Microeconomics - Ford (ASUB )

In the short-run purely competitive firms earn ________ in equilibrium while in the long-run firms earn ________ in equilibrium, respectively...

Profits or losses; normal profit

Diagram a demand and supply curve and an equilibrium point. Label all axes and curves. Also, discuss the concept of elasticity of demand.

The price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price demanded. If a small change in price is accompanied by a large change in quantity demanded a product is said to be elastic. This means that it is responsive to price changes. The reason for the decrease is because the law of demand tells us that the demand curve is downward sloping. Also, we know that when elasticity is greater than 1, that the percent change is quantity is higher than the % increase in price

Shirking can be considered to be a principal-agent problem because...

The work objectives of the agents diverge from the profit objectives of the principal

The kinked-demand curve of an oligopolist is based on the assumption that...

competitors will follow a price cut but ignore a price increase

The demand for a resource depends primarily on...

the demand for the product or service that it helps produce

The marginal revenue product of an input in a competitive market decreases as a firm increases the quantity of an input used because of the...

Law of diminishing returns

Suppose the demand for strawberries rises sharply, resulting in an increased price of strawberries. As it relates to strawberry pickers, we could expect the MRP curve to...

MRP curve to shift to the right

A single buyer is called a(n):

Monopsony

The more inelastic the demand for a resource the...

less elastic its marginal revenue product curve

A monopolistically competitive firm in the short run is producing where price is $3.00 and marginal cost is $1.50. To maximize profits...

It is unclear what the firm should do without knowing marginal revenue

Non-price competition refers to...

advertising, product promotion, and changes in the real or perceived characteristics of a product.

In the long run, new firms will enter a monopolistically competitive industry...

marginal revenue (MR) equals marginal cost (MC) and price equals average total cost

What are the determinants of demand and supply? What happens to the demand and supply curves when any of these determinants change?

Determinants of supply: 1) Resource prices 2) Technology 3) Taxes 4) Prices of other goods 5) Producer expectations 6) The number of sellers in the market When any determinants change, the Supply Curve shifts. Determinants of demand: 1) Income 2) Consumer Preferences 3) Number of Buyers 4) Price of related goods 5) Expectation of future (((((A Change in supply is caused by any determinants changing and a Change in Quantity Supplied is caused by a change in price of a specific product))))))

How does monopolistic competition differ from pure competition in its basic characteristics? From pure monopoly?

In monopolistic competition there is large number of small firms; in which each firm has relatively small market share, and each firm is sensitive to the average market price of its product. The products are similar but not identical products sold by the firms, and there are no barriers of entry into and exit out of the industry. On the hand, pure competition is a market in which there are many firms selling identical products with no firm large enough, relative to the entire market, to be able to influence market price. In fact, each firm in the industry is so small and its output so negligible that it exercises little influence over price of the commodity in the market. In a perfect competitive market, there is very large number of buyers of the product and the seller is a price taker. As well, in pure competition, entry is completely without barriers. In pure monopoly there is only one firm, and its product is unique with no close substitutes. The firm has much control over price, being a price maker. In addition, entry to its industry is blocked, and advertising is mostly for public relations

Critics of the minimum wage argue that an increase in the minimum wage rate above the equilibrium rate of a purely competitive labor market would...

Increase unemployment in the labor market

If the nominal wages of carpenters rose by 5 percent in 2008 and the price level increased by 3 percent, then the real wages of carpenters...

Increased by 2 percent

Explain the meaning and significance of the fact that the demand for a resource is a derived demand. Why do resource demand curves slope downward?

Resource demand is more passive in the sense that it is derived from the demand for the products the resource can produce. If a resource can't be used in production of a desired product, there will not be any demand for it. Additionally, resources are often less mobile than products, so their geographic location relative to demand for the output they produce may be an important factor determining demand for resources in particular geographic areas. Resources, factors of production, are not hired or bought because their employer or buyer desires them for themselves. The demand for resources is entirely derived from what the firm believes the resources can produce. If there were no demand for output, there would be no demand for input.

Which of the following are potential problems with directing and managing government?

The Government's massive size and scope, it is difficult for the government to effectively aggregate information from bottom to top

Economics is a social science concerned with...

The best use of scarce resources to achieve the maximum satisfaction of economic wants

Explain why the general level of wages is high in the United States and other industrially advanced countries. What is the single most important factor underlying the long‐run increase in average real‐wage rates in the United States?

The general level of wages is higher in the United States and other industrially advanced nations because of the high demand for labor in relation to supply. Labor productivity is high in the U.S and other industrially advanced countries because: (1)capital per worker is very high; (2) natural resources are abundant relative to the size of the labor force particularly in the U.S.; (3) technology is advanced in the United States and other industrially advanced countries relative to much of the rest of the world; (4)labor quality is high because of health, vigor, training, and work attitudes; (5) other factors contributing to high American productivity are the efficiency and ±flexibility of American management; the business, social, and political environment that greatly emphasizes production and productivity; and the vast domestic market, which facilitates the gaining of economies of scale.

Suppose all workers are identical, but working for Ajax is more pleasant than working for Acme. In all other non-wage aspects the two firms offer the same job characteristics. We would expect Wages a Ajax to be ? than at Acme

Wage rates at Ajax to be lower than at Acme.

The term oligopoly indicates...

a few firms producing either a differentiated or a homogeneous product.

Resource X has many close substitutes whereas resource Y has no close substitutes. Other things equal, we would expect the demand for resource X to be.....

be more elastic than the demand for resource Y.

17. A person should consume more of something when its marginal...

benefit exceeds its marginal cost

In moving down the elastic segment of the monopolist's demand curve, total revenue is...

increasing, and marginal revenue is positive