Econ 202 Edwardson Tamu Final exam Part 3
What is the difference between the market demand curve for a perfectly competitive industry and the demand curve for a firm in this industry?
The market demand curve is downward sloping, and the firm's demand curve is a horizontal line.
A perfectly competitive firm in a constant cost industry produces 3,000 units of a good at a total cost of 36,000. The prevailing market price is $15. What will happen to the number of firms in the industry and the industry's output in the long run?
The number of firms, and the industry's output increases
The Bay Area Rapid Transit, BART, offers senior citizens discounted fares for BART rides. This suggests that BART authorities believe that senior citizens have a
more price elastic demand for subway rides
With perfect price discrimination there is
no deadweight loss
Mutual interdependence is found in
oligopolistic markets
Assume that price is greater than average variable cost. I a perfectly competitive seller is producing at an output where price is $11 and the marginal cost is $14.54, then to maximize the profits the firm should
produce a smaller level of output
In which market structure is it not possible to practice price discrimination
perfect competition
No barriers to entry, many buyers and sellers, and identical products are the assumptions for what kind of market
perfectly competitive
The labor supply curve is ending backwards because
As the wage rate rises, the income effect becomes larger than the substitution effect
Player B Confess Don't confess Confess A:3 years A:1 year B:3 years B:10 years Player 1 Don't A:10 years A:2 years Confess B:1 year B:2 years The table above shows the payoff matrix for a prisoners' dilemma. In the Nash Equilibrium
Both prisoners choose to confess
What happens when a monopolistically competitive firm reaches long term equilibrium
P=ATC and MR=MC
A firm will make a profit when
P>ATC
The key characteristics of a monopolistically competitive market include
Sellers selling similar but differentiated products
Tony's Italian Ice is a monopolistically competitive firm. if Tony's earns a profit in the short run, what will happen when new firms enter the market
The demand curve will shift to the left
Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit. This condition is referred to as
allocative effeciency
Because leisure is a normal good, an increase in the wage rate will result in
an increase in the quantity of labor supplied because of the substitution effect and a decrease in the quantity of labor supplied because of the income effect.
A natural monopoly is defined as
an industry in which economies of scale allow one firm to supply the entire market at the lowest possible cost
For productive efficiency to hold
average total cost is minimized
A monopoly has two key features which are
barriers to entry and no close substitutes
The prices college students and faculty pay for apple computers are lower than the prices Apple charges on its website and in retail stores. Apple charges lower prices to college students and faculty members because
college students and faculty members have a more elastic demand for computers that the general public
Compared to a similar perfectly competitive industry, a single price monopoly
creates a deadweight loss and decreases consumer surplus
In the long run firms in both monopolistically competitive markets, and perfectly competitive markets earn zero economic profits, but unlike perfectly competitive firms in the long run, monopolistically competitive firms
do not produce at a minimum average total cost
With perfect price discrimination the marginal revenue curve
is equal to the demand curve
The reservation wage is
the lowest wage for which a person is willing to supply labor
The marginal revenue curve for a perfectly competitive firm is
the same as it's demand curve
