Microeconomics Final

Which of the following are pricing schemes associated with a​ two-part tariff? Refer to the graphs. Which outcome is economically efficient in the market of ride tickets at Disney​ World?

All of the above. The outcome shown in graph B.

What is the difference between a​ firm's shutdown point in the short run and its exit point in the long​ run? In the short​ run, a​ firm's shutdown point is the minimum point on the Why are firms willing to accept losses in the short run but not in the long​ run?

average variable cost​ curve, while in the long​ run, a​ firm's exit point is the minimum point on the average total cost curve. There are sunk costs in the short run but not in the long run.

Given the decision tree above for an entry​ game, Wal-Mart will

build a small store.

Is perfect price discrimination economically​ efficient? Perfect price discrimination is

efficient because it converts into producer surplus what had been consumer surplus and deadweight loss.

What is a production​ function? A​ firm's production function is best described as

illustrating the relationship between inputs and the maximum amounts of output that the firm can produce with these inputs.

What does the​ short-run production function hold​ constant? A​ short-run production function holds constant

the amount of capital.

When marginal cost is less than average total​ cost, average total cost must be

decreasing.

In​ equilibrium, what determines the price of​ capital? The price of capital is determined by What determines the price of natural​ resources? The economic rent or pure rent of natural resources is determined by What is economic​ rent? Economic rent is

equilibrium in the market for​ capital, where the marginal revenue product of capital equals the marginal cost of capital. the demand for the natural​ resource, which is the marginal revenue product of the natural resource. the price of a factor of production that is in fixed supply.

Which of the following is an example of positive technological​ change? Positive technological change occurs when

a firm install faster machinery

Men are overrepresented in some jobs​ (and women are overrepresented in other​ jobs). Explain these differences. One explanation is

women may be more likely to select jobs that allow them to be home in the afternoon

Government failure is

market failure due to government intervention rather than to externalities.

If the wage Jill pays is​ constant, then what is ΔVC in terms of w and​ L?

w x (delta)L

What is a sequential​ game? A sequential game is a game

where one firm acts first and then the other firms respond.

Use your answer above to determine​ Jill's marginal cost of producing pizzas if the wage is ​$800 per week and the marginal product of labor is 100. The marginal cost of production is

$8

Give an example of a firm using a​ two-part tariff as part of its pricing strategy. An example of a​ two-part tariff is

- a tennis club requiring the purchase of an annual membership in addition to a fee each time members use the tennis courts -Sam's club requiring consumers to pay a membership fee before shopping at its stores

What is the law of diminishing​ returns? The law of diminishing returns states that Does it apply in the long run?

Adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline. No

An example of technological change is

All of the above

A student​ argues: ​"To maximize profit.​, a firm should produce the quantity where the difference between marginal revenue and marginal cost is the greatest. If a firm produces more than this​ quantity, then the profit made on each additional unit will be​ falling." Is the above statement true or​ false?

False. Profit is maximized at the output level where marginal revenue equals marginal cost.

Use the information in the graph to the right to find the values for the following at an output level of 65.

HW 6 Chapter 11 and 12 #12

Consider the table​ below, which describes the amount of output produced by various quantities of workers. Use the numbers from the table above to draw a graph showing the marginal product of labor and the average product of labor.

HW 6 Chapter 11 and 21 #15

Which of the following correctly explains the effect of a variable on the labor demand​ curve?

If the number of firms in the market increases, then the labor demand curve will shift to the right

Which type of tax raises the most revenue for the federal​ government? Which type of tax raises the most revenue for state and local​ governments?

Individual income taxes. Sales tax.

How does collusion make firms better​ off? Given the incentives to​ collude, why​ doesn't every industry become a cartel?

The firms can act as a single​ entity, like a monopoly. All of the above.

The average total cost curve and the marginal cost curve are

U shaped.

Any cost that changes as output changes represents a​ firm's

Variable cost

Corporate income taxes

are progressive in the US because companies pay a higher rate if they have a greater level of income.

If one of the two firms expands​ production, then that firm will

be able to offer lower​ prices, driving the other firm out of business.

If the labor supply curve shifts to the right and the labor demand curve remains​ unchanged, what will happen to the equilibrium wage and the equilibrium level of​ employment? After the labor supply curve that has shifted to the right​, the new equilibrium will be where The equilibrium wage --(1)-- and the equilibrium level of employment --(2)--

the original labor demand curve intersects the new labor supply curve. 1. decreases 2. increases

If labor supply is​ unchanged, an increase in labor demand will​ ________ the equilibrium wage and​ ________ the number of workers employed.

​increase; increase

A form of market structure studied by economists is monopoly. When is a firm a​ monopoly, or are monopolies only theoretical concepts that do not​ exist?

A firm is a monopoly if its economic profits are not competed away in the long run

Review the figure to the right on the inefficiency of monopoly. Will the deadweight loss due to monopoly be larger if the demand is elastic or if it is​ inelastic? Briefly explain. When a monopoly maximizes​ profit, deadweight loss will be larger if demand is

inelastic because price will be farther from marginal cost.

A tax where people with lower incomes pay a higher percentage of their income in tax than do people with higher incomes is called a As presented in the​ text, how is the federal income tax​ structured?

regressive tax. The rate at which income is taxed increases as income increases. Up to a​ limit, additional amounts of income are taxed at ever greater rates.

The average total cost curve and the marginal cost curve are related in that

the MC curve passes through the minimum point of the ATC curve.

Further, positive technological change is defined as

-being able to produce more output using the same inputs. -being able to produce the same output using fewer inputs.

What is personnel​ economics? Personnel economics is

-the application of economic analysis to human resource issues such as training -the application of economic analysis to human resource issues such as the link between differences among jobs and differences in the way workers are paid.

Now suppose instead that two firms are in the​ market, each producing half of the​ market's electricity. If each firm has the same average total cost​ curve, then the average cost of producing electricity will now be ​$ _______

0.18

Suppose 18 units of output are supplied in the market. How much lower is the average total cost of production for one firm compared to two​ firms? One firm can supply 18 units of output for ​$_____ less per unit

1

What is positive technological change? Positive technological change is when

A firm is able to produce the same output with fewer inputs A firm is able to produce more output with the same inputs

List the errors in the graph to the right ​(where AFC is average fixed​ cost, AVC is average variable​ cost, ATC is average total​ cost, and MC is marginal cost​).

AFC should be​ MC, ATC should be​ AVC, and AVC should be ATC.

List the errors in the graph to the right ​(where AFC is average fixed​ cost, AVC is average variable​ cost, ATC is average total​ cost, and MC is marginal cost​).

AFC should be​ MC, ATC should be​ AVC, and AVC should be ATC.

How are implicit costs different from explicit​ costs?

An explicit cost is a cost that involves spending​ money, while an implicit cost is a nonmonetary cost.

In the book publishing​ industry, how are firms able to price discriminate across​ time?

An​ author's most devoted book fans want to buy the​ author's books as soon as they are published

Suppose Best Buy is the only electronics store in a particular​ market, but RadioShack is thinking about entering the market. Best Buy chooses how much to produce first and then RadioShack chooses whether to enter the industry. The strategies and corresponding profits for Best Buy​ (BB) and RadioShack​ (RS) are depicted in the decision tree to the right. What will the firms​ do?

Best Buy will choose the large quantity and RadioShack will not enter.

What is perfect price​ discrimination?

Charging every consumer a different price equal to their willingness to pay.

Economic theory suggests perfectly competitive markets are efficient. How should competition affect economic​ discrimination?

Competition among firms may reduce but not completely eliminate discrimination due to negative feedback loops​,where discrimination discourages black workers from training to enter certain occupations.

Which of the following is most likely to a variable cost for a business​ firm?

Cost of shipping products

Define economic discrimination. Is the fact that one group in the population has higher earnings than other groups evidence of economic​ discrimination?

Economic discrimination is paying a person a lower wage or excluding a person from an occupation on the basis of an irrelevant characteristic such as race -No. Differences in earnings between groups could be due to worker productivity. -No. Differences in earnings between groups could be due to worker preferences.

If consumers cannot resell​ products, which of the following is​ true?

Firms can practice price discrimination.

The graph to the right represents the situation of​ Marguerite's Caps, a firm selling caps in the perfectly competitive cap industry.

In order to maximize her​ profits, Marguerite should produce 100 caps. At the​ profit-maximizing level of​ output, she will earn a profit of ​$200. ​ Suppose Marguerite decides to shut down. Her loss would be ​$300.

Is the amount of time that separates the short run from the long run the same for every​ firm?

No

Is it possible for marginal revenue for a firm operating in a perfectly competitive industry to be​ negative? Would a firm selling in a monopolistically competitive market ever produce where marginal revenue is​ negative?

No No because marginal cost cannot be negative.

Suppose Farmer Smith grows apples. The enitre market for apples is shown in the figure below. Assume the market for apples is perfectly competitive Use the line drawing tool to draw the demand curve for farmer​ Smith's apples. Label this line​ 'Demand for Smith​ apples'.

Straight horizonal line where supply and demand intersect

Which of the following policies follows the​ ability-to-pay principle?

The U.S. income tax has people with higher overall resources paying a larger amount of the overall income taxes.

Surveys of consumers about their willingness to purchase a product revealed which​ fact(s) about odd​ pricing? Which of the following is an example of odd​ pricing?

The quantity demanded of goods with odd prices was greater than predicted using an estimated demand curve. Charging​ $4.99 instead of​ $5.00.

Is it possible to price discriminate across​ time? Briefly explain.

Yes. Firms can charge higher prices at times when consumers are less price sensitive and lower prices at times when consumers are more price sensitive.

Is it possible for average total cost to be decreasing over a range of output where marginal cost is​ increasing? Briefly explain.

Yes. If marginal cost is less than average total​ cost, then average total cost will be decreasing.

What is the difference between zero accounting profit and zero economic​ profit?

Zero economic profit includes a​ firm's opportunity costs but zero accounting profit does not.

What is negative technological​ change? Negative technological change is when

a firm produces less output with the same inputs

What are implicit​ costs? An implicit cost is

a nonmonetary opportunity cost.

An example of yield management is

all of the above.

