ECON 100B Homework
Relative to the Nash equilibrium in the Cournot model, the Nash equilibrium in the Bertrand model with homogeneous products a) results in the same output but a higher price. b) results in the same output but a lower price c) results in a larger output at a lower price. d) results in a smaller output at a higher price.
c)
Suppose a labor market has perfectly inelastic supply that is composed of union and non-union workers, and both groups of workers initially earn the perfectly competitive wage. What happens to the equilibrium employment level and wage for union workers if the union exercises its bargaining power? a) both increase b) employment increases and wage declines c) wage increases and employment declines d) both decline
c)
Suppose the downward sloping labor demand curve shifts rightward in a labor market with a single employer (monopsony). What happens to the marginal expenditure curve? a) shifts left b) shifts right c) remains the same d) we do not have enough information to answer this question
c)
Suppose two firms with differentiated products are competing on price. The reaction curve for Firm 1 is P1 = 4 + 0.5 P2, and the reaction curve for Firm 2 is P2 = 4 + 0.5P1. What is the equilibrium price outcome in this market? a) P1= P2= 4 b) P1= P2= 6 c) P1= P2= 8 d) P1= 6 and P2= 8
c)
The Acme Company is a perfect competitor in its input markets and its output market. Its average product of labor is at its maximum and equals 30. The marginal revenue product of labor is $300. The price of its output is a) $0 b) $3 c) $10 d) $30
c)
Use the following two statements about monopolistic competition to answer this question. I. In the long run, the price of the good will equal the minimum of the average cost. II. In the short run, firms may earn a profit. a) I and II are true b) I is true, and II is false c) I is false, and II is true d) I and II are false
c)
What condition may provide for a relatively small degree of inefficiency under monopolistic competition? a) there is a single seller and no product differentiation b) the marginal cost of production is less than the market price c) the demand curve is relatively elastic so that the price is near the long-run minimum average cost d) there is only one buyer in the market
c)
In the ________, each firm treats the output of its competitor as fixed and then decides how much to produce. a) Cournot model b) model of monopolistic competition c) Stackelberg model d) kinked-demand model
a)
Suppose the labor market and all output markets are perfectly competitive. When the labor market is in equilibrium, the wage rate will a) be less than the marginal revenue product of labor b) equal the marginal revenue product of labor c) be greater than the marginal revenue product of labor d) none of the above is necessarily correct
b)
Which oligopoly model(s) have the same results as the competitive model? a) Cournot b) Bertrand c) Stackelberg d) both Cournot and Stackelberg
b)
A market structure in which there is one large firm that has a major share of the market and many smaller firms supplying the remainder of the market is called a) the Stackelberg Model b) the kinked demand curve model c) the dominant firm model d) the Cournot model
c)
Bette's Breakfast, a perfectly competitive eatery, sells its "Breakfast Special" (the only item on the menu) for $5.00. The costs of waiters, cooks, power, food etc. average out to $3.95 per meal; the costs of the lease, insurance and other such expenses average out to $1.25 per meal. Bette should a) close her doors immediately b) continue producing in the short and long run c) continue producing in the short run, but plan to go out of business in the long run d) raise her prices above the perfectly competitive level e) lower her output
c)
Suppose labor and capital are variable inputs. The wage rate is $20 per hour, the marginal product of labor is 30 units, the rental rate of capital is $100 per machine hour, and the marginal product of capital is 150 units. If the wage rate declines to $15 per hour, the firm employs more labor and the marginal product of labor declines to 20 units. Assuming the rental rate of capital remains the same, what is the marginal product of capital at the new optimal level of input usage? a) 93 b) 125 c) 133 d) 146
c)
For a market with a linear demand curve and constant marginal cost of production, why are the reaction functions for the Cournot duopoly sellers also straight lines? a) The reaction functions do not have to be straight lines, and they are only drawn this way in the book to keep the figures simple b) Cournot thought the lines would be straight, but this was proven wrong by other economists c) Marginal revenue is always linear when marginal costs are constant d) We know that the marginal revenue curves for linear demand curves are also straight lines
d)
If the firms in an industry could take advantage of a reduced wage, how would one best describe the firms' demand for labor? The MRPL a) schedule would remain unchanged, and the firms would hire more labor at the lower wage b) schedule would shift to the left and the firms would move down the new schedule c) schedule would shift to the right and the firms would move down the new schedule d) none of the above
a)
If the market for labor is perfectly competitive, the profit maximizing level of labor occurs where (W wage and P output price) a) MRPL< W b) MRPL= P c) MRPL just exceeds W. d) MRPL= W.
