Microeconomics Test 3 Campbell
A characteristic of monopolistic competition that is not present in any other market structure is that there...
Are many sellers, and each produces its own version of the product
A characteristic of an oligopoly is that...
There are a small number of sellers with considerable market power
If the wage rate falls, firms will find that...
They move downward and to the right along the labor demand curve
Suppose a coffee shop in Des Moines, Iowa, hires workers to workers to personalize coffee mugs for special occasions. The store sells the mugs for $7 each. The marginal revenue product of the store's third worker is $84. What is the marginal product of the third worker?
12 coffee mugs
Why is an expert hairstylist more likely to price discriminate than an expert jam maker?
A haircut cannot be resold, but a jar of jam can be resold
All of these government policies would create a barrier to entry in a market except...
A requirement that there can be no switching costs for consumers
Nash Equilibrium
A situation where neither player in Game Theory can improve their circumstances by changing their decision
The BP and Sunoco stations are the only two providers of gasoline in the small town of Davenport. The two gas stations decide to cooperate to raise the local price of gasoline. Total profits of the two businesses are highest when ____ cheats on the agreement. BP's profits are highest when ____.
Neither firm ; BP cheats, but Sunoco does not
Which statement regarding a Nash equilibrium is true?
No player can do better by unilaterally changing his or her choice
The options for rideshare transportation in your city are Uber and Lyft. The market structure is...
Oligopoly
How does output for a seller who has market power compare to output for a seller who does not have market power, assuming both follow the Rational Rule for Sellers
Output is higher for the seller without market power than the one with market power
When labor is hired in a competitive market, the value of the marginal revenue product is computed by...
P x MPL
In a perfectly competitive labor market, employers...
Pay the market wage
You have a garden and sell your tomatoes at the farmer's market on summer weekends. However, many other sellers at the same market sell tomatoes that are indistinguishable from yours. You don't differentiate yourself through branding or certifications, and if you slightly lower your price, you lower your profit margin. The market structure is...
Perfect competition
Many hotel chains offer discounts to AAA members. This is an example of ____ that is ____ in the United States
Price discrimination ; Legal
A price-discriminating company can attract additional customers by ____, this will add to its profits if the ____
Reducing price ; price is not above the company's marginal cost
How do you determine what output and price a firm should charge?
See where the marginal cost curve and marginal revenue curve meet, see what the price for that quantity is on the firm demand curve
Carl owns one of the 30 lawn-mowing businesses in his city. What will happen to his business if there are new entrants into his city's lawn mowing market?
The demand for Carl's services will fall
What is the relationship between a company's market power and the price that the company can charge for its product?
The greater the market power, the higher the price the company can charge without losing many customers
A reservation price is...
The highest price that a customer is willing to pay for a product
In your area, 100 data analysts begin looking for jobs ad 75 retire. If there are no other changes, which is true?
The market labor supply curve shift to the right, with downward pressure on wages
To maximize profits when hiring employees, continue to hire workers until...
The wage equals the marginal revenue product
Economic Profit
Total Revenue - Explicit cost - implicit cost
How to solve a Game Theory problem
Determine which the more profitable choice is for both players
Suppose major streaming services like Netflix, Hulu, Amazon Prime, Disney+, and others collude to charge subscribers a common, higher, minimum price per moth. Why might this agreement not be honored by one of the partners?
Each party has an incentive to lower its price and take customers away from the others
____ attract new sellers into a market
Existing sellers in the market earning economic profits
The marginal product of labor is the...
Extra output produced from hiring an additional worker
As output rises, average fixed costs
Fall
A cost that does NOT depend on the quantity of output produced is...
Fixed
A basic logic that applies to all strategic interactions is that...
Making a good choice requires that you anticipate what others will do
The marginal revenue product is the...
Marginal revenue from hiring an additional worker
How do a company's accounting profit and economic profit compare in size
Accounting profit is larger than economic profit, if there are implicit costs
Total revenue divided by quantity is called ____ , or ____
Average revenue ; price
Accounting Profit
Total revenue - Explicit cost
The two main types of implicit costs are...
Forgone wages and forgone interest
If a group of buyers is price sensitive, then the...
Group will not buy at higher prices
When new sellers enter a market, existing sellers will...
Have less market power
Assume that there is free entry and exit in the coffee shop market. How profitable can Mario expect his coffee shop to be in the long run?
He can expect it to earn zero economic profits
In a product market, why would a company owner prefer to face fewer competitors than more?
With fewer competitors, companies have more market power
Alena manages a small theme park. She hires one more custodian at $450 per week, making her park cleaner and more attractive. As a result of this improvement, ticket sales rise by 40 tickets per week. Tickets sell for $12. Use the Rational Rule for Employers to determine if hiring the extra custodian was a good move.
Yes, it was a good move because it added more to revenue than to cost