Which of the terms below is defined as​ "anything that keeps new firms from entering an industry in which firms are earning economic​ profits"? Economies of scale exist when a​ firm's ___________ average costs fall as it​ __________ output. Which of the following terms is a barrier to​ entry?

barriers to entry ​long-run; increases ownership of a key input patents economies of scale

What is​ cost-plus pricing? ​Cost-plus pricing is ​Cost-plus pricing is The percentage markup

charging consumers a price by adding a percentage markup to average cost. not consistent with a firm maximizing profits because it ignores demand. is higher on products that have inelastic demand and is lower on products that have elastic demand.

A game theory analysis of deterring entry concludes that

deterring entry may be a good or a bad​ idea, depending on the circumstances.

Do airlines practice price discrimination? Explain. Airlines

engage in price discrimination by reducing the price on seats that they expect will not be sold

Since the marginal cost of production is less than the average total cost of​ production, the average total cost of production must be

falling

The graph to the right represents the situation of​ Marguerite's Caps, a firm selling caps in the perfectly competitive cap industry. In order to maximize her​ profits, Marguerite should produce ___ caps

https://www.chegg.com/homework-help/questions-and-answers/graph-right-represents-situation-marguerite-s-caps-firm-selling-caps-perfectly-competitive-q13101425

The marginal product of labor is The marginal product of labor curve Which of the following is true regarding the shapes of the marginal product of labor and the average product of labor​ curves?

initially increasing and then decreasing. intersects the average product of labor curve when the average product of labor is at a maximum. -The marginal product of labor initially increases due to division of labor and then decreases due to diminishing returns. -Whenever the marginal product of labor is greater than the average product of​ labor, it pulls the average product of labor up.

The figure to the right illustrates market demand for a monopoly along with its average total cost​ (ATC) curve. Is the monopoly a natural monopoly​? The firm

is a natural monopoly because it can supply the entire market at lower average total cost than can two or more firms.

A monopolistically competitive​ firm's demand curve ​(D​), marginal revenue curve ​(MR​), and marginal cost curve ​(MC​) are illustrated in the figure. Is this firm maximizing profits if it chooses to produce 2 units of​ output? Explain. If the firm chooses to produce 2 units of​ output, then it is

not maximizing profit because marginal cost is less than marginal​ revenue, so the firm should produce more.

What effect does the entry of new firms have on the demand curve of an existing firm in a monopolistically competitive​ market? The entry of new firms cause the demand curve of an existing firm in a monopolistically competitive market to

shift to the left and become more elastic.

Suppose the government adds an excise tax on​ cigarettes, which shifts the supply curve from S1 to S2​, as illustrated in the figure to the right. What is the excess burden of this excise​ tax? ​First, the quantity produced with the tax is The excess burden can be represented by an area equal to the triangle

that quantity where D interects S2 under the demand curve and above S1 for units between Q1 and the quantity produced.

Why might a monopoly​ arise? One firm will be present when

the government blocks entry of more than one firm by granting a copyright

How are prices determined in perfectly competitive markets In perfectly competitive​ markets, prices are determined by

the interaction of market demand and supply because firms and consumers are price takers.

If the marginal product of labor is falling​, is the marginal cost of production rising or​ falling? Briefly explain. If the additional output from each new worker is falling​,

the marginal cost of that output is rising because the only additional cost to producing more output is the additional wages paid to hire more workers.

Consider the natural monopoly shown in the figure on the right. Assume that the government regulatory agency sets the regulated​ price, PR​, at the level of average total cost at which the demand curve intersects the ATC curve. With price set equal to average total​ cost,

the natural monopoly has no incentive to keep its average cost down in the future.

Many firms might like to be monopolies because such firms earn economic profits in the long run. What might cause a​ monopoly? A firm is likely to be a monopoly if

there are important externalities in supplying good or service

William Germano previously served as the vice president and publishing director at the Routledge publishing company. He once gave the following description of how a publisher might deal with an unexpected increase in the cost of publishing a​ book: ​"It's often asked why the publisher​ can't simply raise the price​ [if costs​ increase]... It's likely that the editor​ [is already]... charging as much as the market will bear. ... In other​ words, you might be willing to pay​ $50.00 for a ... book on the Brooklyn​ Bridge, but if... production costs​ [increase] by 25​ percent, you might think​ $62.50 is too much to​ pay, though that would be what the publisher needs to charge. And indeed the publisher may determine that​ $50.00 is this​ book's ceiling—the most you would pay before deciding to rent a movie​ instead." ​Source: William​ Germano, Getting It​ Published: A Guide to Scholars and Anyone Else Serious about Serious Books​, ​Chicago: University of Chicago​ Press, 2001, pp.​ 110-111. According to the graph on the right and what you have learned in this​ chapter, a monopolistically competitive firm responds to an increase in cost by adjusting the price __________ This model does not fit​ Germano's description because he assumes​ what? If a publisher does not raise the price of a book following an increase in its production​ cost, the result will be The ability of a publishing company to raise book prices when costs increase would be​ greater, the

upward Demand is perfectly elastic. less than maximum profit. lower

Is price discrimination​ illegal? In recent​ years, the courts have interpreted the

​Robinson-Patman Act such that price discrimination is illegal if it reduces competition.

Given the decision tree​ below, TruImage's profits are​ $1.5 million if the firm accepts​ Dell's contract offer of​ $20 per copy. Given the decision tree​ above, will Dell offer TruImage a contract of​ $20 per copy or a contract of​ $30 per​ copy?

$30

If the wage falls to ​$700 per week and the marginal product of labor is​ unchanged, then​ Jill's marginal cost -- (1)--- If instead the wage is unchanged at ​$800 per week and the marginal product rises to 150​, then​ Jill's marginal cost ---(2)---

1. decreases 2. decreases

Consider a firm in each of the following three​ situations, and explain whether the firm will produce in the short run or shut down in the short run. In situation​ 1, the firm should --(1)-- In situation​ 2, the firm should --(2)-- In situation​ 3, the firm should --(3)--

1. produce​ 1,000 units of output and break even with a price of​ $10.00. 2. produce​ 1,000 units of output at a loss since the price is less than the average total cost. 3. shut down since the price is less than the average variable cost.

The graph to the right depicts the demand for caffe lattes at a local coffeehouse along with the average total cost and marginal cost of producing lattes. Suppose the coffeehouse is in a monopolistically competitive market in the short run. How many caffe lattes should this coffeehouse produce to maximize​ profits? _______ What is the corresponding​ profit-maximizing price? ________ Calculate the​ coffeehouse's profits on caffe lattes. ​$_________

44 units $4.8 per latte $19.8

Which of the following policies is not consistent with the​ benefits-received principle?

A city creates a property tax to raise revenue for a new skate park.

A flight route is served by American Airlines​ (AA) and Southwest Airlines​ (SW). Suppose American is the industry leader. American will decide whether to raise​ airfares, and then Southwest will decide whether to match the price increase. What is the Nash equilibrium of the​ game?

American will leave fares unchanged and Southwest will leave fares unchanged.

Which of the graphs above represents a typical average total cost​ curve?

B

In the figure to the​ right, consider the marginal revenue of the fifteenth unit sold. When the firm cuts the price from $8.00 to $7.80 to sell the fifteenth ​unit, the area in the graph denoting the output effect is given by In​ dollars, this effect is ​$____ When the firm cuts the price from $8.00 to $7.80 to sell the fifteenth ​unit, the area in the graph denoting the price effect is given by _____ The marginal revenue of the fifteenth unit is therefore equal to

C $7.8 B $5

In the following​ graph, indicate the area representing the Red Robin​ restaurant's profit when the demand curve is D1 and the area representing its loss when the demand curve is D2

HW 7 Chapter 13-14 #18

Any cost that remains unchanged as output changes represents a​ firm's

Fixed cost

Consider the production of slices of pizza. The average total cost​ (ATC) and average fixed cost​ (AFC) of producing slices of pizza are illustrated in the graph to the right. Use the​ four-point curve drawing tool to graph the average variable cost of producing​ one, two,​ three, and four thousand slices of pizza. Properly label this curve.

HW 6 Chapter 11-12 #24

The graph to the right shows a firm in a perfectly competitive market making a profit. The graph includes the​ firm's marginal cost​ curve, average total cost​ curve, and average variable cost curve. Assume the market price is ​$28.

HW 6 Chapter 11-12 #34

Farmer Brown grows cotton. The average total cost and marginal cost of growing cotton for an individual farmer are illustrated in the graph to the right. Assume the market for cotton is perfectly competitive and that the market price is ​$26 per bushel. Also assume that farmer Brown is producing the amount of cotton that maximizes profits.

HW 6 Chapter 11-12 #42

Suppose the figure to the right illustrates the cost curves for a firm in a perfectly competitive market. Let MC be the marginal cost curve and ATC be the​ short-run average total cost curve. Market demand is indicated by​ "D." What is the​ firm's profit when it produces optimally in the short​ run?

HW 6 Chapter 11-12 #43

State whether each of the following events will result in a movement along the market demand curve for labor in electronics factories in China or whether it will cause the market demand curve for labor to shift. If the demand curve​ shifts, indicate whether it will shift to the left or to the right in the provided graph.

HW 9 Chapter 17-18 #4

Consider the following hypothetical income tax brackets for a single taxpayer. Assume for simplicity there are no exemptions or deductions. Is this tax​ regressive, progressive, or​ proportional? The income tax is --(1)-- Suppose​ Susan's income is ​$20,000. How much will she pay in income​ taxes? Susan will pay ​$ --(2)-- income taxes

HW 9 Chapter 17-18 #43 1. regressive 2. 11500

Suppose a firm produces hardware that plays video games using workers according to the table below. Suppose also that its output sells for ​$150 per unit. Is the firm experiencing the effects predicted by the law of diminishing returns? The third ​worker's marginal revenue product is

HW 9 Chapter 17-19 #7 The firm is experiencing diminishing returns $1800

Suppose Miles hires workers to cook pizzas. The table shows how many pizzas can be produced with various quantities of labor. Calculate the marginal product of labor. ​(Enter a numeric response using a real number rounded to one decimal​ place.)

Marginal Product of Labor = Difference in the Quantity of Pizzas

A situation where each firm chooses the best​ strategy, given the strategies chosen by other​ firms.