d)
Use the following statements to answer this question: I. Cartels are illegal in the United States. II. Once price and production levels are agreed upon, each member of a cartel has an incentive to "cheat" on the agreement. a) both I and II are true b) I is true, and II is false c) I is false, and II is true d) both I and II are false
a)
If a graph of a perfectly competitive firm shows that the point occurs where MR is above AVC but below ATC a) the firm is earning negative profit, and will shut down rather than produce that level of output b) the firm is earning negative profit, but will continue to produce where in the short run c) the firm is still earning positive profit, as long as variable costs are covered d) the firm is covering explicit, but not implicit costs e) the firm can cover all of fixed costs but only a portion of variable costs
b)
In the Stackelberg model, suppose the first-mover has MR = 15 - Q1, the second firm has reaction function Q2 = 15 - Q1/2, and production occurs at zero marginal cost, where Q1 is quantity of firm 1 and Q2 is quantity of firm 2. Why doesn't the first-mover announce that its production is Q1 = 30 in order to exclude the second firm from the market (i.e., Q2 = 0 in this case)? a) In this case, MR is negative and is less than MC, so the first-mover would be producing less than the optimal quantity b) In this case, MR is negative and is less than MC, so the first-mover would be producing too much output c) This is a possible outcome from the Stackelberg duopoly under these conditions d) We do not have enough information to determine if this is an optimal outcome for this case
b)
In the Stackelberg model, there is an advantage a) to waiting until your competitor has committed herself to a particular output level before deciding on your output level b) to being the first competitor to commit to an output level c) to the firm with a dominant strategy d) to producing an output level which is identical to a monopolist's output level
b)
In which oligopoly model(s) do firms earn zero profit? a) Cournot b) Bertrand c) Stackelberg d) oligopoly firms always earn positive economic profits
b)
Suppose the supply of non-OPEC oil increases due to new petroleum discoveries in other countries. What happens to OPEC's share of the world oil market? a) increases b) decreases c) remains the same d) we do not have enough information to answer this question.
b)
The marginal revenue product of labor is equal to a) MPL/ P b) MPL∗MR c) MPL/ MR d) MR / MPL
b)
The market structure in which strategic considerations are most important is a) monopolistic competition b) oligopoly c) pure competition d) pure monopoly
b)
Under an upward sloping supply curve for land, the economic rents to land ________ as the demand for land shifts rightward. a) decrease b) increase c) remain the same d) we do not have enough information to answer this question
b)
An increase in technology that enhances labor productivity will likely result in: a) a decrease in labor employment and an increase in the wage rate b) an increase in labor employment and an increase in the wage rate c) a decrease in labor employment and a decrease in the wage rate d) an increase in labor employment and a decrease in the wage rate
b)
The market structure of the local pizza industry is best characterized by monopolistic competition. One Guy's Pizza is one of the producers in the local market. The demand for One Guy's Pizza is Q = 225-10P. One Guy's cost function is TC=0.15Q2 a) One Guy's is not operating in a long-run equilibrium because it is earning negative profits b) One Guy's is not operating in a long-run equilibrium because it is earning positive profits c) One Guy's is operating in a long-run equilibrium with Q= 45 d) One Guy's is operating in a short-run equilibrium because it is earning negative profits
b)
The oligopoly model that is most appropriate when one large firm usually takes the lead in setting price is the ________ model. a) Cournot b) Stackelberg c) game theory d) Prisoners' Dilemma
b)
Under what circumstances will the economic rent earned by a factor of production always be zero? a) infinitely inelastic supply curve b) infinitely elastic supply curve c) somewhat inelastic supply curve d) elastic demand curve
b)
Which of the following markets is most likely to be oligopolistic? a) market for corn b) market for aluminum c) market for colas d) market for ground coffees
b)
For which of the following market structures is it assumed that there are barriers to entry? a) perfect competition b) monopolistic competition c) monopoly
