econ unit 4
The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. If TWC operated under a marginal cost pricing rule, what is the price of cable television in Oakland
$10
correct, 16.3-15 The graph shows the demand, marginal revenue, and marginal cost curves for a a monopoly producer. The horizontal axis measures the quantity in pounds of steaks per hour, from 0 to 5,000, increasing by 1,000. The vertical axis measures the price and cost in dollars per pound of steak, from 0 to $20.00, increasing by $2.00. The graph shows an upward-sloping, convex curve, labeled S=MC, and two downward-sloping, linear curves, labeled MR and D, starting at the same point on the vertical axis, at a price of $20. The MR curve lies below the D curve. The S=MC curve intersects the D curve at a point corresponding to a quantity of 3,000 and a price of $8. The S=MC curve intersects the MR curve at a point corresponding to a quantity of 2,000 and a cost of $4. The combinations of quantity and price along the D curve are (0, 20), (1,000, 16), (2,000, 12), (3,000, 8), and (4,000, 4). Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a singleminus price monopoly. The figure above shows the relevant demand and cost curves. When the market is a monopoly, the price of a pound of steak is
$12
The distinguishing features of oligopoly are ______
a small number of interdependent firms with natural or legal barriers preventing the entry of new firms
Sugaring season in Vermont is going full blast. Vermont, the biggest U.S. syrup producer, produces about 500,000 gallons a year. In 2007, maple syrup cost an average of $35 a gallon; this year, the price is $45 a gallon. Canada is usually a huge producer, but with a poor season it has seen a 30 percent drop in production. As consumers turn away from artificially flavored maple syrup to natural maple syrup, demand for natural maple syrup has rocketed The maple syrup market is an example of perfect competition for all of the following reasons except ______.
a small number of interdependent maple syrup producers compete
If we compare a perfectly competitive market to a singleminus price monopoly with the same costs, the monopoly sells
a smaller quantity at a higher price
The figure above shows the demand curve, marginal revenue curve, and marginal cost curve. The amount of consumer surplus when the market has a monopoly producer is
abf
The figure above shows the demand curve, marginal revenue curve, and marginal cost curve. The amount of consumer surplus when the market has a monopoly producer is ________ and the amount of consumer surplus when the market is perfectly competitive is ________
abf,ace
Decreasing marginal returns occur in the short run as more labor is hired to work in a fixed sized plant because
adding more workers exhausts the possible gains from specialization.
Increasing marginal returns to labor
are the result of specialization and division of labor in the production process.
The figure above shows the demand curve, marginal revenue curve, and marginal cost curve. The deadweight loss when the market has a monopoly producer is
bcd
"Advertising and brand names are a social waste. We would be better off if brand names were not protected and if advertising were banned." Discuss these assertions, and in doing so, use the analysis of the effects of advertising and brand names presented in this chapter
signal quality to consumers, and provide an incentive to producers to achieve consistent quality
If firms in a competitive industry are ______, then in the long run, firms have ______ the industry.
making positive economic profit; an incentive to enter
The characteristics that describe a perfectly competitive industry include
many firms selling an identical product
In perfect competition, a firm maximizes its economic profit if it produces the output at which _______.
marginal cost equals market price
A market with a large number of sellers
might be a monopolistically competitive or a perfectly competitive market.
In the short run, a perfectly competitive firm ________ earn an economic profit and ________ incur an economic loss.
might;might
________ a large number of firms competing by making similar but slightly different products
monopolistic competition requires
A monopoly
must determine the price it will charge
If firms in monopolistic competition are earning economic profits, eventually
new firms enter the industry
A monopoly arises when there are ______ A monopoly can price discriminate only if ______.
no close substitutes and a barrier to entry it sells goods and services that cannot be resold
Ramona is an asparagus farmer and the world asparagus market is perfectly competitive. the market price is $14 a bundle. Ramona sells 600 bundles a week and her marginal cost is $19 a bundle.
not maximizing profit because marginal cost is greater than marginal revenue
A monopoly occurs when
one firm sells a good that has no close substitutes and a barrier blocks entry for other firms.
Megs fortune cookies operates in a market called
perfect competition
A firm in monopolistic competition makes its decisions on quantity and price by
producing where MR = MC and setting the price for this quantity from the demand curve.