Nash equilibrium

President Barack Obama proposed legislation that Congress failed to enact that would have included the​ so-called "Buffett​ Rule," named after billionaire Warren​ Buffett, who noted that he was paying a lower tax rate than his secretary. The​ "Buffett Rule" would set a new tax rate for those earning incomes of more than​ $1 million per year. Looking at the above table for the percentage of federal taxes paid by the different income​ categories, is Mr.​ Buffett's situation of paying a lower tax rate than his secretary typical of the highest 1 percent of U.S. income​ earners? Capital gains are Which of the following goals and principles of evaluating taxes is relevant to considering whether the federal government should continue to tax capital gains at a lower rate than ordinary​ income?

No the profits from the sale of an asset like a stock. The​ ability-to-pay principle.

Refer to the graph to the right of an electric utility that has a natural monopoly. If regulators want to achieve economic​ efficiency, what price would regulators require the utility to​ charge? What price will ensure that the owners of the utility will break even on their​ investment?

P3 P2

Some people—usually business travelers—have a very strong desire to fly to a particular city on a particular​ day, and airlines charge these travelers higher ticket prices than they charge other​ people, such as families who are planning vacations months in advance. Some people really like Big Macs and other people only rarely eat Big​ Macs, preferring to eat other food for lunch on most days. Consider the following possible explanations of why airlines can charge different people different​ prices, while​ McDonald's can't. Which is​ correct?

Since people​ can't resell airline​ tickets, they cannot buy them at a low price and resell them at a high​ price, whereas people can resell hamburgers.

In the second​ graph, illustrate a change in the market that is consistent with Brian​ Cashman's explanation for the decline in salaries.

Supply shift down and to the right

How are decision trees used to analyze sequential​ games? A decision tree

contains decision nodes where firms must make​ decisions, arrows illustrating the​ decisions, and terminal nodes showing the resulting rates of return.

Suppose a monopolistically competitive firm sells a particular brand of jeans. The quantities of jeans sold per day at various prices are shown in the table below. Fill in total revenue and marginal revenue in the table below. ​

The marginal revenue curve for this firm is below its demand curve

Refer to the to graph. For a certain output range​ (or quantity of pizzas produced per​ day), marginal cost is greater than average cost. What is this output​ range?

The output range greater than about 525 pizzas per day

A startup firm in a perfectly competitive market finds that its average total cost is higher than the market price. Since the firm is incurring​ short-run losses, the management is debating whether to continue operations. Alex​ Ferguson, a senior​ manager, feels that this is a temporary phase and the firm should continue operations. Which of the​ following, if​ true, would weaken​ Alex's argument?

The price of the main component of the​ firm's product is expected to increase.

Farmer Smith grows wheat. The average total cost and marginal cost of growing wheat for an individual farmer are illustrated in the graph to the right. Suppose the market for wheat is perfectly competitive. If the market price is ​$7 per bushel​, then to maximize​ profits, farmer Smith should produce

The quantity where price and MC intersect 65 thousand bushels of wheat

What is yield​ management? Give an example of a firm using yield management to increase profits. Yield management is the practice of

continually adjusting prices to take into account fluctuations in demand.

Suppose that the quantity demanded per day for a product is 40 when the price is​ $35. The following table shows costs for a firm with a monopoly in this market. Briefly explain whether this firm has a natural monopoly in this market.

This firm has a natural monopoly because it produces at lower average total cost than two or more firms would.

Why have some firms traditionally used odd​ pricing? Firms have traditionally used odd pricing because An example of odd pricing might be to charge ​$___ instead of $30.00

charging a nickel less than a round number somehow seems like a significant reduction. $29.50

The graph to the right illustrates the average product of labor. Use the​ three-point curved line drawing tool to graph the marginal product of labor. Properly label this curve. Why do the marginal product of labor and the average product of labor curves have the shapes illustrated in the​ graph?

Week 6 Chapter 11 and 12 #12 Both a and b.

Almost all states levy sales taxes on retail​ products, but about half of them exempt purchases of food. In​ addition, virtually all services are exempt from state sales taxes. a. The exemption of food from sales taxes is most likely explained by​ what? b. The exemption of services from sales taxes is most likely explained by​ what?

a. The​ ability-to-pay principle. b. Attaining social objectives such as avoiding tax evasion.

Why do single firms in perfectly competitive markets face horizontal demand​ curves?

With many firms selling an identical​ product, single firms have no effect on market price.

An article in the Wall Street Journal about attempts by Congress to rewrite the tax code to make it more efficient noted that there were many provisions in the code intended to reduce the taxes paid by industries in districts of the members of Congress supporting the provisions. In​ total, these provisions result in tax losses of​ $1 trillion to the federal government. The article observed that eliminating these provisions is​ "virtually impossible ...​ [because] congressional sponsors engage in logrolling to make sure almost everything stays in year after​ year." Logrolling refers to the situation where Suppose that eliminating tax preferences for industries in districts of members of Congress supporting the provisions would increase the federal governments tax receipts by​ $1 trillion, which could then be used to lower the tax rates of the individual income tax. Such a change would likely A change like this is more likely to be enacted if those that

a member of Congress votes to approve a bill in exchange for favorable votes from other members on other bills. benefit the economic interests of a larger group. benefit have significant political influence.

Michael Korda for many years was​ editor-in-chief at the Simon​ & Schuster book publishing company. He has described the many books that have become bestsellers by promising to give readers financial advice that will make them​ wealthy, by, for​ example, buying and selling real estate. Korda is very skeptical about how useful the advice in these books​ is: ​ "I have yet to meet anybody who got rich by buying a​ book, though quite a few people got rich by writing​ one." ​ a. On the basis of the analysis in this​ chapter, which of the following statements is​ true? b. Refer to the figure to the right. Note that P and Q are the​ profit-maximizing price and quantity. This firm was first in the market. It is currently earning​ what? c. Refer to the figure to the right. What will happen if there is entry into the​ market?

a. All of the above are true. b. An economic profit. c. The demand curve will shift to the left.

Bradford is a small town that currently has no​ fast-food restaurants.​ McDonald's and Burger King are both considering entering this market. Burger King will wait until​ McDonald's has made its decision before deciding whether to enter. Use the decision tree below to determine the optimal strategy for each​ company, assuming that the minimum rate of return that owners of​ fast-food restaurants require on their investment is 20% a. What is the optimal strategy for Burger​ King? b. What is the optimal strategy for​ McDonald's?

a. Enter the market if Mcdonald's builds a small store b. Build a large store

The figure to the right illustrates the average total cost curves for two automobile manufacturing​ firms: LittleAuto and BigAuto. Under which conditions would you expect to see the market composed of firms like LittleAuto and under which conditions would you expect to see the market dominated by firms like​ BigAuto? a. When the market demand curve intersects the quantity axis at less than​ 1,000 units. b. When the market demand curve intersects the quantity axis at more than​ 1,000 units but less than​ 10,000 units. c. When the market demand curve intersects the quantity axis at more than​ 10,000 units.

a. Firms like LittleAuto b. Firms like BigAuto c. Firms like BigAuto

Governments often have multiple objectives in imposing a tax. In each part of this​ question, use the demand and supply graph to help determine your answer. a. If the government wants to minimize the excess burden from excise​ taxes, should these taxes be imposed on goods for which demand is inelastic or​ elastic? b. Suppose that rather than minimizing excess​ burden, the government is most interested in maximizing the revenue it receives from the tax. In this​ situation, should the government impose excise taxes on goods for which demand is inelastic or​ elastic? c. Suppose that the government wishes to discourage smoking and drinking alcohol. Will a tax be more effective in achieving this objective if the demand for these goods is inelastic or if the demand is​ elastic?

a. inelastic b. inelastic c. elastic

Suppose Angelica opens a small store near​ campus, selling beef brisket sandwiches. Use the graph to the​ right, which shows the demand and cost for​ Angelica's beef brisket​ sandwiches, to answer the questions that follow. a. If Angelica wants to maximize​ profits, she should sell --(1)-- beef brisket sandwiches per day and charge $--(2)-- b. At the above price and quantity she is making an economic profit​ (or loss) of $--(3)-- c. What is Angelica likely to do in the long​ run?

a1. 55 2. $4.5 b. $-55 c. Exit the industry.

What is the law of diminishing​ returns? The law of diminishing returns states that Does it apply in the long​ run?

adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline. No

An economist argues that with respect to advertising in some​ industries, gains to firms that advertise​ "are matched by losses to​ competitors" in the industry. ​ The​ economist's reasoning assumes that ​However, it could also be the case that

advertising does not increase the size of the market. one​ firm's advertising raises sales for all firms.

World War I began in August 1914 and on the Western Front quickly bogged down into trench warfare. In Belgium and northern​ France, British and French troops were dug into trenches facing German troops a few hundred yards away. The troops continued firing back and forth until a remarkable event​ occurred, which historians have labeled​ "The Christmas​ Truce." On Christmas​ Eve, along several sectors of the​ front, British and German troops stopped firing and eventually came out into the area between the trenches to sing Christmas carols and exchange small gifts. The truce lasted until Christmas night in most areas of the​ front, although it continued until New​ Year's Day in a few areas. Most of the​ troops' commanding officers were unhappy with the truce-they would have preferred the troops to keep fighting through Christmas-and in the future they often used a policy of rotating troops around the front so that the same British and German troops did not face each other for more than relatively brief periods. According to game​ theory, the Christmas Truce occurred because the troops found a The commanding​ officers' strategy was successful in reducing future unauthorized truces because

cooperative equilibrium where players work together to increase their mutual payoff. it lowered the familiarity of the troops and the likelihood of cooperation.

A review of Kappo​ Masa, a popular restaurant in New York​ City, notes,​ "The markup that New York restaurants customarily add to retail wine and sake prices is about 150 percent. The average markup at Kappo Masa is 200 percent to 300​ percent." Even 150 percent is a much larger markup than the markups restaurants use to price the meals they serve. Why do restaurants use a higher markup for wine than for​ food, and why might a popular restaurant mark up the price of wine more than an average restaurant​ does? The difference in the markups is likely due to A popular restaurant might mark up the price of wine more than an average restaurant does because

differences in the price elasticity of demand between the two products. the popularity of a restaurant draws diners who are willing to pay more.

