Micro Test 3
Which of the following best describes the efficiency of monopolistically competitive firms?
Neither allocatively efficient nor productively efficient
How often do perfectly competitive firms engage in price discrimination?
Never
The figure in the Last Word section shows that a 10-fold increase in a country's GDP per person is associated with about a 20-point increase in EPI. However, GDP per person was $53,342 in the United States in 2018 but $35,271 in New Zealand; yet New Zealand had an EPI score of 75.96, while the United States had an EPI score of only 71.19. So does getting rich guarantee doing well environmentally?
No, because there are many other factors that may influence environmental quality.
Cindy is a baker and runs a large cupcake shop. She has already hired 11 employees and is thinking of hiring a 12th. Cindy estimates that a 12th worker would cost her $100 per day in wages and benefits while increasing her total revenue from $2,600 per day to $2,750 per day. Should Cindy hire a 12th worker?
Yes
Consider an oligopoly industry whose firms have identical demand and cost conditions. If the firms decide to collude, then they will want to collectively produce the amount of output that would be produced by:
a pure monopolist
The main problem with imposing the socially optimal price (P = MC) on a monopoly is that the socially optimal price:
may be so low that the regulated monopoly can't break even.
"Monopolistic competition is monopolistic up to the point at which consumers become willing to buy close substitute products and competitive beyond that point." This statement recognizes that the products of monopolistically competitive firms
may give them some monopoly power, given strong consumer preferences for their product, but consumers will substitute away if prices become too high relative to similar products offered in the market.
No firm is completely sheltered from rivals; all firms compete for consumer dollars. Therefore, pure monopoly does not exist." A monopoly is more likely to exist if the cross price elasticity of demand is
positive and less than 1
The efficiency loss of imposing an excise tax is due to:
producing and consuming fewer units
The factors determining resource demand differ from those determining product demand. This is because
product demand depends on income and tastes, whereas resource demand is a derived demand
The long-run downward trend in commodity prices is consistent with the idea that:
resource supplies have increased faster than resource demands
Suppose that a monopolist can segregate his buyers into two different groups to which he can charge two different prices. To maximize profit, the monopolist should charge a higher price to the group that has:
the lower elasticity of demand
A community has a nighttime energy demand of 50 megawatts but a peak daytime demand of 75 megawatts. It has the chance to build a 90-megawatt coal-fired plant that could easily supply all of its energy needs even at peak daytime demand. Before deciding whether it should proceed, the community should consider
the relatively higher fixed costs of a coal-fired plant versus the operating costs of the alternatives.
Aquaculture is the growing of fish, shrimp, and other seafood in enclosed cages or ponds. The cages and ponds not only keep the seafood from swimming away but also provide aquaculturists with strong property rights over their animals. These property rights provide
more incentive to care for the fish and to lower production costs than would occur with open-water fishing.
After mining 9,273 tons of coal, Blue Sky Mining's managers note that the marginal cost of mining the next ton of coal would be $40 per ton. They also calculate that the user cost of mining that next ton of coal would be $35. If the market price of coal is $72, should Blue Sky mine an additional ton of coal?
no.
The city of Joslyn has three sources of revenue: borrowing, proprietary income from running the local electric power utility, and taxes. Last year, its total revenue was $150 million. If it received $10 million from running the electric power utility and borrowed $40 million, how much did it collect in taxes? Assume Joslyn's total revenue is $150 million.
$100 million
True or False. As a capitalist economy, the vast majority of U.S. national income flows to the owners of capital.
False
The table below shows the total cost and marginal cost for Choco Lovers, a monopolistic firm producing different quantities of chocolate gift boxes. Fill in the blanks in the table.
Graph: Marginal Revenue = TR/Quantity Profit-maximizing quantity = 45 (MR=MC) Profit-maximizing price = $21 Profit = $787 (TR - TC)
Alice runs a shoemaking factory that uses both labor and capital to make shoes. Which of the following would shift the factory's demand for capital?
