Microeconomics Test 3 Campbell

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A characteristic of monopolistic competition that is not present in any other market structure is that there...

Are many sellers, and each produces its own version of the product

A characteristic of an oligopoly is that...

There are a small number of sellers with considerable market power

If the wage rate falls, firms will find that...

They move downward and to the right along the labor demand curve

Suppose a coffee shop in Des Moines, Iowa, hires workers to workers to personalize coffee mugs for special occasions. The store sells the mugs for $7 each. The marginal revenue product of the store's third worker is $84. What is the marginal product of the third worker?

12 coffee mugs

Why is an expert hairstylist more likely to price discriminate than an expert jam maker?

A haircut cannot be resold, but a jar of jam can be resold

All of these government policies would create a barrier to entry in a market except...

A requirement that there can be no switching costs for consumers

Nash Equilibrium

A situation where neither player in Game Theory can improve their circumstances by changing their decision

The BP and Sunoco stations are the only two providers of gasoline in the small town of Davenport. The two gas stations decide to cooperate to raise the local price of gasoline. Total profits of the two businesses are highest when ____ cheats on the agreement. BP's profits are highest when ____.

Neither firm ; BP cheats, but Sunoco does not

Which statement regarding a Nash equilibrium is true?

No player can do better by unilaterally changing his or her choice

The options for rideshare transportation in your city are Uber and Lyft. The market structure is...

Oligopoly

How does output for a seller who has market power compare to output for a seller who does not have market power, assuming both follow the Rational Rule for Sellers

Output is higher for the seller without market power than the one with market power

When labor is hired in a competitive market, the value of the marginal revenue product is computed by...

P x MPL

In a perfectly competitive labor market, employers...

Pay the market wage

You have a garden and sell your tomatoes at the farmer's market on summer weekends. However, many other sellers at the same market sell tomatoes that are indistinguishable from yours. You don't differentiate yourself through branding or certifications, and if you slightly lower your price, you lower your profit margin. The market structure is...

Perfect competition

Many hotel chains offer discounts to AAA members. This is an example of ____ that is ____ in the United States

Price discrimination ; Legal

A price-discriminating company can attract additional customers by ____, this will add to its profits if the ____

Reducing price ; price is not above the company's marginal cost

How do you determine what output and price a firm should charge?

See where the marginal cost curve and marginal revenue curve meet, see what the price for that quantity is on the firm demand curve

Carl owns one of the 30 lawn-mowing businesses in his city. What will happen to his business if there are new entrants into his city's lawn mowing market?

The demand for Carl's services will fall

What is the relationship between a company's market power and the price that the company can charge for its product?

The greater the market power, the higher the price the company can charge without losing many customers

A reservation price is...

The highest price that a customer is willing to pay for a product

In your area, 100 data analysts begin looking for jobs ad 75 retire. If there are no other changes, which is true?

The market labor supply curve shift to the right, with downward pressure on wages

To maximize profits when hiring employees, continue to hire workers until...

The wage equals the marginal revenue product

Economic Profit

Total Revenue - Explicit cost - implicit cost

How to solve a Game Theory problem

Determine which the more profitable choice is for both players

Suppose major streaming services like Netflix, Hulu, Amazon Prime, Disney+, and others collude to charge subscribers a common, higher, minimum price per moth. Why might this agreement not be honored by one of the partners?

Each party has an incentive to lower its price and take customers away from the others

____ attract new sellers into a market

Existing sellers in the market earning economic profits

The marginal product of labor is the...

Extra output produced from hiring an additional worker

As output rises, average fixed costs

Fall

A cost that does NOT depend on the quantity of output produced is...

Fixed

A basic logic that applies to all strategic interactions is that...

Making a good choice requires that you anticipate what others will do

The marginal revenue product is the...

Marginal revenue from hiring an additional worker

How do a company's accounting profit and economic profit compare in size

Accounting profit is larger than economic profit, if there are implicit costs

Total revenue divided by quantity is called ____ , or ____

Average revenue ; price

Accounting Profit

Total revenue - Explicit cost

The two main types of implicit costs are...

Forgone wages and forgone interest

If a group of buyers is price sensitive, then the...

Group will not buy at higher prices

When new sellers enter a market, existing sellers will...

Have less market power

Assume that there is free entry and exit in the coffee shop market. How profitable can Mario expect his coffee shop to be in the long run?

He can expect it to earn zero economic profits

In a product market, why would a company owner prefer to face fewer competitors than more?

With fewer competitors, companies have more market power

Alena manages a small theme park. She hires one more custodian at $450 per week, making her park cleaner and more attractive. As a result of this improvement, ticket sales rise by 40 tickets per week. Tickets sell for $12. Use the Rational Rule for Employers to determine if hiring the extra custodian was a good move.

Yes, it was a good move because it added more to revenue than to cost


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