Why might a monopoly​ arise? One firm will be present when

only one firm has control of a key raw material necessary to produce a good

An article in the Economist on the work of the late Nobel Laureate James Buchanan made the following​ observation: ​"It was important... to understand the ways that government could fail​ systematically." In this​ context, government failure means Public choice theory helps us to understand how government could fail systematically because it recognizes that policymakers are The same article notes​ that: ​"Rent-seeking is a very useful concept to have around when thinking about​ policy." Rent seeking is Rent seeking can be useful in understanding why government policies

politicans making bad decisions for their own selfish reasons. no different than consumers or managers of firms and are likely to pursue their own​ self-interest, even if their​ self-interest conflicts with the public interest. lobbying or bribing politicians to gain favorable legislation or regulations. sometimes produce results that are inefficient and harmful to the people.

Consider the restaurant Red Robin. The economic profit when Red Robin has a demand​ curve, D1​, that is above its ATC at the point where MR=​MC, is equal to The economic loss when Red Robin has a demand​ curve, D2​, that is below its ATC at the point where MR=​MC, is equal to

the difference in price and​ long-run average cost multiplied by the quantity produced when demand is D1 the difference in price and​ long-run average cost multiplied by the quantity produced when demand is D2

An article in a Federal Reserve publication notes that​ "nearly all taxes create some market inefficiency in the form of deadweight​ loss." The article notes that when something is taxed the result is​ "an outcome in which both​ [buyers and​ sellers] would gain from more​ production." Taxes result in deadweight loss because Although buyers and sellers would gain from more production of a good or service that is​ taxed, more of the good or service does not get produced because the price that

the equilibrium price​ rises, and the equilibrium quantity​ falls; some consumer surplus and some producer surplus become tax revenue for the​ government, and some becomes deadweight loss. producers receive is​ lowered, so their incentive to produce is lowered.

A startup firm in a perfectly competitive market finds that its average total cost is higher than the market price. Since the firm is incurring​ short-run losses, the management is debating whether to continue operations. Alex​ Ferguson, a senior​ manager, feels that this is a temporary phase and the firm should continue operations. In which of the following cases would it be most advisable to continue to offer a product or service even though money is lost on each​ sale?

​Choi's Traditional Korean Foods loses money on each sale of traditional Korean​ delicacies, but customers who buy those goods also buy items with strong profit margins.

Cecil​ Bohanon, an economist at Ball State​ University, and Brian​ Pizzola, an economist with the accounting firm of Ernst and​ Young, used a proposed tax on income earned by credit card lenders in Minnesota to explain how tax incidence is determined. The​ tax, which state lawmakers did not​ pass, would have been imposed on lenders who charged credit card customers more than 15 percent interest on their balances. Bohanon and Pizzola explained that many of those who paid high interest rates were consumers with fewer other sources of credit and there was nothing to prevent lenders from further raising interest rates after the tax was imposed. John​ Spry, an economist at St. Thomas​ University, stated that the proposed tax was​ "...highly regressive...twenty percent of the new tax would be paid by Minnesota families with the lowest 10 percent of income.​ Thirty-seven percent of the tax would be paid by families with the lowest 20 percent of​ income." Explain why John Spry believed that the proposed tax would have been​ "highly regressive." Do Bohanon and Pizzola believe the elasticity of demand of those who would have been most affected by the tax was more or less elastic than the elasticity of supply of credit card​ lenders?

​Low-income credit card customers would have paid a higher percentage of their income in taxes. Less elastic​ (in absolute​ value) relative to the elasticity of supply of credit card lenders.

Which of the following is an example of price​ discrimination? An example of price discrimination is

-an airline charging higher prices for business travelers than for leisure travelers. -a movie theater charging higher prices for evening showings than for afternoon showings.

The figure to the right shows the average total cost curve for a firm producing electricity and the total demand for electricity in the​ firm's market. If the firm is a monopoly and produces 36 billion kilowatt hours of electricity per​ year, then its average total cost of production will be ​$ _______ per kilowatt hour.

0.1

HW 6 Chapter 11-12 #31 Farmer​ Parker's profit-maximizing level of production is 6 bushels of wheat. At this level of production he produces following the rule Marginal Revenue​ = Marginal Cost and earns the maximum possible profit of ​$5.00. Farmer​ Parker's fixed costs are --(1)-- Suppose that fixed costs increase by ​$2.00. Farmer​ Parker's new​ profit-maximizing level of production after the increase in fixed costs is --(2)-- The amount of profit that Farmer Parker will earn after the increase in fixed costs is

1. $4 2. 6 bushels of wheat 3. $3

HW 6 Chapter 11-12 #33 Farmer Brown grows peaches in Georgia. Suppose the market for peaches is perfectly competitive and that the market price for a box of peaches is ​$74 per box. Farmer​ Brown's marginal cost of production is illustrated in the table. Farmer Brown will charge a price of --(1)-- What is farmer​ Brown's profit-maximizing level of​ output? Farmer Brown maximizes profit when producing --(2)--

1. $74 2. 5 Boxes of peaches

Consider a market with two​ firms, Target and​ Wal-Mart, that sell CDs in their music department. Both stores must choose whether to charge a high price ​($20​) or a low price ​($15​) for the new Miley Cyrus CD. These price strategies with corresponding profits are depicted in the payoff matrix to the right.​ Target's profits are in red and​ Wal-Mart's are in blue. ​Target's dominant strategy is to pick a price of ​$--(1)-- ​Wal-Mart's dominant strategy is to pick a price of ​$ --(2)-- What is the Nash equilibrium for this​ game?

1. 15 2. 15 The Nash equilibrium is for Target and​ Wal-Mart to both choose a price of $15

Why do the marginal product of labor and the average product of labor curves have the shapes illustrated in the​ graph?

Both A and B

Suppose that​ Wal-Mart and Target are selling Sony​ flat-screen computer monitors for a price of either​ $150 or​ $200 each. Based on the information in the payoff matrix to the​ right, what is the likeliest​ outcome?

Both firms will charge​ $150.

b. Although most books were published as scrolls in the first century​ A.D., by the third​ century, most were published as codices. Considering only the factors mentioned in this​ problem, explain why this change may have taken place.

By the third​ century, enough books were being published such that the average cost of producing a book as a codex was lower than the average cost of producing a book as a scroll.

Which of the following is most likely to be a fixed cost for a​ farmer?

Insurance premiums on property Cost of shipping products

These output strategies with corresponding profits are depicted in the payoff matrix to the right.​ Kuwait's profits are in red and Saudi​ Arabia's are in blue. Suppose the two countries form a cartel What is the cooperative equilibrium? What is the Nash equilibrium for this​ game?

The cooperative equilibrium is for Saudi Arabia to produce a low output and Kuwait to produce a low output. The Nash equilibrium is for Saudi Arabia to produce a high output and Kuwait to produce a high output.

Which of the following is an expression of profit for a perfectly competitive​ firm? Profit for a perfectly competitive firm can be expressed as

Profit=(P−ATC)×Q​, where P is​price, Q is​output, and ATC is average total cost.

Suppose transactions costs for a product are zero and the product can be resold. Why might the firms that sell a product charge different​ prices? Firms might charge different prices for the same product even when transactions costs are zero and the product can be resold if the

firms offer different levels of service

In 541​ A.D., an outbreak of bubonic plague hit the Byzantine Empire. Because the plague was spread by​ flea-infested rats that often lived on​ ships, ports were hit particularly hard. In some​ ports, more than 40 percent of the population died. The emperor Justinian was concerned that the wages of sailors were rising very rapidly as a result of the plague. In 544​ A.D., he placed a ceiling on the wages of sailors. The graph shows the effect of the plague on the wages of sailors. Use this same graph to show the effect of​ Justinian's wage ceiling.

https://www.chegg.com/homework-help/questions-and-answers/541-d-outbreak-bubonic-plague-hit-byzantine-empire-plague-spread-flea-infested-rats-often--q42693855

White males earn on average over​ $10,000 more annually than Hispanic females. Is this due to economic​ discrimination? The wage gap between white males and

is partly due to economic discrimination and partly due to differences in education

The U.S. Postal Service​ (USPS) is a monopoly because the federal government has blocked entry into the market for delivering​ first-class mail. Is it also a natural​ monopoly? How can we​ tell? The USPS What would happen if the law preventing competition in this market were​ removed? If the law preventing competition were​ removed, then

is probably not a natural monopoly because if it​ were, then a law blocking competition would not be necessary. new firms would likely enter the market.

How is the market supply curve of labor​ determined? Suppose a labor market consists of three​ workers: Jacob,​ Isabella, and Peter. The market supply curve

is the sum of the individual labor supply curves.

What is the difference between explicit collusion and implicit​ collusion? Unlike explicit​ collusion, implicit collusion

is where firms signal to each other without actually meeting and agreeing to charge the same price.

One of the reasons why monopolies exist is because the government blocks the entry of more than one firm into a market. How might the government do​ this? The government could block entry by

issuing copyright granting the exclusive right to use a creation during the creator's lifetime

Oligopolies exist because of barriers to entry. One of the most important barriers to entry is due to economies of scale. Why is this​ true? It is more likely for an industry to be an oligopoly than competitive in the presence of economies of scale because

minimum average cost occurs when firm output is a large fraction of industry output.

Refer to the graph to the right of the costs for a perfectly competitive firm. Which of the following best represents profit per unit of​ output? Which of the following best represents total​ profit?

the distance between points A and B the shaded rectangle

Tax incidence is

the division of the tax burden between buyers and sellers in a market.

What is required for a firm to successfully engage in price​ discrimination? Successful price discrimination requires

the firm to be able to divide up the market between customers

A marginal tax rate is Which is more important in determining the impact of the tax system on economic​ behavior? The _________ tax rate

the fraction of each additional dollar of income that must be paid in​ taxes, while the average tax rate is the total tax paid divided by total income. marginal

When does the law of one price not​ hold? The law of one price will not hold when

transaction costs are high

Perfect price discrimination is

unlikely to occur because firms typically do not know how much each consumer is willing to pay.

Use your answer above and the expressions given for the marginal product of labor and the marginal cost of output to find an expression for marginal​ cost, ΔTC/ΔQ​, in terms of the​ wage, w, and the marginal product of​ labor, ΔQ/ΔL. Marginal cost equals

w/(ΔQ/ΔL)

What is odd​ pricing? Odd pricing is

when prices end in ​"9"

Give an example of each. An example of explicit collusion is

where firms meet and agree to charge the same price and an example of implicit collusion is price leadership

Is there a connection between how people are paid and what they contribute to​ people's well​ being?