The wages that the factory has to pay its workers due toan economywide labor shortage
Alice runs a shoemaking factory that uses both labor and capital to make shoes. Which of the following would shift the factory's demand for capital?
The wages that the factory has to pay its workers rise due to an economywide labor shortage.
Is it possible for a country with a regressive tax system to have a tax-spending system that transfers resources from the rich to the poor?
Yes, if the poor get more in spending than they pay in taxes
Assume that a pure monopolist and a purely competitive firm have the same unit costs. a. Using the table and the assumption stated above, determine which of the following conditions are true in this specific case with respect to (a) price, (b) output, and (c) profits. b. Using this same assumption, in the case of a pure monopolist, resources will be allocated c. Even though both monopolists and competitive firms follow the MC = MR rule in maximizing profits, there are differences in the economic outcomes because d. The costs of a purely competitive firm and a monopoly may be different because e. If a monopoly can experience economies of scale, it can
a. a, e, and g b. inefficiently, because the monopolist does not produce at the point of minimum ATC and does not equate price and MC. c. pure competitors are small with no market power. d. monopolies might experience economies of scale not available to competitive firms e. reduce the price below a pure competitor and improve resource allocation
a. Price collusion might occur in oligopolistic industries because b. Assess the economic desirability of collusive pricing. c. Price leadership is legal in the United States, whereas price-fixing is not. This is because
a. price competition can lower revenue for all firms. b. Collusive pricing is economically desirable from the oligopoly's viewpoint because it results in monopoly profits. c. price leadership is not an agreement, whereas price-fixing is
a. Economic profit is b. Which of the following is not one of the three basic sources of economic profit? c. Which of the following is an example of profit from creating a popular new product? d. Which of the following is an example of profit from creating and maintaining a profitable monopoly? e. e. Which of the following is an example of profit from reducing production costs below rivals' costs?
a. smaller than accounting profit, because economic cost is larger than accounting cost. b. Establishing political allies. c. A firm's profit from developing and patenting a new medication that greatly reduces cholesterol and thus diminishes the likelihood of heart disease and stroke d. A restaurant's profit that results from the completion of a new highway past its door e. The profit received by a firm due to an unanticipated fall in local input costs.
a. A firm in a purely competitive labor market is a wage taker because b. If a firm decided to pay less than the going market wage rate,
a. that firm alone cannot influence the market wage rate. b. no workers would offer their services to that firm.
a. According to the benefits-received principle of taxation, b. According to the ability-to-pay principle of taxation, c. Which of the following statements is true?
a. those who make use of government services should pay for them b. the higher one's income, the higher the tax, and the higher the percentage of one's income paid in tax. c. Redistribution of income by government—transfer payments—would be impossible with the benefits-received principle.
A principal is worried that her agent may not do what she wants. As a solution, she should consider:
all of the above
Collusive agreements can be established and maintained by:
credible threats.
The MR curve of a perfectly competitive firm is horizontal. The MR curve of a monopoly firm is:
downward sloping
Because a perfectly competitive employer's MRC curve is ____________ it will hire __________workers than would a monopsony employer with the same MRP curve.
flat more
The demand for a resource is a derived demand. This is because
if there were no demand for output, there would be no demand for input.
It would cost the town of Irondale $50 million to build a gas-powered generator that could produce a maximum of 5 megawatts of electricity at 15 cents per hour. Another alternative is for Irondale to build a $100 million coal-fired generator that could produce a maximum of 15 megawatts of electricity at 5 cents per hour. Irondale should:
obtain more information before deciding what to do.
The market equilibrium wage is currently $12 per hour among hairdressers. At that wage, 17,323 hairdressers are currently employed in the state. The state legislature then sets a minimum wage of $11.50 per hour for hairdressers. If there are no changes to either the demand or supply for hairdressers when that minimum wage is imposed, the number of hairdressers employed in the state will be:
unchanged.