c)
Which statement most nearly describes a Nash equilibrium applied to price competition? a) two firms cooperate and set the price that maximizes joint profits b) each firm automatically moves to the purely competitive equilibrium because it knows the other firm will eventually move to that price anyway c) given the prices chosen by its competitors, no firm has an incentive to change their prices from the equilibrium level d) one dominant firm sets the price, and the other firms take that price as if it were given by the market
c)
A monopolistically competitive firm in short-run equilibrium a) will make negative profit (lose money) b) will make zero profit (break-even) c) will make positive profit d) any of the above are possible
d)
Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as a) P = MR b) P = AVC c) AR = MR d) P = MC e) P = AC
d)
Which of the following is true for both perfectly competitive and monopolistically competitive firms in the long run? a) P = MC b) MC = ATC c) P > MR d) profit equals zero
d)
A situation in which each firm selects its best action, given what its rivals are doing, is called a a) Nash equilibrium b) cooperative equilibrium c) Stackelberg equilibrium d) zero sum game
a)
For a monopsony buyer of an input, the marginal expenditure curve a) lies above the average expenditure curve. b) lies below the average expenditure curve. c) is identical to the average expenditure curve. d) lies below the input demand curve.
a)
Homer's Boat Manufacturing cost function is (75/128)*Q4+10,240. If Homer can sell all the boats he produces for $1,200, then a) Homer will produce and make a loss of $3,040 b) Homer will not produce because it has a loss of $10,240 c) Homer will not produce because it has a loss of $3,040 d) There is no enough information to examine whether Homer stays or leaves the market
a)
Under a Cournot duopoly, the collusion curve represents: a) all possible allocations of the pure monopoly quantity among the two firms in the duopoly b) all possible allocations of the pure monopoly quantity that would be possible if the two firms in the duopoly did not cooperate c) all optimal price-quantity outcomes for a cartel rather than a Cournot duopoly d) the potential profits to be earned by firms in a collusive cartel
a)
What is one difference between the Cournot and Stackelberg models? a) In Cournot, both firms make output decisions simultaneously, and in Stackelberg, one firm sets its output level first b) In Stackelberg, both firms make output decisions simultaneously, and in Cournot, one firm sets its output level first c) In Cournot, a firm has the opportunity to react to its rival d) Profits are zero in Cournot and positive in Stackelberg
a)
You are the manager of a firm producing green chalk. The marginal product of labor is: MPL = 24L-1/2 Suppose that the firm is a competitor in the green chalk market. The price of green chalk is $1 per unit. Further suppose that the firm is a competitor in the labor market. The wage rate is $12.00 per hour. How much labor will be hired to maximize profit? a) 4 b) 8 c) 12 d) 16
a)
Collusion can earn higher prices and higher profits under the Bertrand model, but why is this an unlikely outcome in practice? a) firms prefer to remain independent of other firms so that their pricing plans can be more flexible over time b) the collusive firms have an incentive to gain market share at the expense of the other firms by cutting prices c) the federal antitrust authorities have an easier time catching firms that collude on price rather than quantity d) none of the above
b)
Suppose the upward sloping labor supply curve shifts leftward in a labor market with a single employer (monopsony). What happens to the equilibrium wage and level of employment in the market? a) wage and level of employment increase b) wage increases and level of employment declines c) wage decreases and level of employment increases d) wage and level of employment decline
b)
The demand curve facing a perfectly competitive firm is a) the same as its average revenue curve, but not the same as its marginal revenue curve b) the same as its average revenue curve and its marginal revenue curve c) the same as its marginal revenue curve, but not its average revenue curve d) not the same as either its marginal revenue curve or its average revenue curve e) not defined in terms of average or marginal revenue
b)