​Yes, because if the output of a market improves well​ being, then all else​ equal, more people will demand the​ product, the labor used to produce it will​ increase, and the wage rate will rise.

An article in the Wall Street Journal discussed the sidewalk vegetable stands in New York​ City's Chinatown. About 80 of these small vegetable stands operate along a handful of streets in that neighborhood. Most supermarkets buy vegetables from large wholesalers. In​ contrast, the entrepreneurs who run the stands in Chinatown buy from smaller wholesalers located in the neighborhood. These​ wholesalers, in​ turn, buy primarily from smaller family​ farms, some located overseas. Because these wholesalers make several deliveries per​ day, the owners of the stands do not have to invest in substantial storage space and the refrigerators that supermarkets use to keep vegetables fresh. The reporter compared prices for vegetables sold by these stands with vegetables sold by her​ supermarket: "In almost every​ case, Chinatown's prices were less than half what I would pay at the supermarket. Among the​ bargains: broccoli for 85 cents a​ pound, $1 each for​ pomegranates, oranges for a​ quarter." Is it likely that the owners of these vegetable stands are earning an economic​ profit? Briefly explain. The owners of these vegetable stands are likely Why​ doesn't competition among supermarkets drive the prices of vegetables they sell down to the prices of the vegetables sold in the Chinatown​ stands?

​Yes, the owners of these vegetable stands are likely earning an economic profit because they remain in business. Vendors in Chinatown have a cost advantage.

With a​ downward-sloping demand​ curve, average revenue is equal to price With a​ downward-sloping demand​ curve, marginal revenue is below price

​actually, average revenue is always equal to​ price, whether demand is downward sloping or not. because the firm must lower its price to sell additional units.

Now suppose Rob increases production to 10,001 hotdogs​, and the total cost of production increases to $2,000.13. What is his marginal cost of producing the 10,001th hotdog​?

$0.13

Suppose Rob is currently producing 10,000 hotdogs per month at a total cost of $2,000.00. What is his average total cost of​ production?

$0.2

Consider a market with two​ firms, Target and​ Wal-Mart, that sell CDs in their music department. Both stores must choose whether to charge a high price ​($20​) or a low price ​($17​) for the new Miley Cyrus CD. These price strategies with corresponding profits are depicted in the payoff matrix to the right.​ Target's profits are in red and​ Wal-Mart's are in blue. ​Target's dominant strategy is to pick a price of ​$ __(1)__ ​Wal-Mart's dominant strategy is to pick a price of ​$__(2)__ What is the Nash equilibrium for this​ game? __(3)__

1. 17 2. 17 3. The Nash equilibrium is for Target and​ Wal-Mart to both choose a price of $17.

Use the graph to the right for​ Elijah's burgers: If Elijah produces at the​ profit-maximizing level of​ output, his total revenue will be $__(1)__ ​Elijah's total cost is $__(2)__ Elijah's earnings $__(3)__ In the long​ run, Elijah's profits will __(4)__

1. 5440 2. 4080 3. 1360 4. fall as new firms enter the market.

HW 6 Chapter 11-12 #30 Farmer Parker will maximize profits by producing --(1)-- Suppose that the marginal cost of wheat increases by​ $0.50 for every bushel of wheat produced. For​ example, the marginal cost of producing the eighth bushel of wheat is now ​$6.50. Will this increase in marginal cost change the​ profit-maximizing level of production for Farmer​ Parker? --(2)-- How much profit will Farmer Parker make​ now?

1. 6 bushels of wheat 2. No 3. $6

The figure to the right illustrates the​ short-run cost curves for a company that produces cell phones. Identify the average total cost curve​ (ATC), the average variable cost curve​ (AVC), the average fixed cost curve​ (AFC), and the marginal cost curve​ (MC) in the figure. The ATC curve is --(1)-- the AVC curve is --(2)-- the AFC curve is --(3)-- and the MC curve is --(4)--

1. C3 2. C2 3. C1 4. C4

When the average product of labor is decreasing, the average product of labor is __(1)__ the marginal product of​labor, and when the average product of labor is increasing, the average product of labor is __(2)__ the marginal product of labor.

1. Greater than 2. Less than

The figure illustrates the average total cost​ (ATC) and marginal cost​ (MC) curves for an orange farmer in California. Assume the market for oranges is perfectly competitive. Suppose the market price of oranges is ​$30.00 per crate. Characterize the​ farmer's profit. At a $30.00 ​price, the farmer will --(1)-- The orange farmer will make a profit if the price of oranges is above --(2)--

1. Make profit 2. $20 per crate

At the end of​ 2016, as the company suffered​ losses, Red Robin CEO Denny Marie Post announced that the company was increasing the number of​ lower-priced items on its menus. In​ particular, the restaurant would increase the number of meals priced at​ $6.99 from one to four. An article on marketwatch.com quoted the CEO as​ saying: "[W]e see our recent upturn in traffic...as validation of our decision to refocus on everyday value...and improved​ speed-to-table." In increasing the number of​ lower-priced menu​ items, Red Robin is more likely to be reacting to competition from ---(1)---. In emphasizing improved service time​("speed-to-table"), Red Robin is more likely to be reacting to competition from ---(2)--- Would these two strategies be an example of a firm in a monopolistically competitive industry attempting to differentiate its​ product? If​ not, briefly explain why the CEO may have decided to pursue these strategies. --(3)--

1. Panera Bread 2. Mcd 3. ​Yes, because Red Robin is trying to differentiate its products in order to compete with other firms.

Suppose the wage increases. What effect will this have on a​ worker's labor​ supply? The substitution effect of a wage increase causes the worker to supply --(1)-- quantity of labor The income effect of a wage increase causes the worker to supply --(2)-- quantity of labor If the substitution effect is bigger than the income​ effect, then the supply curve will slope --(3)--

1. a larger 2. a smaller 3. upward

Briefly explain which of the five competitive forces is involved in each of the following business developments. The effect on Apple as Microsoft introduces the Surface Laptop computer The competitive force involved in this business development is --(1)-- The effect on​ McDonald's as White Castle and Taco Bell consider starting to sell breakfast food. The competitive force involved in this business development is --(2)-- The effect on cable television firms as Apple plans a Web TV service that will include programs from 25 to 30 cable networks. The competitive force involved in this business development is --(3)-- The effect on the publishing firm Hachette when Amazon bargains to lower the prices of the books Hachette sells on​ Amazon's site. The competitive force involved in this business development is --(4)-- The effect on the AMC movie theater chain of IMAX increasing the fees it charges to theaters to use its technology. The competitive force involved in this business development is --(5)--

1. competition from existing firms. 2. competition from substitute goods or services. 3. the threat from potential entrants. 4. the bargaining power of buyers.

An article in the Wall Street Journal discussed why the hotel workers union in New York City was against a proposal for more hotels to be built in​ mid-town Manhattan:​ "The union is concerned that rapid hotel development shrinks room prices and profit​ margins, driving down the wages of its​ members." The demand for hotel workers is --(1)-- the demand for hotel rooms. When the supply of hotel rooms increases and the price of hotel rooms falls​ (the price of the product​ falls), the marginal revenue product --(2)--, --(3)--, the demand for hotel​ workers, and --(4)--the wage of hotel workers.

1. derived from 2. falls 3. decreasing 4. lowering

The graph to the right depicts the demand​ (and marginal​ revenue) for a monopolistically competitive​ firm's shampoo along with the average total cost and marginal cost of producing shampoo in the short run. As the market for shampoo moves toward a​ long-run equilibrium, firms will --(1)-- This will shift the demand curves for existing firms to the --(2)-- and the demand curves of existing firms will become --(3)-- elastic.

1. exit the industry 2. right 3. less

For Jill​ Johnson's pizza​ restaurant, explain whether each of the following is a fixed or variable cost. The payment she makes on her fire insurance policy is a __(1)__ cost The payment she makes to buy pizza dough is a __(2)__ cost. The wages she pays her workers is a __(3)__ cost. The lease payment she makes to her landlord who owns the building where her store is located is a __(4)__ cost. The​ $300-per-month payment she makes to her local newspaper for running her weekly advertisements is a __(5)__ cost.

1. fixed 2. variable 3. variable 4. fixed 5. fixed

Southwest signs a new contract with the Transport Workers Union that requires the airline to increase wages for its flight attendants. Marginal cost would increase ---(1)--- average variable cost would ---(2)--- average fixed cost would ----(3)--- and average total cost would ---(4)---

1. increase 2. increase 3. remain unchanged 4. increase

The federal government starts to levy a​ $20 per passenger carbon emissions tax on all commerical air travel. Marginal cost would ---(1)--- average variable cost would ---(2)--- average fixed cost would ---(3)--- and average total cost would ---(4)---

1. increase 2. increase 3. remain unchanged 4. increase

The equilibrium wage __(1)__ and the equilibrium level of employment __(2)__

1. increases 2. decreases

For​ example, business travelers have a more ___(1)___ demand than leisure​ travelers, so airlines charge business travelers __(2)__

1. inelastic 2. a higher

Southwest decides on an​ across-the-board 10 percent cut in executive salaries. Marginal cost would ---(1)---​, average variable cost would ---(2)---​, average fixed cost would ---(3)---​, and average total cost would ---(4)---.

1. remain unchanged 2. remain unchanged 3. decrease 4. decrease

Southwest decides to double its television advertising budget. Marginal cost would ---(1)---​, average variable cost would ---(2)---​, average fixed cost would ---(3)---​, and average total cost would ---(4)---.

1. remain unchanged 2. remain unchanged 3. increase 4. increase

Sally runs a vegetable stand. The following table shows two points on the demand curve for the heirloom tomatoes she​ sells: ​Sally's marginal revenue from lowering the price of tomatoes from $5.5 to $4.25 is $____ Lowering the price from $5.50 to $4.25 results in an output effect of ​$______ and a price effect of $__________

1.75 425000, -250000

HW 7 Chapter 13-14 #13 Use the graph to the right for​ Elijah's burgers: If Elijah produces at the​ profit-maximizing level of​ output, his total revenue will be ​$_________ ​Elijah's total cost is ​$________ Elijah is earning ​$__________ In the long​ run, Elijah's profits will

5440, 4080, 1360 fall as new firms enter the market.