Suppose that hiring a third worker at the campus coffee shop increases sales from $115 per hour to $130 per hour. What is the marginal product of labor per hour from adding that third worker?
15
If proprietors' income is included within the labor (wage) share, the combined rent, interest, and profit share of the income earned by Americans in a typical year would be almost _______ of national income.
20 percent
As shown in the table above, $1,000 invested at 10 percent compound interest will grow into $1,331 after three years. What is the present value of $2,662 in three years if it is discounted back to the present at a 10 percent compound interest rate? (Hint: $2,662 is twice as much as $1,331.)
2000
Ingvar and Olaf are the only two fishermen in their area. Each has been assigned an ITQ that allows him to catch 20 tons of salmon. Ingvar's MC of catching salmon is $6 per ton while Olaf's MC of catching salmon is $7 per ton. If the price of salmon is $10 per ton, then to maximize efficiency, the two fishers should trade ITQs until Ingvar is in charge of catching _____ tons while Olaf catches _____ tons.
40;0
Suppose George made $20,000 last year and that he lives in the country of Harmony. The way Harmony levies income taxes, all citizens must pay 10 percent in taxes on their first $10,000 in earnings and then 50 percent in taxes on anything else they might earn. Given that George earned $20,000 last year, his marginal tax rate on the last dollar he earns will be __________, and his average tax rate for his entire income will be __________.
50 percent; less than 50 percent
Brenda owns a construction company that employs bricklayers and other skilled tradespeople. Her firm's MRP for bricklayers is $22.25 per hour for each of the first seven bricklayers, $18.50 for an eighth bricklayer, and $17.75 for a ninth bricklayer. Given that she is a price taker when hiring bricklayers, how many bricklayers will she hire if the market equilibrium wage for bricklayers is $18.00 per hour?
8
It has been proposed that natural monopolists should be allowed to determine their profit-maximizing outputs and prices, and then government should tax their profits away and distribute them to consumers in proportion to their purchases from the monopoly. Is this proposal as socially desirable as requiring monopolists to equate price with marginal cost or average total cost? Explain.
No, it does not consider that the output of natural monopolists would still be at the suboptimal level where P > MC
Assume a monopolistic publisher has agreed to pay an author 10 percent of the total revenue from the sales of a book. Will the author and the publisher want to charge the same price for the book?
The author would prefer a lower price than the publisher
Use the circular flow diagram above to identify the portions of the circular flow that impact the allocation of resources and the distribution of income based on the following government actions. a. The construction of a new high school will impact b. A 2-percentage-point reduction of the corporate income tax will impact c. An expansion of preschool programs for disadvantaged children will impact d. The levying of an excise tax on polluters will impact
a. 1,3,4,5,6,11,12 b. 1,5,6,11 c. 7,9,8,12 d. 1,2,3,4,11,12
Suppose that Sea Shell Oil Company (SS) is pumping oil at a field off the coast of Nigeria. At this site, it has an extraction cost of $30 per barrel for the first 10 million barrels it pumps each year and then $60 per barrel for all subsequent barrels that it pumps each year, up to the site's maximum capacity of 90 million barrels per year. a. Suppose the user cost is $50 per barrel for all barrels and the current market price for oil is $90 per barrel. How many barrels will SS pump this year? What is the total accounting profit on the total amount of oil it pumps? What is the total economic profit on those barrels of oil? b. What will happen if the current market price for oil rises to $120 per barrel, while the user cost remains at $50 per barrel? How many barrels will SS pump? What will be its accounting profit? What will be its economic profit? c. If the current market price remains at $120 per barrel but the user cost rises to $95 per barrel, how many barrels will SS pump this year? What will be its accounting profit? What will be its economic profit?
a. 10 600 100 b. 90 5.7 1.2 c. 0 0 0
Suppose that the most popular car dealer in your area sells 10 percent of all vehicles. a. If all other car dealers sell either the same number of vehicles or fewer, what is the largest value that the Herfindahl index could possibly take for car dealers in your area? b. In that same situation, what would the four-firm concentration ratio be?
