EC 321 Test 3 Chapters 10-13.3
At Point A on the demand curve, a monopolistic competitor sells 24 units of a product at a price of $16. At Point B, the output increases by 4 units, the price falls by $2, and the total costs increase by $20. Step 1 of 2 : Calculate the absolute difference between the marginal revenue and the marginal cost for Point B. If necessary, round any intermediate calculations and your final answer to two decimal places, and write your final answer as a positive number.
1) At Point A on the demand curve, a monopolistic competitor sells 24units of a product at a price of $16 At Point B, the output increases by 4 units, the price falls by $2, and the total costs increase by $20 Calculate the marginal cost at Point B as a change in total cost divided by a change in quantity. Round your answer to two decimal places if necessary. 24/5=5 2) At Point A on the demand curve, a monopolistic competitor sells 24 units of a product at a price of $16. At Point B, the output increases by 44 units, the price falls by $2, and the total costs increase by $20 Calculate the price and quantity at Point B of the curve.Price =$16−$2=$14 =24+4=$28 3)To find the total revenue, multiply price by quantity. Find the change in the total revenues between Points A and B as the difference between total revenue at Point B and total revenue at Point A: $28x$14 -$24x$16 =8 4) Now, calculate the marginal revenue by dividing the change in total revenue by the change in quantity. Round your answer to two decimal places if necessary.$8/4= $2 5)Find the absolute value of the difference between the marginal cost and the marginal revenue. If necessary, round your answer to two decimal places, and write it as a positive number.||$2.00−$5.00||= 3
Consider the following scenario:Shade Sunscreen Company produces 1,000 bottles of sunscreen per day and sells their sunscreen at $7 per bottle. Its output and pricing decisions do not consider the external costs resulting from hazardous waste resulting from the production process.Now, suppose the government forces Shade Sunscreen to consider the external costs it creates by imposing taxes or fines. Which of the following quantity and price combinations would likely emerge? Select the best answer.
Price up/ qty down
PPQdQdQS1QS1QS2QS2$16$160013131111$13$132.52.510.510.58.58.5$10$103.53.59977$8$8668866$6$67.57.57.57.55.55.5$3$38.58.56644 Step 2 of 4 : Identify the equilibrium price and quantity when only private costs are taken into account. Enter your answers in the boxes below, and round to one decimal place if necessary.
P=$P=$6 6Q=Q=7.5
Consider the following situation:A new restaurant opens up by your house that you can walk to.Is this situation an example of a negative or a positive externality? Select the best answer.
Posititve
Consider the following situation:The San Francisco power plant is not required to address the impact of its air quality emissions. Step 1 of 2 : What is the effect of this situation on the market supply curve? Select the best answer.
Same
There is a requirement that all coal-burning power plants install scrubbers, an apparatus used to remove sulfur emissions from coal and lessen the formation of acid rain.
Standard regulation command/control
Consider the following situation:The Las Vegas power plant is not required to address the impact of its air quality emissions. Step 2 of 2 : What is the effect of this situation on the equilibrium price? Select the best answer.
Stay the same
You were asked to identify the correct statement.The following answer is correct: Even game theory, which is often used to explain firms' behavior in oligopolies, is comprised of several possible scenarios. There is no universal pattern that all oligopolies follow.
There is no single, generally-accepted theory of how oligopolies behave.
Which of the following is not a criticism of command-and-control policies? Select the best answer.
They do not promote alternative energy sources
Which statement about cooperation in oligopolies is correct? Select the best answer.
Where there is a kinked demand curve , none of the ologpolist has a strong incentive to change
Which of the following acts is a command-and-control regulation responsible for preventing toxic air pollution? Select the best answer.
Yes, command /control
Suppose that Soram's Sodas, a firm in a monopolistically competitive industry, is currently maximizing profit by producing a quantity where marginal revenue is equal to marginal cost. Assume that at this point, profits of the firm are equal to zero. Suppose that market demand decreases, which decreases demand for all firms in the industry.Based on this information, which option completes the blanks in the following sentence?In the short run, this firm will produce [blank], and profits will be [blank]; in the long run, firms in this industry will [blank], and profits will be [blank].
less; negative; exit; zero
Consider the following situation: Bands play different kinds of music (or the same kind of music in slightly different styles) and often produce their own CDs and t-shirts. Which market structure is this industry most likely to be in? Select the best answer.
monopolistic competition
Consider the following situation:There are large economies of scale in production, such that the firm's average cost curve meets demand before the minimum of the average cost curve.Which market structure is this industry most likely to be in? Select the best answer.
monopoly
Suppose that Edward's Electronics, a firm in a monopolistically competitive industry, is currently maximizing profit by producing a quantity where marginal revenue is equal to marginal cost. Assume that at this point, profits of the firm are equal to zero. Suppose that market demand increases, which increases demand for all firms in the industry.Based on this information, which option completes the blanks in the following sentence?In the short run, this firm will produce [blank], and profits will be [blank]; in the long run, firms in this industry will [blank], and profits will be [blank].
more, positive, enter, zero
Consider a firm that produces toasters. The price of one toaster is $45 and the quantity of toasters sold is 115 A new environmental protection law is passed, so the firm must pay additional external costs per toaster produced. As a result, the quantity of toasters sold decreases by 42, and total revenue decreases by $1,306 Calculate the additional external costs per toaster. Write the exact answer. Do not round.