Which of the following policies is not consistent with the​ benefits-received principle? Which of the following policies follows the​ ability-to-pay principle?

A city creates a property tax to raise revenue for a new skate park. The U.S. income tax has people with higher overall resources paying a larger amount of the overall income taxes.

The federal​ government's agricultural program is often called the​ "farm bill." Because the U.S. Department of Agriculture administers the Supplemental Nutrition Assistance Program​ (SNAP), more generally known as the food stamp​ program, its funding is included in the farm bill. Some members of Congress believe spending on SNAP should be reduced. In an article in the Washington Post​, Marion Nestle of New York University was quoted as​ arguing: "[The program​ is] at great​ risk, and what has saved it from being chopped up into little pieces is that​ it's in the Farm Bill and therefore logrolled with agricultural​ supports." Briefly explain what Nestle means by​ "logrolling." Does​ Nestle's argument provide an example of​ logrolling?

A situation where members of Congress vote to approve a bill in exchange for favorable votes from others on other bills. ​Yes, if votes for SNAP are traded for votes for farm​ subsidies, then it is an example of logrolling.

Which of the following is an example of​ logrolling? One way in which the government intervenes in the economy is by establishing a regulatory agency or commission that has authority over a particular industry or product. Because the firms that are regulated have an incentive to influence those​ actions, regulation may lead to

Congressman Hacker votes in favor of funding for a national park in Congresswoman​ Sleet's district because Sleet has promised to vote in favor of funding for a new highway in​ Hacker's district. regulatory capture.

Suppose Farmer Smith grows apples. The entire market for apples is shown in the figure below. Assume the market for apples is perfectly competitive

Demand curve for farmer Smith's apples is where the supply and demand intersect

Following the 2016 Major League Baseball​ season, the market home run hitters who were free agents and available to sign with any team was unexpectedly quiet. Players such as Edwin Encarnacion and Chris Carter signed for lower​ salaries, and for fewer​ years, than either they or their agents had expected. Here are two explanations for the relatively low salary​ offers:

Demand shifts down and to the left

Why would it be economically efficient to require a natural monopoly to charge a price equal to marginal​ cost? Why do most regulatory agencies require natural monopolies to charge a price equal to average cost​ instead?

Economic efficiency requires the last unit of a good produced to provide an additional benefit to consumers equal to the additional cost of producing it. Regulating price instead to equal marginal cost would result in the firm suffering a loss.

Jason Furman served as the chairman of the White House Council of Economic Advisers under President Obama. In an opinion column in the Wall Street Journal discussing President​ Trump's tax reform​ proposal, Furman noted the need​ "for seriously revamping​ America's inefficient​ business-tax system to unlock stronger economic​ growth." But he also observed that tax reform is even more difficult than reforming the health care system​ "since it touches a larger fraction of the economy and threatens more powerful vested​ interests." ​ Briefly explain what Furman means by​ "powerful vested​ interests." If tax reform leads to stronger economic​ growth, it seems like a majority of Congress would support it even if vested interests oppose the reform. Why then has tax reform legislation been difficult for Congress to​ pass?

Furman means those groups that benefit from the current tax provisions. Members of Congress are often influenced by special interest groups.

Santiago Delgado owns a copier store. He leases two copy machines for which he pays​ $20 each per day. He cannot increase the number of machines he leases without giving the office machine company six​ weeks' notice. He can hire as many workers as he​ wants, at a cost of​ $40 per day per worker. These are the only two inputs he uses to produce copies. Fill in the remaining columns in the table below. ​(Enter your responses for​ FC, VC, and TC as integers and round your responses for ATC and MC to two decimal​ places.)

HW 6 Chapter 11-12 #17

Assume the market price is ​$26. The graph to the right shows a firm in a perfectly competitive market operating at a loss. The graph includes the​ firm's marginal cost​ curve, average total cost​ curve, and average variable cost curve.

HW 6 Chapter 11-12 #35

Farmer Jones grows sugar. The average total cost and marginal cost of growing sugar for an individual farmer are illustrated in the graph. Assume the market for sugar is perfectly competitive. According to the​ graph, farmer Jones will earn profit​ (positive economic profit as opposed to​ losses) at any market price above ​--(1)-- Assume that the market price specifically is $34 per bushel. If farmer Jones produces the profit maximizing​ quantity, what will be her​ profit? --(2)--

HW 6 Chapter 11-12 #40 1. $20 2. $900

Consider a market with two​ firms, Hewlett-Packard​ (HP) and​ Dell, that sell printers. Both companies must choose whether to charge a high price ​($400​) or a low price ​($250​) for their printers. These price strategies with corresponding profits are depicted in the payoff matrix to the right.​ HP's profits are in red and​ Dell's are in blue. Suppose HP and Dell are initially at the​ game's Nash equilibrium. ​Then, HP and Dell advertise that they will match any lower price of their competitors. For​ example, if HP charges ​$250​, then Dell will match that price and also charge ​$250. What effect will matching prices have on profits​ (relative to the Nash equilibrium without price​ matching)? Assuming HP and Dell can coordinate to maximize​ profits, HP's profit will change by ​$--(1)-- and Dell's profit will change by --(2)--

HW 7 Chapter 13-14 #39 1. $25 2. 25

Consider a Caribbean cruise route served by two cruise​ lines, Carnival and Royal Caribbean. Both lines must choose whether to charge a high price ​($300​) or a low price ​($290​) to vacationers. These price strategies with corresponding profits are illustrated in the payoff matrix to the right. ​ Carnival's profits are in red and Royal​ Caribbean's are in blue. Suppose the cruise lines decide to collude. At which outcome are joint profits​ maximized? Joint profits are maximized when Carnival picks $--(1)-- and Royal Caribbean picks --(2)-- Is this outcome a Nash​ equilibrium? The cooperative equilibrium

HW 7 Chapter 13-14 #40 1. $300 2. $300 is not a Nash equilibrium because both cruise lines can increase profits by picking the low price.

Given the decision tree​ below, TruImage's profits are​ $1.5 million if the firm accepts​ Dell's contract offer of​ $20 per copy. Given the decision tree​ above, will Dell offer TruImage a contract of​ $20 per copy or a contract of​ $30 per​ copy?

HW 7 Chapter 13-14 #45 $30

Consider the daily demand for pizza at a local Italian​ restaurant, provided in the table below. The number of pizzas demanded at various prices in the table is also illustrated in the graph to the right.

HW 7 Chapter 13-14 #9

The figure to the right shows the average total cost curve for a firm producing electricity and the total demand for electricity in the​ firm's market. If the firm is a monopoly and produces 36 billion kilowatt hours of electricity per​ year, then its average total cost of production will be ​$--(1)-- Now suppose instead that two firms are in the​ market, each producing half of the​ market's electricity. If each firm has the same average total cost​ curve, then the average cost of producing electricity will now be $--(2)-- If one of the two firms expands​ production, then that firm will

HW 7 Chapter 15-16 #7 1. 0.14 per kilowatt hour 2. 0.22 per kilowatt hour be able to offer lower​ prices, driving the other firm out of business.

Before inexpensive pocket calculators were​ developed, many science and engineering students used slide rules to make numeric calculations. Slide rules are no longer​ produced, which means nothing prevents you from establishing a monopoly in the slide rule market. The graph to the right shows the situation your slide rule firm would be​ in, with your​ demand, marginal​ revenue, average total​ cost, and marginal cost curves.

HW 8 Chapter 15-16 #11

Suppose a small town has only one artist who sells​ paintings, making that artist a monopoly. One of the​ artist's paintings is demanded at a price of $800​ two paintings are demanded at a price of ​$600​ three at ​$400 four at ​$200​, and five if the paintings are given away​ (with a price of​ zero)

HW 8 Chapter 15-16 #12

Suppose the figure to the right represents the market for diamond​ necklaces, where the company that supplies necklaces is a monopoly because it is the only firm with access to diamond mines. What is the​ firm's profit-maximizing price and​ quantity? What are​ profits?

HW 8 Chapter 15-16 #13

A pharmaceutical corporation has developed a unique new​ drug, making the company a monopoly. Demand for the new drug ​(D​), the corresponding marginal revenue ​(MR​), and the​ firm's cost structure​ (marginal cost is MC​) are illustrated in the figure to the right. What are the​ company's profit-maximizing price and​ quantity?

HW 8 Chapter 15-16 #14

The late Nobel Laureate economist George Stigler​ wrote: "[The] purely​ "economic" case against monopoly is that it reduces aggregate economic welfare... When the monopolist raises prices above the competitive level in order to reap his​ monopoly profits, customers buy less of the​ product, less is​ produced, and society as a whole is worse​ off." In a​ graph, indicate the price that is at what Stigler refers to as​ "the competitive​ level." Compare this price to the price which earns the firm​ "monopoly profits." Use your graph to explain why society is worse off when a monopolist charges a price that earns monopoly profits rather than when price is set at the​ "competitive level."

HW 8 Chapter 15-16 #15 Economic surplus is reduced.

The figure to the right illustrates the situation regarding a natural monopoly. If government regulators want to achieve economic efficiency, what price should they​ regulate? (Assume the natural monopoly produces at whatever price is​ regulated). If government regulators want to achieve economic​ efficiency, they should regulate a price of --(1)-- The natural monopoly will --(2)-- to produce because at such a​ price, it would --(3)-- What price could government regulators set to maximize efficiency such that the firm would not experience​ losses? Government regulators should regulate a price of ​$--(4)--

HW 8 Chapter 15-16 #19 1. $1 2. not continue 3. experience losses 4. $3.50

Suppose there are two types of​ passengers: business travelers​ (B) and vacationers​ (V). The demands for airline tickets between Denver and Los Angeles for both types of passengers are illustrated in the graph to the right. If an airline can price discriminate between the two​ types, then it should charge an airline ticket price of ​$--(1)--- to business travelers ​(enter a numeric response using an​ integer) and a price of $--(2)--

HW 8 Chapter 15-16 #26 1. 700 2. 575

Suppose a firm produces cables for video games using workers according to the table below and that its output sells for ​$2.00 per unit.