To maintain their economic profits, firms in monopolistic competition must continually engage in
product development and marketing
A brand name _______
provides incentive to the producer to achieve a consistent quality
product differentiation allows a firm to compete with another firm on the basis of
quality, price, and marketing
A perfectly competitive firm can
sell all of its output at the prevailing market price
Catfish farming is a perfectly competitive industry. Catfish farmers suffered tremendous economic losses in the late 1990s. As a result,
some catfish farmers exited the market
in economics, the short run is the time frame in which the quantities of ______ and the long run is the period of time in which ______
some resources are fixed; the quantities of all resources can be varied
A monopoly can price discriminate between two groups of consumers if _______ across the two groups
the average willingness to pay differs
Each of the gas stations mentioned in the news clip has little control over the price of the gasoline because _____.
the market is highly competitive
Comparing a perfectly competitive market to a singleminus price monopoly with the same costs, we see that
the perfectly competitive market achieves efficiency in resource use while the monopoly market does not
The graph shows the perfectly competitive market for sunhats. Draw a shape that shows the consumer surplus. Label it CS. Draw a shape that shows the producer surplus. Label it PS. Draw a point to indicate the efficient equilibrium. At the competitive equilibrium, _____.
the sum of consumer surplus and producer surplus is maximized
Perfect competition achieves efficiency if the market produces the quantity at which _______.
the consumers' marginal benefit from the good equals the marginal cost of producing it
The cost that does not change as output changes is
total fixed cost.
Chuck owns a factory that produces leather footballs. His total fixed cost equaled $86,000 last year. His total cost equaled $286,000 last year. Hence Chuck's
total variable cost equaled $200,000
the only shoe stand license to operate in an airport is a monopoly
true
the us postal service is a monopoly
true
Because the amount of labor a firm employs can be changed, the cost of labor is known as
variable cost
To maximize its profit, in the short run a perfectly competitive firm decides
what quantity of output to produce
The total fixed cost is ______ and the marginal cost of increasing production from 10 to 12 T-shirts is _______.
$20; $8
The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total cost of producing 50 bikes?
$400
A cartel _______
C. is a group of firms acting together to limit output, raise price, and increase economic profi
A firm maximizes its profit by producing the amount of output such that
E. marginal revenue equals marginal cost
The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total fixed cost of producing 64 bikes?
$200
megs marginal revenue for each batch of cookies demanded is
$25
The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. If TWC is left unregulated, what is the price of cable television in Oakland
$30
The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty. Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total variable cost of producing 60 bikes?
$300
Kevin owns a personal training gymnasium in Orlando. The above figure shows the demand and cost curves for his firm, which competes in a monopolistically competitive market. What price will Kevin charge per session
$60
The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot pillows, a monopoly producer of pillows stuffed with parrot feathers. When the pillow market is a monopoly, the price of a pillow is ________ and if the pillow market is perfectly competitive, the price of a pillow is ________
$70,$60
Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a singleminus price monopoly. The figure above shows the relevant demand and cost curves. When the market is perfectly competitive, the price of a pound of steak is
$8
The table shows the demand schedule for Sal's rosebushes (columns 1 and 2) and the firm's total cost schedule (columns 2 and 3). Calculate Sal's total revenue and marginal revenue schedules.
0,9,16,21
The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. If TWC is left unregulated, how many households in Oakland are served?
20,000
Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a singleminus price monopoly. The figure above shows the relevant demand and cost curves. When the market is a monopoly, the quantity of steak is
2000 pounds
Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a singleminus price monopoly. The figure above shows the relevant demand and cost curves. When the market is perfectly competitive, the quantity of steak is
3000 pounds
The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot pillows, a monopoly producer of pillows stuffed with parrot feathers. When Paul maximizes his profit, Paul produces ________ pillows per hour and if the market was perfectly competitive, ________ pillows per hour would be produced
3000;4000
Kevin owns a personal training gymnasium in Orlando. The above figure shows the demand and cost curves for his firm, which competes in a monopolistically competitive market. Kevin will train how many clients per day
4
The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. If TWC operated under a marginal cost pricing rule, how many households in Oakland are served
40,000
The market demand curve in a perfectly competitive market is ________ and the demand curve for a perfectly competitive firm's output is ________.
A. downward sloping; horizontal
GPS navigation system producer Garmin spent millions of dollars advertising during the Super Bowl _______
A. to signal to consumers that the Garmin GPS is a high-quality product
If a monopoly wants to sell a greater quantity of output, it must
lower its price
, a small isolated town, has one dentist . For a 45 -minute consultation, the dentist charges an adult twice as much as a senior. If the dentist decided to charge everyone the maximum price that he or she would be willing to pay, the consumer surplus would equal $0 If the dentist decided to charge everyone the maximum price that he or she would be willing to pay, the market for counselling services would be ______.
E. efficient because no deadweight loss is created
What is the difference between perfect competition and monopolistic competition?
In perfect competition, firms produce identical goods, while in monopolistic competition, firms produce slightly different goods.
________ natural monopolies is a commonly used, potential solution to the problems presented by natural monopolies
Regulating
Airlines seek new ways to save on fuel as costs soar Fuel is an airline's biggest single expense. In 2008, the cost of jet fuel rocketed. Airlines tried to switch to newer generation aircraft, which have more fuel-efficient engines
The cost of fuel is a variable cost for an airline
When natural or legal forces work to protect a firm from potential competitors, the market is said to have _______
a barrier to entry
A market is classified as an oligopoly when
a few firms compete
a cartel is
a group of firms acting together to raise price, decrease output, and increase economic profit.