The marginal revenue product can be expressed as the a) additional revenue received from selling one more unit of product b) increment to revenue received from one additional unit of input hired c) marginal physical product of an input times the average revenue received from the sale of the product d) average physical product of the input times the marginal revenue received from the sale of the final product
b)
This market situation is much like a pure monopoly except that its member firms tend to cheat on agreed upon price and output strategies. What is it? a) duopoly b) cartel c) dominant firm d) natural monopoly
b)
Use the following statements to answer this question: I. Under the dominant firm model, the dominant firm effectively acts like a monopolist who is facing the excess market demand that cannot be supplied by the fringe firms. II. Under the dominant firm model, the fringe firms also act like profit maximizing monopolists. a) I and II are true b) I is true and II is false c) I is false and II is true d) I and II are false
b)
Which of the following is TRUE concerning equilibrium in a monopsonistic factor market? a) the firm uses the efficient level of the input but does not maximize profit b) the firm maximizes profit but does not use the efficient level of the input c) the firm maximizes profit and uses the efficient level of the input. d) the firm either maximizes profit or uses the efficient level of the input, but it cannot do both
b)
Which of the following is true in the Stackelberg model? a) the first firm produces less than its rival. b) the first firm produces more than its rival. c) both firms produce the same quantity. d) both firms have a reaction curve.
b)
Consider the following scenario: 2 soft-drink firms, Fizzle and Sizzles, operate on a river. Fizzle is farther upstream, and gets cleaner water, so its cost of purifying water for use in the soft drinks is lower than Sizzle's by $500,000 yearly. According to the describe scenario, Fizzle and Sizzle a) would be perfectly competitive if their purification costs were equal; otherwise, not b) would be perfectly competitive if it costs Fizzle $500,000 yearly to keep that land c) may or may not be perfect competitors, but their position on the river has nothing to do with it d) cannot be perfect competitors because they are not identical firms
c)
In the short run, a perfectly competitive profit maximizing firm that has not shut down a) is operating on the downward-sloping portion of its AVC curve b) is operating at the minimum of its AVC curve c) is operating on the upward-sloping portion of its AVC curve d) is not operating on its AVC curve e) can be at any point on its AVC curve
c)
Which of the following is true of the output level produced by a firm in long-run equilibrium in a monopolistically competitive industry? a) it produces at minimum average cost b) it does not produce at minimum average cost, and average cost is increasing c) it does not produce at minimum average cost, and average cost is decreasing d) either B or C could be true.
c)
Consider the following scenario: 2 soft-drink firms, Fizzle and Sizzles, operate on a river. Fizzle is farther upstream, and gets cleaner water, so its cost of purifying water for use in the soft drinks is lower than Sizzle's by $500,000 yearly. Refer to the information in the previous scenario. If Fizzle and Sizzle sell the same output at the same price and are otherwise identical, Fizzle's profit will be a) higher than Sizzle's by $500,000 yearly b) higher than Sizzle's by just less than $500,000 yearly c) zero in the long run, and Sizzle will be out of business d) the same as Sizzle's because Fizzle must be assigned an implicit cost of $500,000 yearly for economic rent
d)
Which of the following is NOT conducive to the successful operation of a cartel? a) market demand for the good is relatively inelastic b) the cartel supplies all of the world's output of the good c) cartel members have substantial cost advantages over non-member producers d) the supply of non-cartel members is very price elastic
d)
Which of the following is true for both perfect and monopolistic competition? a) firms produce a differentiated product b) firms face a downward sloping demand curve c) firms produce a homogeneous product d) there is freedom of entry and exit in the long run
d)
Which of the following statements is TRUE when comparing monopsony and competitive labor markets? a) the monopsony hires more workers but pays a lower wage. b) the monopsony hires more workers at a higher wage. c) the monopsonist's wage is lower and quantity of labor higher than would prevail under competition. d) the monopsonist's wage and quantity of labor are lower than would prevail under perfect competition.