HW 8 Chapter 15-16 #41

Suppose a firm produces cables for video games using workers according to the table and that its output sells for ​$1.00 per unit. The​ firm's labor demand curve is the --(1)-- This​ firm's labor demand curve is --(2)-- For​ example, when the wage is ​$12​ the quantity of labor demanded is --(3)-- When the wage is ​$6​ the quantity of labor demanded is --(4)--

HW 8 Chapter 15-16 #42 1. marginal revenue product curve 2. downward sloping 3. 2 workers 4. 4 workers

If the labor supply curve shifts to the left and the labor demand curve remains​ unchanged, what will happen to the equilibrium wage and the equilibrium level of​ employment?

HW 8 Chapter 15-16 #45

Consider the labor market illustrated in the figure to the right. Suppose the price of the product decreases. What effect will this have on the labor​ market?

HW 8 Chapter 15-16 #47

The equilibrium quantity of sanitary engineers is 88 thousand workers​, and the equilibrium wage is ​

HW 8 Chapter 15-16 #49

If the labor demand curve shifts to the right and the labor supply curve remains​ unchanged, what will happen to the equilibrium wage and the equilibrium level of​ employment?

HW 9 Chapter 17-18 #13

Use the graphs to the right to answer the questions. What is the equilibrium quantity of sanitary engineers​ hired, and what is the equilibrium​ wage?

HW 9 Chapter 17-18 #19

Consider the labor market for lawyers at law firm A illustrated in the graph to the right. Suppose law firm A discriminates by firing all of their female lawyers.

HW 9 Chapter 17-18 #21

a. Suppose that the fixed cost of preparing a codex was 58 drachmas and that there was no similar fixed cost for a scroll. Would an ancient book publisher who intended to sell 5 copies of a book be likely to publish it as a scroll or as a​ codex? What if he intended to sell 10​ copies? Briefly explain.

If a publisher intended to sell 5​ copies, he would publish the book as a scroll because the average cost would be lower than as a codex. If he intended to sell 10​ copies, he would publish the book as a codex because the average cost would be lower than as a scroll.

What is the difference between the short run and the long​ run?

In the short​ run, at least one of a​ firm's inputs is​ fixed, while in the long​ run, a firm is able to vary all its inputs and adopt new technology.

A student examines the graph to the right and​ argues, ​"I believe that a firm will want to produce at Q1​, not Q2. At Q1​, the distance between price and marginal cost is the greatest.​ Therefore, at Q1​, the firm will be maximizing its​ profits." Is the​ student's argument correct or​ incorrect?

Incorrect. Profits are maximized at the quantity where marginal revenue equals marginal cost.

In recent​ years, McDonald's has faced increased competition from other​ fast-food restaurants. In an attempt to differentiate itself from​ fast-food competitors,​ McDonald's has responded by remodeling some restaurants to offer table service and install kiosks that customers can use to pay for their orders and request table service. Remodeling a restaurant can cost as much as​ $60,000. McDonald's expects customers will spend more on food when they order with kiosks. Suppose​ McDonald's begins to earn an economic profit in the restaurants offering table service and kiosks. How are other​ fast-food restaurants likely to​ respond? Is this new strategy likely to enable​ McDonald's to earn an economic profit in the long​ run? Briefly explain.

Other​ fast-food restaurants are likely to respond by offering similar services to their customers. ​Yes, it is possible for​ McDonald's to earn​ long-run economic profits with continued product differentiation.

An article describing the work of James Buchanan​ observed: ​"Buchanan and other public choice theorists altered the debate by proposing that government may not really correct problems in the marketplace because of the wealth​ trading, or rent​ seeking, that occurs during the legislative​ process." The same article included the following statement by​ Buchanan: "I was greatly influenced by Knut​ Wicksell's admonition that economists cease acting as if government were a benevolent​ despot." Explain why James Buchanan and other public choice economists believed that government policymakers do not act as​ "benevolent despots." Why would​ "rent seeking" be an impediment to government attempts to correct​ "problems in the​ marketplace"?

Public choice​ economists, such as​ Buchanan, assume that policymakers are motivated by their own​ self-interests. Policymakers may accept campaign contributions from​ rent-seeking firms to introduce​ special-interest legislation on their behalf.

Harvard Business School started using case studies—descriptions of strategic problems encountered at real companies—in their courses in 1912.​ Today, Harvard Business Publishing​ (HBP) sells its case studies to about​ 4,000 colleges worldwide. HBP is the sole publisher of the Harvard Business​ School's case studies. What criteria would you use to determine whether HBP has a monopoly on the sale of business case studies to be used in college​ courses?

The ability to ignore the actions of other​ firms, the persistence of economic​ profits, and the availability of close substitutes.

In​ 2017, the Trump Administration proposed changes to the federal tax​ code, including reducing the top corporate income tax rate from 35 percent to 15 percent. An article in the Wall Street Journal noted​ that: "A tax overhaul could give companies more incentive to​ invest..." ​Source: Nick Timiraos and Andrew​ Tangel, "Can Trump Deliver​ 3% Growth? Stubborn Realities Stand in the​ Way," Wall Street Journal​, May​ 15, 2017. What type of investments is the article referring​ to? Why would cutting the corporate income tax rate lead companies to engage in more​ investment? Some policymakers and economists are critical of cuts in the corporate income tax rate because they argue that such cuts increase income inequality. Does the incidence of the corporate income tax matter in evaluating this​ argument? Briefly explain.

The article is referring to investments in physical​ capital, such as machinery or equipment. A lower tax rate would increase the amount of earnings that companies can devote to investment. ​Yes, it does​ matter, but it would be difficult to determine how a reduction in the tax rate would affect income inequality.

Airlines often find themselves in price wars. Consider the following​ game: Delta and United are the only two airlines flying the route from Houston to Omaha. Each firm has two​ strategies: charge a high price or charge a low price. What​ (if any) is the dominant strategy for each​ firm? Is this game a prisoner's dilemma? How could repeated playing of the game change the strategy each firm​ uses?

The dominant strategy for each firm is to set a low price. Yes All of the above are possible strategies.

If a perfectly competitive firm is producing at point A​, in the graph to the​ right, which of the following is​ true? What does the shaded area in the second graph to the right represent for a perfectly competitive firm that produces at output level Q​?

The firm earns zero economic profit. negative economic profit

Suppose that a large oil field is discovered in Michigan. By imposing a tax on the​ oil, the state government is able to eliminate the state income tax on wages. What is likely to be the effect on the labor supply curve in​ Michigan?

The quantity of labor supplied in Michigan will increase if the substitution effect is larger than the income effect

Suppose a pizza parlor has the following production​ costs: ​$5.00 in labor per​ pizza, ​$1.00 in ingredients per​ pizza, ​$0.30 in electricity per​ pizza, ​$2,500 in restaurant rent per​ month, and ​$400 in insurance per month. Assume the pizza parlor produces 2,000 pizzas per month. What is the variable cost of production​ (per month)? What is the fixed cost of production​ (per month)?

The variable cost of production is ​$12600 The fixed cost of production is ​$2900

Suppose Securitex is a small firm that has developed a new​ anti-theft device for automobiles. Securitex currently sells its device online and earns profit of ​$10 million per year. GM is considering installing​ Securitex's system on its automobiles. The two firms​ first, however, must bargain over what price GM will pay Securitex for its software. GM chooses how much to offer Securitex for its system and then Securitex chooses whether to accept the offer and install its system on​ GM's automobiles. The strategies and corresponding profits for GM​ (GM) and Securitex​ (SX) are depicted in the decision tree to the right. Profits are in​ millions, and​ GM's payoffs represent the additional profit it can earn on its automobiles with​ Securitex's anti-theft system. What is the​ subgame-perfect equilibrium?

The​ subgame-perfect equilibrium is for GM to offer a high price and for Securitex to accept the offer.

There are many wheat farms in the United​ States, and there are also more than​ 2,000 Panera Bread restaurants. ​Why, then, does a Panera Bread restaurant face a​ downward-sloping demand curve when a wheat farmer faces a horizontal demand​ curve?

Wheat is a homogeneous​ good, while Panera Bread is able to differentiate its food from other restaurants.

A group of firms that colludes by agreeing to restrict output to increase prices and profits is called If the individual countries that are members of OPEC exceed their production​ quotas, the amount of oil supplied to the world oil market​ _________, and the price of oil​ _________.

a cartel ​increases; decreases

Which of the factors listed below does not cause the demand curve for labor to​ shift? As the wage​ increases,

a change in the wage the demand for labor curve does not​ shift, but the quantity demanded of labor decreases.

Over​ time, the gap between the wages of workers with a college degree and the wages of workers without a college degree has been increasing. ​ Shouldn't this gap have increased the incentive for workers to earn a college​ degree, thereby increasing the supply of​ college-educated workers and reducing the size of the​ gap? This wage gap may have not been reduced because

a college education is only a signal of desirable worker characteristics and does not change wages.

What is a merger between firms in the same industry​ called? Which of the following is most likely to increase market​ power?

a horizontal merger horizontal mergers

A tax is efficient if it imposes​ __________ relative to the tax revenue it raises. The​ ability-to-pay principle of taxes is best achieved using Which of the following represents the​ horizontal-equity principle of​ taxation?

a small excess burden a progressive tax. People in the same economic situation should be treated equally.