Compared to a perfectly competitive market, a singleminus price monopoly sets
a higher price
Before 1991, the eight Ivy League colleges (Brown, Columbia, Cornell, Dartmouth, Harvard, Princeton, the University of Pennsylvania, and Yale), along with MIT, shared information and agreed on rules for setting their prices of education (price equals tuition minus scholarship). Since 1991, these schools have set their prices in competition with each other. Moving from 1991 to today, everything else remaining the same, the Ivy League market for education ______ producer surplus decreases consumer surplus increases deadweight loss decreases
became more efficient
Elsie is a perfectly competitive dairy farmer. The market price of milk was $2.40 but just fell to $2.20 a gallon. Elsie
can sell as much milk as she wants at $2.20 a gallon
A differentiated product has
close but not perfect substitutes
A singleminus price monopoly transfers
consumer surplus to producers
Jerry's Jellybean Factory produces 2,000 pounds of jellybeans per month and sells them in a perfectly competitive market. The marginal cost is $3 per pound, the average variable cost is $2 per pound, and the beans sell for $4 per pound. Jerry
could increase his profit by producing more beans
Suppose that a perfectly competitive firm's marginal revenue equals $12 when it sells 10 units of output. If the marginal cost of producing the 10th unit is $14, to maximize its profit the firm should
decrease its production
Suppose the government passes legislation that imposes a legal barrier to entry on the window blind industry and the number of firms decreases. You would expect ______ in production differentiation and ______ competition on product quality, price, and features
decrease;less
As a typical firm increases its output, its marginal cost
decreases at first and then increases
Allegiant carries leisure travelers from 75 small U.S. cities to 14 warm-weather places. The airline faces no competition on 186 of its routes and has the lowest costs, the fullest planes, and the highest margins in the U.S. airline industry Allegiant determines the fare and the number of seats to offer on each of its monopoly routes by ______.
determining demand for seats, finding the profit-maximizing quantity by setting marginal revenue equal to marginal cost, and finding the highest price it can charge for this quantity
In monopolistic competition, profit is maximized by producing so that marginal revenue
equals marginal cost and which are less than price
In monopolistic competition, each firm's markup ______ that in perfect competition, and the price is ______ than in perfect competition. The total quantity produced by the firms in monopolistic competition is _______ the total quantity produced by firms in perfect competition
exceeds;higher less than
a department store in a large downtown shopping area is a monopoly
false
amazon.com, the online bookstore is a monopoly
false
walmart.com the national department store is a monopoly
false
In perfect competition, ______
firms can choose to enter the industry but they cannot choose the price at which to sell their good
Marginal returns start to decrease when more and more workers ______
have to share the same equipment and workspace
Two gas stations on opposite sides of the road: Rutter's Farm Store and Sheetz gas station. Rutter's doesn't even have to look across the road to know when Sheetz changes its price for a gallon of gas. When Sheetz raises prices, Rutter's pumps are busy. When Sheetz lowers prices, there's not a car in sight. Both gas stations survive but each has no control over price Each of the gas stations mentioned in the news clip faces a demand that is _____.
highly elastic
Price discrimination is possible when a firm is able to ______.
identify and separate different types of buyers, and sell a product that cannot be resold
Major league baseball is exempt from laws designed to limit market power and it operates as a monopoly. If the baseball market became competitive, the number of teams would ______ and the economic profit of each team would ______
increase;decrease
Major league baseball is exempt from laws designed to limit market power and it operates as a monopoly. If the baseball market became competitive, the number of players would ______ and the average salary of a baseball player would _____
increase;rise
If a perfectly competitive firm's marginal revenue is greater than its marginal cost, as it increases its output, its profit ________ and the price it can charge for its product ________.
increases; does not change
Because economic profits are eliminated in the long run in monopolistic competition, to earn an economic profit firms continuously
innovate and develop new products
Product differentiation ________.
is making a product slightly different from the products of competing firms
In a perfectly competitive market, the firm is a price taker because ______.
it produces only a tiny proportion of the total output of a particular good and buyers are well informed about the prices of other firms
To produce more output in the short run, a firm must employ more of
its variable resources
Compared to a perfectly competitive industry, a singleminus price monopoly produces
less output
A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a ________ demand for its product and is able to charge a _______
less elastic; a higher price than before
Which of the following firms is most likely to be a monopoly
local distrubutor of electricity
The long run is a time period that is
long enough to change the size of the firm's plant and all other inputs
The table gives the total product schedule for Flora's Flower Shoppe. If Flora increases the number of workers she hires from 2 to 3, marginal product is ______ bouquets. If Flora increases the number of workers she hires from 3 to 4, marginal product is ______ bouquets.
70; 40