d)
monopolistic competitive firms use advertising to a) influence a consumer's buying decision b) convince customers that their product is worth its price c) persuade buyers that their product is superior to others d) all of the above answers are correct
d)
A price taker is a) a firm that accepts different prices from different customers b) a consumer who accepts different prices from different firms c) a perfectly competitive firm d) a firm that cannot influence the market price e) both C and D
e)
In the dominant firm model, the smaller fringe firms behave like a) competitive firms b) Cournot firms c) Stackelberg firms d) Bertrand firms
a)
A firm should hire more labor when the marginal revenue product of labor a) equals the wage rate b) exceeds the wage rate c) is less than the wage rate d) any of these can be true
b)
A monopolistically competitive firm in long-run equilibrium: a) will make negative profit b) will make zero profit c) will make positive profit d) any of the above are possible
b)
A ________ shows how much a firm will produce as a function of how much it thinks its competitors will produce. a) contract curve b) demand curve c) reaction curve d) Nash equilibrium curve
c)
A firm maximizes profit by operating at the level of output where a) average revenue equals average cost b) average revenue equals average variable cost c) total costs are minimized d) marginal revenue equals marginal cost e) marginal revenue exceeds marginal cost by the greatest amount
d)
Which of the following can be thought of as a barrier to entry? a) scale economies b) patents c) strategic actions by incumbent firms d) all of the above
d)
A firm operating in a monopolistically competitive market faces demand given by P = 10 - 0.1Q and a total cost of TC= -10Q+0.0333Q3 + 130, where P is in dollars per unit, output rate Q is in units per time period, and total cost C is in dollars. a) the price and output that will allow the firm to maximize profit are Q = 13.17 and P = 8.68. The Lerner index is 0.154 b) the price and output that will allow the firm to maximize profit are Q = 13.17 and P = 8.68. The Lerner index is 514 c) the price and output that will allow the firm to maximize profit are Q = 12.12 and P = 9.5. The Lerner index is 154 d) the price and output that will allow the firm to maximize profit are Q = 12.12 and P = 9.5. The Lerner index is 514
a)
All of the payment to a factor of production will be economic rent when the factor of production has: a) an infinitely inelastic supply curve b) an infinitely elastic supply curve c) a constant, unit elastic supply curve d) an infinitely inelastic demand curve
a)
Conigan Box Company produces cardboard boxes that are sold in bundles of 1000 boxes. The market is highly competitive, with boxes currently selling for $100 per thousand. Conigan's total cost curve is: TC = 3,000,000 + 0.001Q2, where Q is measured in thousand box bundles per year a) Conigan's profit maximizing quantity is Q = 50,000 and Conigan is losing $500,000 per year b) Conigan's profit maximizing quantity is Q = 5,000 and Conigan is losing $50,000 per year c) Conigan's profit maximizing quantity is Q = 500 and Conigan is losing $50,000 per year d) Conigan's profit maximizing quantity is Q = 5,000 and Conigan is losing $500,000 per year
a)
If an individual's labor supply curve is backward bending, then a) the income effect associated with a higher wage is greater than the substitution effect b) the substitution effect associated with a higher wage is greater than the income effect c) the substitution effect associated with a higher wage encourages more leisure d) A and C
a)
If only one firm in an industry could take advantage of a reduced wage and all other firms continue paying the old wage, how would one best describe the one firm's reaction to this reduced wage assuming labor is the only variable input? The marginal revenue product of labor curve a) would remain unchanged, and the firm would hire more labor at the lower wage b) shifts to the left, and the firm hires more labor at the lower wage on the new curve c) shifts to the right, and the firm hires more labor at the lower wage on the new curve d) shifts to the left, and the firm hires less labor at the lower wage on the new curve
a)
In a Cournot duopoly, we find that Firm 1's reaction function is Q1 = 50 - 0.5Q2, and Firm 2's reaction function is Q2 = 75 - 0.75Q1. What is the Cournot equilibrium outcome in this market? a) Q1= 20 and Q2= 60 b) Q1= 20 and Q2= 20 c) Q1= 60 and Q2= 60 d) Q1= 60 and Q2= 20
a)
In a competitive labor market, with one variable factor, the supply of labor to the firm is a) equal to the marginal expenditure curve b) equal to the demand curve for labor c) greater than the marginal expenditure curve d) equal to the marginal revenue product curve
a)
