Econ Final

TR equation

P*Q

Phil's Copy Studio pays its workers $90 per day and sells poster-size copies for $15 per print. Now suppose that, during the holiday season, the price of poster-size copies increases to $20. What happens?

The demand for labor increases.

The "dilemma" in a Prisoner's Dilemma refers to the fact that

both players would be better off by cooperating (not confessing), but not cooperating (confessing) is a dominant strategy

A natural monopoly exists when

increasing returns to scale (economies of scale) provide a large cost advantage to a single firm.

Suppose that the government decided to reduce pharmaceutical patent protection by requiring companies to sell their drugs at marginal cost. What are the likely consequences of such a policy?

All of these statements are correct

Derived demand suggests that

labor demand is derived from demand for the product it produces.

tactic collusion occurs when firms

limit competition with one another implicitly

If you travel to Chicago, youcan stay at a Holiday Inn in the downtown area, in a suburban community, or near the airport. These Holiday Inn establishments are examples of product differentiation by

location

When firms price-discriminate, ppl w/ ___ price elasticity of demand will pay ___ prices relative to those purchasing the same product who have a ___ price elasticity of demand

lower; higher; higher

In which type of market structure do entry barriers exist?

oligopoly and monopoly

which labor supply curves will bend backward at high wages?

only the individual labor supply curve

The effect of products differentiation is to

reduce competition among the firms in the oligopoly

Critics of advertising argue that it

results in higher prices to consumers

Game theory is the study of

strategic decision making g

Which advertising slogan provides information to potential buyers?

"Bee's Beachside Restaurant is the only restaurant on the beach for 50 miles."

Differentiated goods

goods that are different but considered somewhat substitutable by consumers (e.g. Coke vs. Pepsi).

Gary Becker's theory of economic discrimination explains how firms that discriminate will

have higher labor costs

List the barriers to entry mentioned in class

1. control over a key input of production 2. economies of scale (large fixed cost) 3. technological superiority 4. Gov't created barriers (patents, copyrights, trademarks) 5. network externalities (values increases as more people use it

Which of these is not an example of price discrimination?

a novel printed in paperback that sells for more than the same book in an electronic format

Suppose the equilibrium market wage for bricklayers is $100 a day, but then a minimum wage of $130 a day for bricklayers is set by the government. As a result

3 workers who would have been employed at the previous $100 market wages will be let go

Advertising is an example of

nonprice competition

The Sherman Antitrust act

Act of 1890 United States antitrust law that regulates competition among enterprises, which was passed by Congress under the presidency of Benjamin Harrison

Haircuts for men are often cheaper than haircuts for women, even when they are offered by the same stylist. Why might this be price discrimination?

Demand for haircuts for women might be more inelastic than demand for haircuts for men, and haircuts are impossible to arbitrage.

The first thing that sets monopolies apart from perfect competition is that a monopolist

Is the only producer of a good that has no close substitutes (e.g. De Beers (until circa 1980)

Which of the following is true for monopolies?

P > MR

In the long run, which of the following is true for a monopolistic competitive firm?

Price = ATC and MR =MC.

The 1890 law intended to prevent the establishment of more monopolies and to break up existing ones in the United States was the ___ act

Sherman antitrust

If Tamara is given a $3-per-hour pay increase, and in response she decides to work more hours, then:

Tamara's work hours are represented on the upward-sloping portion of her labor supply curve

Tacit collusion is not feasible in monopolistic competition because of the large number of competing firms.

True

A profit-maximizing firm will hire workers up to the quantity of labor where

VMPL=W.

which factor cause ppl to work more (shift the market labor supple curve to the right?)

a reduction in non-wage income

Jack works for a large lumber company. Although he chose not to join the union for personal reasons, he is still required to pay union dues. Jack's company is represented by which form of union?

agency shop

Gary Becker's views regarding economic discrimination include which idea?

all of these (study his views)

Over the past several years, the demand for phone operators has fallen dramatically. Which factor would account for this development

an increase in the number of automated answering services

Ceteris paribus, a price-discriminating firm will charge less to the customers who

are the most elastic in their demand for a product

Wage differences across jobs that reflect the fact that some jobs are less pleasant than others are called

compensating differentials

The economic inefficiency of a monopolist can be measured by the

deadweight loss involved relative to a competitive firm

Under monopolistic competition, entry of new firms typically causes price to _____ and profits to _____.

decrease; decrease

If a monopolist knows its price elasticity of demand is greater than one, then a(n)___ in price will ___ total revenue

decrease; increase

Diamond rings are relatively scarce because

diamond producers limit the quantity supplied to the market

Maximization of joint profits is most likely when firms are

duopolist who collude

In the long run, monopolistic competitors will:

earn zero economic profits.

Compared with a single-price monopolist, a price-discriminating monopolist

earns higher profits

which characteristics does NOT describe an oligopoly

economic profits are zero in the long run

When a firm finds that its ATC of production decreases as it increases production, this firm is said to be experiencing

economies of scale (aka increasing returns of scale)

Suppose that the gov't eases restrictions on the immigration of scientists and engineers. What would happen in the labor market for these professions, all else equal?

equilibrium wages would fall and labor quantity would rise

De Beers became a monopoly by

establishing control over diamond mines

In which situation can a Prisoner's Dilemma outcome most likely be avoided?

if the game is repeated over and over under the same conditions

Henry Ford produced his cars by _____, while GM produced its cars _____

maximizing economies of scale; with an emphasis on product differentiation

The ability of a monopolist to raise its price above the competitive level by reducing output

market power

An example of an oligopoly is

mobile wireless providers in California

Most electric, gas, and water companies are examples of

natural monopolies

If large fixed costs result in ATC falling as output increases and this occurs over the relevant range of output, this industry is a

natural monopoly

One way to take advantage of economies of scale and to avoid the market power of a natural monopoly in the short run is through

price control

If a player has an incentive to cheat no matter what the other player does and if both players act in this manner, both players will be worse off. This is a...

prisoners dilemma

Suppose there are diminishing returns to labor. If the ___ of labor hired by a firm increases, holding everything else constant, the ___ labor will ___.

quantity; marginal product of; fall

If new technology improves worker productivity, then the marginal product of labor will

rise, shifting demand for labor to the right

In game theory, a dominant strategy ___ exist

sometimes

Which characteristic is NOT that of monopolistic competition?

tacit collusion

In an oligopoly market, pieces will tend to be closer to the competitive price

the more firms there are in the industry

Market structures are categorized by

the number of firms and whether products are differentiated.

The prisoners dilemma refers to

the pursuit of individual interests that lead to an outcome that is in no one's best interest

Cartels are

unstable and tend to lose market power over time