a. 1000 b. 40
Suppose that low-skilled workers employed in clearing woodland can each clear one acre per month if each is equipped with a shovel, a machete, and a chainsaw. Clearing one acre brings in $1,000 in revenue. Each worker's equipment costs the worker's employer $150 per month to rent and each worker toils 40 hours per week for four weeks each month. a. What is the marginal revenue product of hiring one low-skilled worker to clear woodland for one month? b. How much revenue per hour does each worker bring in? c. If the minimum wage is $11.20, by how much will the revenue per hour in part b differ from the minimum wage? d. Now consider the employer's total costs, which include the equipment costs as well as a normal profit of $50 per acre. If the firm pays workers the minimum wage of $11.20 per hour, what will the firm's economic profit or loss be per acre? (Note: Enter your answer as a positive number—that is, do not use a negative sign if you are entering a loss.) e. At what value would the minimum wage have to be set so that the firm makes zero economic profit from employing an additional low-skilled worker to clear woodland?
a. 1000 b. 6.25 c. -4.95 d. loss ; 992 e. 5
Suppose that the interest rate is 4 percent. a. What is the future value of $100 four years from now? How much of the future value is total interest? b. By how much would total interest be greater at a 6 percent interest rate than at a 4 percent interest rate?
a. 116.99 16.99 b. 9.26
Suppose that a car dealership wishes to see if efficiency wages will help improve its salespeople's productivity. Currently, each salesperson sells an average of one car per day while being paid $20 per hour for an 8-hour day. a. What is the current labor cost per car sold? b. Suppose that when the dealer raises the price of labor to $30 per hour, the average number of cars sold by a salesperson increases to 2 per day. What is now the labor cost per car sold? By how much is it higher or lower than it was before? Has the efficiency of labor expenditures by the firm (cars sold per dollar of wages paid to salespeople) increased or decreased? c. Suppose that if the wage is raised a second time to $40 per hour, the number of cars sold rises to an average of 2.5 per day. What is now the labor cost per car sold?
a. 160 b. 120 Lower ; 40 increased c. 128 d. 30 e. 40
Suppose a monopolist's profit-maximizing output is 200 units per week and that the firm sells its output at a price of $60 per unit. The firm has total costs of $9,000 per week. Assume the monopolist is maximizing its profit and earns $30 per unit from the sale of the last unit produced each week. a. What are the firm's weekly economic profits? b. What is the firm's marginal cost? c. What is the firm's average total cost?
a. 3000 b. 30 c. 45
Suppose that a monopolistically competitive restaurant is currently serving 230 meals per day (the output where MR = MC). At that output level, ATC per meal is $10 and consumers are willing to pay $12 per meal. a. What is this firm's profit or loss? b. Will there be entry or exit? In long-run equilibrium, suppose that this restaurant charges $11 per meal for 180 meals and that the marginal cost of the 180th meal is $8. Suppose that the allocatively efficient output level in long-run equilibrium is 200 meals. c. What is the firm's economic profit? d. Is the deadweight loss greater than or less than $60?
a. 460 b. entry ; Left c. 0 ; Less than
Assume that you borrow $5,000, and you pay back the $5,000 plus $250 in interest at the end of the year. a. Assuming no inflation, what is the real interest rate? b. What will the interest rate be if the $250 of interest had been discounted at the time the loan was made? c. What would the interest rate be if you are required to repay the loan in 12 equal monthly installments? Assume that you borrowed on average $2,500 for the whole year, since you would have paid back about half of the loan by the sixth month and reduced the principal by about 1/12 for every month thereafter.
a. 5 b. 5.26 c. 10
After a campus pub increases its output from 5 kegs of beer per day to 9 kegs of beer per day, its total resource cost increases from $225 per day to $450 per day. a. What is the marginal resource cost per day of the additional kegs? b. Assuming the pub is using its resources in a profit-maximizing way, what is the marginal revenue product per day of the additional kegs?