In general, does the demand for labor become more or less elastic as we increase the number of other variable inputs used in a production process? a) more elastic b) no change in elasticity c) less elastic d) we cannot answer this question without more information about the other inputs
a)
In monopolistic competition, the products of different sellers are assumed to be a) similar but slightly different b) identical perfect substitutes c) either identical or differentiated d) unique without any close or perfect substitutes
a)
In the dominant firm model, the fringe firms a) are price takers b) maximize profit by equating average revenue and average cost c) determine their price and output before the dominant firm determines its price and output d) all of above
a)
In the short run, a perfectly competitive firm earning negative economic profit is a) on the downward-sloping portion of its ATC curve b) at the minimum of its ATC curve c) on the upward-sloping portion of its ATC curve d) above its ATC curve
a)
Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows: P = 30 - Q The marginal cost to produce this new drink is $3. What will be the price of this new drink in the long run if the industry is a Bertrand duopoly? a) $3 b) $9 c) $12 d) $13.50
a)
Suppose the downward sloping labor demand curve shifts rightward in a labor market with a single employer (monopsony). What happens to the equilibrium wage and level of employment in the market? a) wage and level of employment increase b) wage increases and level of employment declines c) wage decreases and level of employment increases d) wage and level of employment decline
a)
The Acme Company is a perfect competitor in its input markets and its output market. Its average product of labor is 30, the marginal product of labor is 20, the price of labor is $20, and the price of the output is $5. For Acme Company, the marginal revenue product of labor a) is $100 b) is $150 c) is $400 d) is $600
a)
The industry demand curve for labor is the a) horizontal sum of individual firm labor demand curves b) vertical sum of individual firm demand curves c) representative firm's demand curve multiplied by the number of firms d) none of the above
a)
The market for an industrial chemical has a single dominant firm and a competitive fringe comprised of many firms that behave as price takers. The dominant firm has recently begun behaving as a price leader, setting price while the competitive fringe follows. The market demand curve and competitive fringe supply curve are given below. Marginal cost for the dominant firm is $0.75 per gallon. QM = 140,000 - 32,000P QF = 60,000 + 8,000P, where QM = market quantity demanded, and QF = supply of competitive fringe. Quantities are measured in gallons per week, and price is measured as a price per gallon. The output for the competitive fringe is a) 71,000 b) 25,000 c) 96,000 d) 100,000
a)
The most important factor in determining the long-run profit potential in monopolistic competition is a) free entry and exit b) the elasticity of the market demand curve c) the elasticity of the firm's demand curve d) the reaction of rival firms to a change in price
a)
Electric power utility companies use various fuel sources (e.g., coal, natural gas, nuclear) to generate electricity for their customers. What happens to the demand for natural gas used to generate electricity as we move from a short-run planning horizon to a long-run planning horizon? Why? a) Demand becomes more inelastic over time because the other fuel sources become more scarce, so there are fewer options available for electric power utilities in the long run b) Demand becomes more inelastic over time because all of the power generation plants tend to choose the same technology, which makes the industry less responsive to prices in the long run c) Demand becomes more elastic over time because the electric plant's technology becomes obsolete, and the power company has less flexibility to adjust to changes d) Demand becomes more elastic over time because the power companies have more options available and can adopt new generating technologies or substitutes for natural gas over the long run
d)
If a competitive firm's marginal cost curve is U-shaped, then a) its short-run supply curve is U-shaped too b) its short-run supply curve is the downward-sloping portion of the marginal cost curve c) its short-run supply curve is the upward-sloping portion of the marginal cost curve d) its short-run supply curve is the upward-sloping portion of the marginal cost curve that lies above the short-run average variable cost curve e) its short-run supply curve is the upward-sloping portion of the marginal cost curve and lies above the short-run average total cost curve
d)
If a monopolistically competitive seller can convince buyers that its product is of better quality and value than products sold by rival firms, a) demand increases b) the firm gains more control over its price c) demand becomes more inelastic d) all of the above occur