$11
There is a duopoly in the market, with Firm A and Firm B considering whether to compete against each other or cooperate. If Firm A and Firm B both agree to cooperate, they will each earn $770 in profits. If one of them decides to compete at the expense of the other, it will earn $1,800 in profits, while the other will earn three times less.Calculate the difference between the total profits for both firms when they cooperate and when one takes advantage of the other. Write the exact answer. Do not round.
$860
Which definition matches the following term? Select the best answer.Command-and-control regulations
Government policies for all
Consider the following situation:Refrigerator producers are required to pay a fine for the pollution they create. Step 1 of 2 : What is the effect of this situation on the market supply curve? Select the best answer.
shift to the left
Which option correctly completes the blank in the following sentence? Select the best answer.Because externalities that occur in market transactions affect other parties beyond those involved, they are sometimes called [blank].
spillovers
Which statement is true? Select the best answer.
to increase output is the dominant strategy in the oligopoly version of the prisoner's dilemma
When there are spillover costs of production, private markets produce [blank] output and have prices that are [blank], relative to what would be socially optimal. Select the answer that correctly completes the blanks.
too much, too low
In an oligopolistic cartel, each firm produces 500 units of output for a price of $70 per unit. Firm A decides to slightly decrease the price in order to increase output by 150 units, but other firms also cut prices. Although Firm A reached the desired output, the price settled eventually on $40 Now, Firm A decides to raise prices by $15 to somehow cover the losses, but other firms keep their prices at $40 therefore, Firm A loses an additional $660 in revenue for each $1 of the raised price as compared to its revenue before the increase in price.Calculate the revenue of Firm A after all the changes discussed. Write the exact answer. Do not round.
1) Calculate the revenue of Firm A after the price decreased to $40 by multiplying the price by the new quantity of output. Write the exact answer. Do not round.(500+150)×$40 (500+150)x140=26,000 2)Subtract the loss the firm suffered due to an increased price after the price decrease to calculate the new revenue. Write the exact answer. Do not round. 26,000-(15x$660)= 16,100
In an oligopolistic cartel, each firm produces 700units of output for a price of $100 per unit. Firm A decides to slightly decrease the price in order to increase output by 110 units, but other firms also cut prices. Although Firm A reached the desired output, the price settled eventually on $70. Now, Firm A decides to raise prices by $10 to somehow cover the losses, but other firms keep their prices at $70; therefore, Firm A loses an additional $860in revenue for each $1 of the raised price as compared to its revenue before the increase in price.Calculate the revenue of Firm A after all the changes discussed. Write the exact answer. Do not round. Answer Keypad
1) Calculate the revenue of Firm A after the price decreased to $70 by multiplying the price by the new quantity of output. Write the exact answer. Do not round.(700+110)×$70= 56,700 2) Subtract the loss the firm suffered due to an increased price after the price decrease to calculate the new revenue. Write the exact answer. Do not round. $56,700−(10×$860)= 48,100
Suppose a company creates its own differentiated type of sneaker and is thus considered a monopolistically competitive firm. This firm has a constant marginal cost curve. For each unit of output that the monopolistically competitive firm produces, it costs an additional $50 The firm's marginal revenue curve is MR=300−10Q where Q is the quantity produced. The firm's perceived demand curve is P=300−5 −5Q.What is the monopolistically competitive firm's profit-maximizing output and price? Write the exact answer. Do not round.
1)The following answer is correct: Quantity =25Quantity =Price=$175 This is correct because a monopolistically competitive firm will produce the quantity at which MR=MCMR=MC. The firm's price is then determined by its perceived demand at that quantity. In this problem, MR=300−10Q where Q is the quantity produced. Set MR=MCMR=MC.
In order to create more jobs in the region, the local government gave permission to a foreign investor to build a chemical plant not far from a residential area. Analysts predict that real estate prices will drop by 15%. Currently, the total value of real estate is $40 million.Calculate the potential external cost for the residents in this area of building the chemical plant. Write the exact answer. Do not round.