a. 56.25 b. 56.25
What is the meaning of the following four-firm concentration ratios? a. A four-firm concentration ratio of 60 percent means the largest four firms in the industry account for _____ percent of sales. b. A four-firm concentration ratio of 90 percent means the largest four firms in the industry account for _____ percent of sales.
a. 60 b. 90
Suppose that a small town has seven burger shops whose respective shares of the local hamburger market are (as percentages of all hamburgers sold): 23 percent, 22 percent, 18 percent, 12 percent, 11 percent, 8 percent, and 6 percent. a. What is the four-firm concentration ratio of the hamburger industry in this town? b. What is the Herfindahl index for the hamburger industry in this town? c. If the top three sellers combine to form a single firm, what would happen to the four-firm concentration ratio and to the Herfindahl index?
a. 75 b. 1702 c. Four-firm concentration ratio = 94 Herfindahl index = 4334
Consider a small landscaping company run by Mr. Viemeister. He is considering increasing his firm's capacity. If he adds one more worker, the firm's total monthly revenue will increase from $50,000 to $58,000. If he adds one more tractor, monthly revenue will increase from $50,000 to $62,000. Each additional worker costs $4,000 per month, while an additional tractor would also cost $4,000 per month. a. What is the marginal revenue product of labor? The marginal revenue product of capital? b. What is the ratio of the marginal revenue product of labor to the price of labor (MRPL/PL)? What is the ratio of the marginal revenue product of capital to the price of capital (MRPC/PC)? c. Is the firm using the least-costly combination of inputs? d. Does adding an additional worker or adding an additional tractor yield a larger increase in total revenue for each dollar spent?
a. 8000 ; 12000 b. 2 ; 3 c. No, because MRPC/PC > MRPL/PL d. Revenue is increased more by spending money on an additional tractor
Answer the following questions about the barriers to entry that shield monopolies from competition. a. Which of the following is not a major barrier to entry into an industry? b. Which of the following is a true statement?
a. Diminishing marginal returns b. Unfair competition is a barrier with no social justification.
a. Which of the following statements is true? b. An example of a government transfer payment is
a. Exhaustive expenditures use resources, whereas nonexhaustive expenditures change the ownership of financial resources. b.a subsidy to a large corporation.
a. Because they can control product price, monopolists can guarantee profitable production by simply charging the highest price consumers will pay. b. The pure monopolist seeks the output that will yield the greatest per-unit profit. c. An excess of price over marginal cost is the market's way of signaling the need for more production of a good. d. The more profitable a firm, the greater its monopoly power. e. The monopolist has a pricing policy; the competitive producer does not. f. With respect to resource allocation, the interests of the seller and of society coincide in a purely competitive market but conflict in a monopolized market.
a. False b. False c. True d. Cannot be determined e. True f. True
A new production technology for making vitamins is invented by a college professor who decides not to patent it. Thus, it is available for anybody to copy and use. The TC per bottle for production up to 100,000 bottles per day is given in the following table. a. What is ATC for each level of output listed in the table? Enter your answers in the table above. b. Suppose that for each 25,000-bottle-per-day increase in production above 100,000 bottles per day, TC increases by $5,000 (so that, for instance, 125,000 bottles per day would generate total costs of $85,000 and 150,000 bottles per day would generate total costs of $90,000). Are there economies of scale at all output levels? c. Suppose that the price of a bottle of vitamins is $1.33. At that price, the total quantity demanded by consumers is 75,000,000 bottles. How many firms will be in this industry? d. Suppose that, instead, the market quantity demanded at a price of $1.33 is only 75,000. How many firms will be in this industry? e. Review your answers to parts b, c, and d. Does the level of demand determine this industry's market structure? f. Compare your answer to part d of this problem with your answer to part d of problem 3. Do both production technologies show constant returns to scale?
a. Graph - ATC = total cost/quantity b. Yes C. One firm d. One firm e. No f. No, the second technology (this problem) has increasing returns to scale.
