her probability of winning.
This statement is true if
consumers value quality and service more than a lower price.
Collusive agreements can be established and maintained by:
credible threats.
A software company in Silicon Valley uses programmers (labor) and computers (capital) to produce apps for mobile devices. The firm estimates that when it comes to labor, MPL = 5 apps per month while PL = $1,000 per month. And when it comes to capital, MPC = 8 apps per month while PC = $1,000 per month. If the company wants to maximize its profits, it should:
decrease labor while increasing capital.
Suppose again that the formerly competing firms form an employers' association that hires labor as a monopsonist would. This will cause:
divergence of the marginal resource cost and the supply curve, which will result in fewer workers hired at a lower wage rate.
The demand curve faced by a purely monopolistic seller is
downward sloping, whereas that facing the purely competitive firm is perfectly elastic. Correct
The MR curve of a perfectly competitive firm is horizontal. The MR curve of a monopoly firm is:
downward sloping.
Firms will enter a monopolistically competitive industry when there are
economic profits. This will shift demand to the left, reducing the firm's market share and its economic profit.
The most common reason that oligopolies exist is
economies of scale.
The difference between monopolistic competition and pure competition is that compared to pure competition, monopolistic competition has
fewer firms, product differentiation, some price control, and relatively easy but not barrier-free entry.
Because a perfectly competitive employer's MRC curve is
flat; more
Investment in human capital is any action that
improves a worker's skills and abilities.
The long-run rise in real-wage rates in the United States
is directly related to investment in human capital and improved labor-force skills.
Investment in human capital explains wage differentials because
it enables a worker to build specialized skills that have additional wage value in the labor market.