Frances sells pencils in the perfectly competitive pencil market. Her output per day and costs are seen in the table to the right. a. If the current equilibrium price in the pencil market is ​$1.60​, what price will Frances​ charge? b. Find the correct quantities for the missing values in the​ table i. Marginal revenue ii. Total revenue iii. Marginal revenue iv. Total revenue What quantity of pencils will maximize France's profit?

a. $1.60 bi. $1.6 ii. $6.4 iii. $1.6 iv. $11.2 c. 6

Maria manages a​ bakery, that specializes in ciabatta​ bread, and has the following information on demand and​ costs: a. To maximize​ profits, Maria should sell _______ Maria should charge a price of ​$___________ ​Maria's maximum profit is ​$_________ b. The marginal revenue when selling the​ profit-maximizing number of loaves of ciabatta bread is $____ The marginal cost when selling the​ profit-maximizing number of loaves of ciabatta bread is $_____

a. 6 loaves of ciabatta bread per hours, $3, $4.50 b. $0.5, $0.5

Give brief definitions of the following​ concepts: Game​ theory, cooperative​ equilibrium, noncooperative​ equilibrium, dominant​ strategy, and Nash​ equilibrium, and price leadership. To do​ this, identify the definition for each term from the following list. 1 Actions taken by a firm to achieve a​ goal, such as maximizing profits. 2 The study of how people make decisions where attaining goals depends on interactions with others. 3 A table that shows the payoffs each firm earns from every combination of firm strategies. 4 An agreement among firms to charge the same price or otherwise not to compete. 5 A strategy that is the best for a​ firm, no matter what strategies other firms use. 6. A situation in which each firm chooses the best​ strategy, given the strategies chosen by other firms. 7. A game outcome in which players seek to increase their mutual payoff. 8. A game outcome in which players pursue their own​ self-interest. 9. A situation in which no player can make himself better off by changing his decision at any decision node. 10. A situation where one firm announces a price​ change, which is matched by other firms in the industry.

a. Game​ theory: 2. b. Cooperative​ equilibrium: 7 c. Noncooperative​ equilibrium: 8 d. Dominant​ strategy: 5 e. Nash​ equilibrium: 6 f. Price​ leadership: 10

Almost all states levy sales taxes on retail​ products, but about half of them exempt purchases of food. In​ addition, virtually all services are exempt from state sales taxes. a. The exemption of food from sales taxes is most likely explained by​ what? b. The exemption of services from sales taxes is most likely explained by​ what?

a. The​ ability-to-pay principle. b. Attaining social objectives such as avoiding tax evasion.

​Coca-Cola and Pepsi both advertise​ aggressively, but would they be better off if they​ didn't? Their commercials are usually not designed to convey new information about their products.​ Instead, they are designed to capture each​ other's customers. The payoff matrix to the right illustrates the following​ information: ≻If neither firm​ advertises, Coca-Cola and Pepsi both earn profits of​ $750 million per year. ≻If both firms​ advertise, Coca-Cola and Pepsi both earn profits of​ $500 million per year. ≻If ​Coca-Cola advertises and Pepsi​ doesn't, Coca-Cola earns profits of​ $900 million and Pepsi earns profits of​ $400 million. ≻If Pepsi advertises and​ Coca-Cola doesn't, Pepsi earns profits of​ $900 million and​ Coca-Cola earns profits of​ $400 million. If​ Coca-Cola wants to maximize​ profit, they will --(1)-- If Pepsi wants to maximize​ profit, they will --(2)-- Is there a Nash​ equilibrium?

advertise advertise There is only a Nash equilibrium in which both firms advertise.

Edward Scahill produces table lamps in the perfectly competitive desk lamp market. The equilibrium price of lamps is $50 a. Fill in the blanks in the table for total revenue and marginal​ revenue, as represented by i. Total Revenue ___ ii. Marginal revenue ___ b. How many table lamps will Edward produce to maximize​ profit? c. If next week the equilibrium price of desk lamps drops to​ $30, should Edward shut down?

ai. $150 ii. $50 b. 7 lamps c. No because price is greater than minimum AVC.

How do specialization and division of labor typically affect the marginal product of​ labor? In the initial stages of​ production, specialization and division of labor lead to an increasing marginal product for​ workers,

allowing workers to concentrate on a few tasks so that they become more skilled at doing them quickly and efficiently.

Substitutes exist for just about every​ product, so can a firm ever really be a​ monopoly? A firm can

be a monopoly if it can ignore the actions of other firms.

There are about 400 wineries in​ California's Napa Valley. Suppose the owner of one of the wineries—​Jerry's Wine Emporium—raises the price of his wine by​ $5.00 per bottle. If the industry is perfectly​ competitive, the reaction of consumers would be to ________ If the industry is monopolistically​ competitive, the reaction of consumers ________

buy wine from another winery. could be to remain loyal to​ Jerry's and pay the higher price.

Sean​ Astin, who played Sam in the Lord of the Rings​ movies, wrote the following about an earlier film he had appeared​ in: ​"Now I was in a movie I​ didn't respect, making obscene amounts of money​ (five times what a teacher​ makes, and teachers do infinitely more important​ work) ..." Are salaries determined by the importance of the work being​ done? If​ not, what are they determined​ by? Salaries are determined

by the marginal revenue product of the last worker hired and the supply of labor.

According to the goal of economic​ efficiency, governments tend to favor taxes that In​ addition, governments favor taxes that treat people in the same economic situation equally​, according to the --(1)-- principle Further, governments favor taxes that place a greater share of the tax burden on those who have greater ability to pay​, according to the --(2)-- principle According to the benefits−received ​principle, governments favor taxes that ​Finally, governments tend to favor taxes that promote social objectives.

create a small excess burden relative to revenue raised. 1. horizontal equity 2. ability to pay place a greater share of the tax burden on those who receive greater benefits True

The demand for labor is called a derived​ demand, because

demand for labor is derived from the​ firm's output choice.

Writing on the Baseball Prospectus Web​ site, Dan Fox​ argued, ​"What a player is really worth depends in great deal on the teams that are interested in signing​ him." Do you​ agree? Shouldn't a baseball player with a particular level of ability be worth the same to every​ team? Briefly explain. What a baseball player is worth

depends on his marginal product and the price his output sells​ for, the latter of which is different for each team.

An article in the Wall Street Journal gives the following explanation of how products were traditionally priced at​ Parker-Hannifin Corporation: ​"For as long as anyone at the​ 89-year-old company could​ recall, Parker used the same simple formula to determine prices of its​ 800,000 parts—from ​heat-resistant seals for jet engines to steel valves that hoist buckets on cherry pickers. Company managers would calculate how much it cost to make and deliver each product and add a flat percentage on​ top, usually aimed for about​ 35%. Many managers liked the method because it was straightforward...​ ." Is it likely that this system of pricing maximized the​ firm's profits? Briefly explain. This system of pricing likely

does not maximize profits because it ignores consumer demand.

The graph to the right shows a firm in a perfectly competitive market making a profit. The graph includes the​ firm's marginal cost​ curve, average total cost​ curve, and average variable cost curve. Assume the market price is ​$36.

https://www.chegg.com/homework-help/questions-and-answers/graph-right-shows-firm-perfectly-competitive-market-making-profit-graph-includes-firm-s-ma-q38509961

If the labor supply curve shifts to the left and the labor demand curve remains​ unchanged, what will happen to the equilibrium wage and the equilibrium level of​ employment?

https://www.chegg.com/homework-help/questions-and-answers/labor-supply-curve-shifts-left-labor-demand-curve-remains-unchanged-happen-equilibrium-wag-q24885709

Assume the market price is ​$24. The graph to the right shows a firm in a perfectly competitive market operating at a loss. The graph includes the​ firm's marginal cost​ curve, average total cost​ curve, and average variable cost curve.

https://www.chegg.com/homework-help/questions-and-answers/mc-assume-market-price-24-48-graph-right-shows-firm-perfectly-competitive-market-operating-q33889346

What are the five most important variables that cause the market demand curve for labor to​ shift? The demand curve for labor shifts with changes in

human​ capital, technology, the price of the​ product, the quantity of other​ inputs, and the number of firms in the market.

HW 7 Chapter 13-14 #3 Complete the following table showing the demand for snow skiing lessons per day. i. Total revenue for 3 lessons is ____ ii. Average revenue for 5 lessons is ___ iii. Marginal revenue for 8th lesson is ___

i. 225 ii. 65 iii. 15

What effect might the government have on​ oligopolies? In​ oligopolies, the government might

impose barriers to entry with a quota to limit foreign competition

Evaluate the discussion between the two managers. ​Ben's assertion that the firm should produce the quantity of lamps where average costs are minimized is _____________

incorrect because profits are instead maximized at the quantity where marginal cost equals marginal​ revenue, which may be different since marginal revenue depends on consumer demand.

According to an article in the New York Times​, during 2009 some New Yorkers were deciding to buy existing condominiums​ (condos) rather than newly constructed condos. One reason given was the​ following: ​"[Some buyers] seek to avoid the 1.825 percent transfer tax that buyers must pay on a​ brand-new condo.​ (In resales, the seller pays the​ tax.)" Analyze this reason for buying a resale rather than a new condo. This reason for why New Yorkers were buying a resale rather than a new condo is

incorrect because the burden of the tax is the same whether buyers or sellers pay the tax.

What conditions make a market perfectly​ competitive? A market is perfectly competitive if

it has many buyers and many​ sellers, all of whom are selling identical​ products, with no barriers to new firms entering the market.

A woman who owned a music store in New York City was quoted in an article in the Wall Street Journal as​ "bemoaning the comparative salaries of tubists and stockbrokers.​ 'People should be paid in terms of what they contribute to​ people's well​ being.'" ​Source: Corinne​ Ramey, "NYC's Last Classical Sheet Music Store to​ Close," Wall Street Journal​, March​ 2, 2015. The pay that people receive is based on

labor supply and labor demand in that market.

When should firms use​ cost-plus pricing? ​Cost-plus pricing may be the best way to determine the optimal price when Does​ cost-plus pricing have any​ shortcomings? ​Cost-plus pricing

marginal and average cost are roughly equal and the firm has difficulty estimating its demand curve. is limited in that it ignores demand

In arguing that the costs of the federal​ government's agricultural programs exceed their​ benefits, economist Vincent H. Smith​ stated, "The​ 10% to​ 15% of farm families that receive more than​ 85% of all farm subsidies—amounting to millions of dollars a year in a few cases—have annual household incomes many times as large as those of the average U.S.​ taxpayer." According to the U.S. Government Accountability Office these programs cost taxpayers about​ $20 billion annually. The stated purpose of the federal​ government's agricultural programs is to The points Smith raises—most farm subsidies go to a small percentage of high income farmers—are The programs persist because farmers receiving subsidies are the

provide income security for farmers so that they continue to produce. inconsistent with the stated purpose of the agricultural programs because the programs are not supporting most farm families. most politically active.

In​ economics, the best definition of technology is

the process a firm uses to turn inputs into outputs.

What is​ technology? Technology is An example of technological change is

the processes a firm uses to turn inputs into outputs of goods and services. -being able to produce more output using the same inputs. -being able to produce the same output using fewer inputs. -a decline in the quantity of output that can be produced from a given quantity of inputs.