Assume that the most efficient production technology available for making vitamin pills has the cost structure given in the following table. Note that output is measured as the number of bottles of vitamins produced per day and that costs include a normal profit. a. What is ATC per unit for each level of output listed in the table? Enter your answers in the table above. b. Are there economies of scale in production? c. Suppose that the market price for a bottle of vitamins is $2.50. At that price the total market quantity demanded is 75,000,000 bottles. How many firms will be in this industry?
a. Graph: ATC = total cost/quantity b. Yes c. 1000 firms d. 1 firm e. yes
Eric and Kyle are fishermen with different equipment and, as a result, different costs for catching fish. Eric's costs for catching fish are $1,000 per ton for the first 5 tons and then $2,500 per ton for any additional tons. Kyle can harvest fish at a cost of $3,000 per ton for the first 15 tons and then $1,400 for any additional tons. a. If society wants 30 tons of fish and for some reason will allow only one of the two fishers to do all the fishing, which one should society choose if it wants to minimize the cost of catching those 30 tons of fish? How much will the total cost of catching the fish be? What will be the average cost per ton for the 30 tons? b. If society wants 30 tons of fish and wants them for the least cost regardless of who catches them, how much should Eric and Kyle each catch? How much will the total cost of catching 30 tons be? What will be the average cost per ton for the 30 tons? c. Suppose that Eric and Kyle can both sell whatever amount of fish they catch for $3,000 per ton. Also suppose that Eric is initially given ITQs (individual transferable quotas) for 30 tons of fish, while Kyle is given ITQs for zero tons of fish. Suppose that Kyle is willing to pay Eric $550 per ton for as many tons of ITQs as Eric is willing to sell to Kyle. How much profit would Eric make if he used all the ITQs himself? What is the profit situation if Eric sold 25 tons' worth of his ITQs to Kyle while using the other 5 tons of ITQs to fish for himself? d. What price per ton can Kyle offer to pay Eric for his 25 tons of ITQs such that Eric will make exactly as much money from that deal (in which he sells 25 tons' worth of ITQs to Kyle while using the rest to fish for himself) as he would by using all 30 tons of ITQs for himself?
a. Kyle 66000 2200 b. 5 ; 25 64000 2133.33 c. 22500 23750 d. 500
a. "Competition in quality and service may be just as effective as price competition in giving buyers more for their money." This statement is true if b. Monopolistically competitive firms frequently prefer nonprice competition to price competition because
a. consumers value quality and service more than a lower price. b. price competition can lead to lower economic profits or even loss.
Suppose you have been tasked with regulating a single monopoly firm that sells 50-pound bags of concrete. The firm has fixed costs of $10 million per year and a variable cost of $1 per bag no matter how many bags are produced. a. If this firm keeps increasing its output level, will ATC per bag ever increase? Are there economies of scale at all levels of output? b. If you wished to regulate this monopoly by charging the socially optimal price, what price would you charge? At that price, what will be the size of the firm's profit or loss? Will the firm want to exit the industry? c. c. You find out that if you set the price at $2 per bag, consumers will demand 10 million bags. How big will the firm's profit or loss be at that price? d. If consumers instead demanded 20 million bags at a price of $2 per bag, how big would the firm's profit or less be? e. Suppose that demand is perfectly inelastic at 20 million bags, so that consumers demand 20 million bags no matter what the price is. What price should you charge if you want the firm to earn only a fair rate of return? Assume as always that TC includes a normal profit.