6 Million
There is a duopoly in the market, with Firm A and Firm B considering whether to compete against each other or cooperate. If Firm A and Firm B both agree to cooperate, they will each earn $600 in profits. If one of them decides to compete at the expense of the other, it will earn $2,100 in profits, while the other will earn three times less.Calculate the difference between the total profits for both firms when they cooperate and when one takes advantage of the other. Write the exact answer. Do not round.
600x2=1200 , 2100 + 600=2700, 2800-1200=1600
Consider a firm that produces toasters. The price of one toaster is $45, and the quantity of toasters sold is 115. A new environmental protection law is passed, so the firm must pay additional external costs per toaster produced. As a result, the quantity of toasters sold decreases by 42 and total revenue decreases by $1,306 Calculate the additional external costs per toaster. Write the exact answer. Do not round.
8
You were asked to use the table below to answer the following question: On the outskirts of a large metropolitan area, there are three coal-burning power plants: Amrich, Benthal, and Chagall. Their operations also produce sulfur dioxide emissions. The table below shows the total emissions currently produced by each firm and the marginal cost of abatement by each unit of 100100 tons. The government wants to reduce emissions by one-third. It issues pollution permits, free of charge, based on the current level of emissions where the permits will shrink the allowable amount of pollution by one-third for the entire industry. Firms have the right to trade permits among themselves as long as buyers and sellers agree on a price.Suppose each permit allows a firm to pollute 5050 tons of sulfur dioxide. How many permits will Benthal be given? Select the best answer. Marginal Cost of AbatementAmrichBenthalChagallCurrent level of emissions in tons600600600600900900Cost of reducing emissions by first 100100 tons$2,500$2,500$2,000$2,000$3,600$3,600Cost of reducing emissions by second 100100 tons$3,000$3,000$2,700$2,700$4,500$4,500Cost of reducing emissions by third 100100 tons$3,500$3,500$3,500$3,500$5,500$5,500Cost of reducing emissions by fourth 100100 tons$4,000$4,000$3,800$3,800$6,500$6,500Cost of reducing emissions by fifth 100100 tons$4,500$4,500$4,600$4,600$7,500$7,500Cost of reducing emissions by sixth 100100 tons$5,000$5,000$5,400$5,400$8,500$8,500 Benthal will be given permits to emit two-thirds of its current emissions. Each permit allows 5050 tons of emission.
8 Permits / 400 tons
Which of the following acts is a command-and-control regulation responsible for preventing toxic air pollution? Select the best answer.
Clean Air Act
Consider the following scenario and choose the answer that correctly completes the statement. Select the best answer. Patrick's Pens is a firm in a monopolistically competitive industry. Currently, the firm is choosing an output where marginal revenue is less than marginal cost. To maximize profit, Patrick's Pens should [blank] and set a price based on [blank].
Decrease output, the firm's perceived demand curve
Which statement is true? Select the best answer.
Defenders of market -oriented economies think people want to see a great variety of differentiated products
Consider the following situation:Refrigerator producers are required to pay a fine for the pollution they create. Step 2 of 2 : What is the effect of this situation on the equilibrium price? Select the best answer.
Equill price will increase
The following table shows supply and demand conditions for a firm that will play music on the streets when requested. QS1is the quantity supplied without social costs, and QS2 is the quantity supplied with social costs.
Equillibr increases, quantity decreases
Economists argue that instead of regulating behavior through command-and-control policies, the government could use market-oriented tools to achieve environmental goals. One such instrument is the marketable permit program.Which of the following statements about the marketable permits program is false? Select the best answer.
In a cap and trade system, polluting systems set the maximum amount of pollution and neg amongst themselves how best to meet this target.
Which statement about monopolistic competition is true? Select the best answer.
In a monopolistic competition, a shift in marginal rev is going to change the profit maximizing quanity
Which statement about oligopoly is true? Select the best answer.
In many countries, it is illegal for companies to act together to reduce the output and keep prices high.
Which statement is correct? Select the best answer.
In order to achieve efficient output in a market, firms would have to pay the external costs of pollution.
Why does the diagram indicate that Manuela's Pizza is currently operating in the short run rather than the long run? Select the best answer.
It's currently making a profit
Consider the following scenario: Shade Sunscreen Company produces 65 bottles of sunscreen per day and sells their sunscreen at $8 per bottle. Its output and pricing decisions do not consider the external costs resulting from hazardous waste resulting from the production process. Now, suppose the government forces Shade Sunscreen to consider the external costs it creates by imposing taxes or fines. Which of the following quantity and price combinations would likely emerge? Select the best answer.
Less product increase price
Which of the three difficulties of command-and-control environmental regulation does the following scenario demonstrate? Select the best answer.Coal mining lobbyists persuade legislators that stricter environmental rules should not apply to them.
Loopholes
Which statement is correct? Select the best answer.
Monopolistic competition involves many firms competing against each other but are selling products that are distinct.