d)
If all producers in a market are cartel members, then the demand curve facing the cartel is a) the market demand curve b) horizontal c) identical to the demand curve in the dominant firm model d) identical to the monopolist's demand curve
d)
In monopolistic competition, each firm supplies a small part of the market. This occurs because a) there are barriers to entry b) firms produce differentiated products c) there are no barriers to entry d) there are a large number of firms
d)
In the Bertrand model with homogeneous products, a) the firm that sets the lower price will capture all of the market. b) the Nash equilibrium is the competitive outcome. c) both firms set price equal to marginal cost. d) all of the above
d)
In the Cournot duopoly model, each firm assumes that a) rivals will match price cuts but will not match price increases b) rivals will match all reasonable price changes c) the price of its rival is fixed d) the output level of its rival is fixed
d)
In the ________, one firm sets its output first, and then a second firm, after observing the first firm's output, makes its output decision. a) Cournot model b) model of monopolistic competition c) Bertrand model d) none of the above
d)
Is there a first-mover advantage in the Bertrand duopoly model with homogenous products? a) yes, first-movers always hold the advantage over other firms. b) yes, first-movers may have an advantage, but it depends on the model assumptions. c) no, first-movers cannot choose a profit maximizing quantity because the second-mover can always produce a bit less and earn higher profits. d) no, the second-mover would be able to set a slightly lower price and capture the full market share.
d)
Ronny's Pizza House is a profit maximizing firm in a perfectly competitive local restaurant market, and their optimal output is 80 pizzas per day. The local government imposes a new tax of $250 per year on all restaurants that operate in the city. How does this affect Ronny's profit maximizing decisions? a) No impact on the restaurant's decisions b) Ronny's will remain in business but will definitely produce less pizza c) Ronny's will definitely shut down d) Ronny's decision depends on the circumstances - if their profits are large than $250 per year, then the tax does not impact output; otherwise, Ronny's Pizza House will shut down
d)
Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows: P = 30 - Q The marginal cost to produce this new drink is $3. What will be the price of this new drink in the long run if the firms in the industry collude with one another to maximize joint profit? a) $3 b) $9 c) $12 d) $16.50
d)
Suppose a stream is discovered whose water has remarkable healing powers. You decide to bottle the liquid and sell it. The market demand curve is linear and is given as follows: P = 30 - Q The marginal cost to produce this new drink is $3. What will be the price of this new drink in the long run if the industry is a Stackelberg duopoly? a) $3 b) $9 c) $12 d) none of the above
d)
The marginal expenditure curve for labor is based on the assumption that a) the most productive workers are hired first. b) the wage rate is independent of the quantity of labor employed. c) the market supply curve for labor is infinitely elastic. d) all workers are paid the same wage rate.
d)
The marginal product of labor for Acme, Inc. is 15. The average product of labor is 25, and the price of labor is $10. Assuming that Acme, Inc. is a competitor in its output and input markets, the marginal revenue product of labor a) is $10 b) is $150 c) is $250 d) cannot be determined with the information provided
d)
The market for an industrial chemical has a single dominant firm and a competitive fringe comprised of many firms that behave as price takers. The dominant firm has recently begun behaving as a price leader, setting price while the competitive fringe follows. The market demand curve and competitive fringe supply curve are given below. Marginal cost for the dominant firm is $0.75 per gallon. QM = 140,000 - 32,000P QF = 60,000 + 8,000P, where QM = market quantity demanded, and QF = supply of competitive fringe. Quantities are measured in gallons per week, and price is measured as a price per gallon. The price that would prevail in the market under the conditions described above is a) 1.572 per gallon b) 1.754 per gallon c) 1.271 per gallon c) 1.375 per gallon
d)
What happens to the marginal revenue product curve of a factor as more of a complementary factor is hired? a) it shifts to the left, because its marginal product decreases b) it shifts to the left, because its marginal product increases c) it shifts to the right, because its marginal product decreases d) it shifts to the right, because its marginal product increases
d)