a. No ; Yes b. 1 loss ; 10 Yes c. 0 d. Profit ; 10 e. 1.50
Suppose you have been tasked with regulating a single monopoly firm that sells 50-pound bags of concrete. The firm has fixed costs of $10 million per year and a variable cost of $6 per bag no matter how many bags are produced. a. If this firm keeps increasing its output level, will ATC per bag ever increase? Are there economies of scale at all levels of output? b. If you wished to regulate this monopoly by charging the socially optimal price, what price would you charge? At that price, the size of the firm's Will the firm want to exit the industry? c. You find out that if you set the price at $7 per bag, consumers will demand 10 million bags. d. If consumers instead demanded 20 million bags at a price of $7, how big would the firm's profit or loss be? e. Suppose that demand is perfectly inelastic at 20 million bags, so that consumers demand 20 million bags no matter what the price is. What price should you charge if you want the firm to earn only a fair rate of return? Assume as always that TC includes a normal profit.
a. No ; Yes b. 6 Loss ; 10 Yes c. 0 d. Profit ; 10 e. 6.50
Suppose that a price-discriminating monopolist has segregated its market into two groups of buyers, as shown by the following tables. a. Calculate the missing TR and MR amounts for Group 1. b. Assume that MC is $13 in both markets and MC = ATC at all output levels. What price will the firm charge in each market? c. Based solely on these two prices, which market has the higher price elasticity of demand? d. What will be this monopolist's total economic profit?
a. On graph - TR = Price x Quantity demanded MR = Difference in total revenues (ex. 166-100 = 66) b. Group 1: 6:48 Group 2: 6:33 c. The second market has the higher price elasticity of demand d. 330
Suppose a pure monopolist faces the following cost data, as shown by the table on the left, and the demand schedule, as shown on the right. a. Calculate the missing TR and MR amounts. ' b. What is the profit-maximizing price for this monopolist? What is the profit-maximizing output? c. What is the monopolist's profit?
a. On graph - TR = Price x Quantity demanded MR = Difference in total revenues (ex. 166-100 = 66) b. 63, 4 c. 42
Identify whether each of the following taxes is progressive or regressive. a. Personal income tax b. sales tax c. payroll taxes d. property taxes
a. Progressive b. Regressive c. Regressive d. Regressive
Various cultures have come up with their own methods to limit catch size and prevent fishery collapse. In old Hawaii, certain fishing grounds near shore could be used only by certain individuals. And among lobstermen in Maine today, strict territorial rights are handed out so that only certain people can harvest lobsters in certain waters. a. These systems provide incentives to harvest b. These types of systems
a. at a sustainable rate. b. are more difficult and costly the further the fishing moves from shore
Suppose that in year 1, Acme Corporation can make a real (inflation-adjusted) return on an investment of 8 percent. Assume the nominal interest rate is 9 percent and the inflation rate is 3 percent. a. Using this information, we can conclude that the investment would b. Now suppose that in year 2, the real (inflation-adjusted) return on an investment is 4 percent. In this case, we can conclude that the investment would____________.
a. be profitable b. not be profitable
a. There is so much advertising in monopolistic competition and oligopoly because b. Advertising helps consumers and promotes efficiency by c. Which of the following statements is true?
a. brand distinction encourages consumer loyalty, which increases profits. b. providing information about new products, increasing sales and output, and lowering average total cost. c. When advertising either leads to increased monopoly power or is self-canceling, economic inefficiency results.
ADVANCED ANALYSIS Suppose you are playing a game in which you and one other person each picks a number between 1 and 100, with the person closest to some randomly selected number between 1 and 100 winning the jackpot. (Ask your instructor to fund the jackpot.) Your opponent picks first. a. You expect your opponent to choose the number 50 because You would then pick the number ____________ b. The two numbers are so ____________ because c. Home Depot and Lowes, Walgreens and Rite-Aid, McDonald's and Burger King, and other major pairs of rivals locate close to each other in many well-defined geographical markets that are large enough for both firms to be profitable. This is because all of these companies
a. choosing this number lowers the chance of winning below 50-50. 51 b. close each person maximizes his or her probability of winning. c. choose a central location to maximize their share of customers.