Which statement is correct? Select the best answer.
Monopolistic competition involves many firms competing against each other but selling products that are distinct in some way.
Consider the following situation:A single company controls all the production of an input that is essential to the production process.Which market structure is this industry most likely to be in? Select the best answer.
Monopoly
Which statement is correct? Select the best answer.
Most monopolistic firms try to develop differentiated products
Which of the following is the best example of a differentiated product? Select the best answer.
Movies
Consider the following situation:The paper factory in your town emits a putrid smell.Is this situation an example of a negative or a positive externality? Select the best answer.
Negative
At Point A on the demand curve, a monopolistic competitor sells 24 units of a product at a price of $18 At Point B, the output increases by 66 units, the price falls by$1, and the total costs increase by $22. Step 2 of 2 : Is Point B a profit-maximizing point on the demand curve? Select the best answer.
No because at point B the marginal rev is greater than the marginal cost.
At Point A on the demand curve, a monopolistic competitor sells 24 units of a product at a price of $16At Point B, the output increases by 4 units, the price falls by $2 and the total costs increase by $20 Step 2 of 2 : Is Point B a profit-maximizing point on the demand curve? Select the best answer.
No, because at Point B, the marginal revenue is lower than the marginal cost.
In an oligopolistic cartel, each firm produces 800 units of output for a price of $90 per unit. Firm A decides to slightly decrease the price in order to increase output by 140140 units, but other firms also cut prices. Although Firm A reached the desired output, the price settled eventually on $60. Now, Firm A decides to raise prices by $5 to somehow cover the losses, but other firms keep their prices at $60; therefore, Firm A loses an additional $950 in revenue for each $1 of the raised price as compared to its revenue before the increase in price.
The following answer is correct: $51,650 Revenue is price multiplied by the quantity of output. First, calculate the revenue of Firm A after the price decreased to $60. Note that Firm A was able to increase its output by 140 units. (800+140)×$60=$56,400 Now, subtract the loss the firm suffered due to increased price after the price decrease to calculate the new revenue. $56,400−(5×$950)=$51,650
Which option would be considered an intangible aspect of a product? Select the best answer.
The promise of a product's reliability
Which option would be considered a physical aspect of a product? Select the best answer.
The texture of a product
Which option would be considered a physical aspect of a product? Select the best answer.
The weight of a product
At Point A on the demand curve, a monopolistic competitor sells 24 units of a product at a price of $18. At Point B, the output increases by 66 units, the price falls by $1 and the total costs increase by $22 Step 1 of 2 : Calculate the absolute difference between the marginal revenue and the marginal cost for Point B. If necessary, round any intermediate calculations and your final answer to two decimal places, and write your final answer as a positive number.
You were asked to calculate the absolute difference between the marginal revenue and the marginal cost for Point B based on the following information. At Point A on the demand curve, a monopolistic competitor sells 24 units of a product at a price of $18. At Point B, the output increases by 66 units, the price falls by $1, and the total costs increase by $22. The following answer is correct: $9.33 Use the provided values to calculate the marginal cost at Point B as a ratio of the change in total cost and the change in quantity: MC=$226=$3.67 To calculate the marginal revenue, first, calculate the change in total revenue. At Point B, the price is $18−$1=$17 and the quantity is 24+6=30 units. Therefore, the change in total revenue can be found as follows: ΔTR=30×$17−24×$18=$78
Which of the following is the best example of a differentiated product? Select the best answer.
houses
Consider the following scenario and choose the answer that correctly completes the statement. Select the best answer. Diana's DVDs is a firm in a monopolistically competitive industry. Currently, the firm is choosing an output where marginal revenue is greater than marginal cost. To maximize profit, Diana's DVDs should [blank] and set a price based on [blank].
increase output; the firm's perceived demand curve
Consider the following scenario and choose the answer that correctly completes the statement. Select the best answer. Harry's Hats is a firm in a monopolistically competitive industry. Currently, the firm is choosing an output where marginal revenue is greater than marginal cost. To maximize profit, Harry's Hats should [blank] and set a price based on [blank].
increase output; the firm's perceived demand curve
Consider the following scenario and choose the answer that correctly completes the statement. Select the best answer. Jeremy's Jumpers is a firm in a monopolistically competitive industry. Currently, the firm is choosing an output where marginal revenue is greater than marginal cost. To maximize profit, Jeremy's Jumpers should [blank] and set a price based on [blank].
increase output; the firms perceived demand curve MR>MC
Consider the following situation:In the summer, there are many farmers who sell raspberries in local markets.Which market structure is this industry most likely to be in? Select the best answer.
perfect competition
Which option correctly completes the blank in the following sentence? Select the best answer. The benefit to a third party outside a market transaction by others is called [blank].
positive externality