Suppose you are playing a game in which you and one other person each picks a number between 1 and 100, with the person closest to some randomly selected number between 1 and 100 winning the jackpot. (Ask your instructor to fund the jackpot.) Your opponent picks first. a. You expect your opponent to choose the number 50 because You would then pick the number b. The two numbers are so c. Home Depot and Lowes, Walgreens and Rite-Aid, McDonald's and Burger King, and other major pairs of rivals locate close to each other in many well-defined geographical markets that are large enough for both firms to be profitable. This is because all of these companies
a. choosing this number lowers the chance of winning below 50-50. ; 51 b. close ; each person maximizes his or her probability of winning c. choose a central location to maximize their share of customers
a. How does the demand curve faced by a purely monopolistic seller differ from that confronting a purely competitive firm? The demand curve faced by a purely monopolistic seller is b. Why does it differ? Of what significance is the difference? The demand curve facing a c. Complete the following statement. The pure monopolist's demand curve is not
a. downward sloping, whereas that facing the purely competitive firm is perfectly elastic. b. purely competitive firm is perfectly elastic, because it may sell all that it wishes at the equilibrium price. c. perfectly inelastic, because MR is negative when demand is inelastic, so MR = MC < 0.
a. The most common reason that oligopolies exist is b. Which of the following are products or services of oligopolists that you own or regularly purchase? c. Oligopoly differs from monopolistic competition in that
a. economies of scale. b. Automobiles, personal computers, and gasoline c. oligopoly has few firms, whereas monopolistic competition has many firms.
a. The difference between monopolistic competition and pure competition is that compared to pure competition, monopolistic competition has b. The difference between monopolistic competition and pure monopoly is that compared to monopolistic competition, pure monopoly has c. Product differentiation d. Firms will enter a monopolistically competitive industry when there are
a. fewer firms, product differentiation, some price control, and relatively easy but not barrier-free entry. b. one firm, a unique product, price control, and entry barriers c. provides an advantage in the market. d. economic profits. This will shift demand to the left, reducing the firm's market share and its economic profit.
a. Investment in human capital is any action that b. Investment in human capital explains wage differentials because c. The long-run rise in real-wage rates in the United States
a. improves a worker's skills and abilities. b. it enables a worker to build specialized skills that have additional wage value in the labor market c. is directly related to investment in human capital and improved labor-force skills
a. The kinked-demand curve for oligopolists assumes that rivals will b. There is a gap in the oligopolist's marginal-revenue curve because c. The kinked-demand curve explains price rigidity in oligopoly because
a. match price cuts, but ignore price increases. b. the slope of the demand curve changes abruptly. c. firms expect any change in price will lower revenue and profits
Evaluate and explain: a. Compared to pure monopoly and pure competition, monopolistically competitive industries b. True or False. In the long run, monopolistic competition leads to a monopolistic price but not to monopolistic profits.
a. may earn economic profits, but profits will diminish as competitors enter. There will be productive inefficiency. b. True, since P > MC, but the availability of close substitutes pushes the price of the average firm down until it equals ATC.
When using a supply-and-demand model to illustrate how land rents are set, economists typically draw the supply curve as a vertical line because: the supply of land is fixed. the supply of land is perfectly inelastic. the quantity supplied of land does not increase when rents go up. all of the above.
all of the above
Entrepreneurs are the residual claimants at their respective firms, which means that they:
all of the above.
Florida citrus growers say that the recent crackdown on illegal immigration is increasing the market wage rates necessary to get their oranges picked. Some are turning to $100,000 to $300,000 mechanical harvesters known as "trunk, shake, and catch" pickers, which vigorously shake oranges from trees. If widely adopted, this will
decrease the demand for human orange pickers, implying the substitution effect is greater than the output effect.
The socially optimal price (P = MC) is socially optimal because:
it achieves allocative efficiency.
U.S. pharmaceutical companies charge different prices for prescription drugs to buyers in different nations, depending on elasticity of demand and government-imposed price ceilings. These companies, for profit reasons, oppose laws allowing re-importation of drugs to the United States because
it would make it much more difficult to maintain the different prescription drug prices.
