question

What level of output maximizes profits in a perfectly competitive market?

answer

When MC = MR

question

In a perfectly competitive market, what price should a firm charge?

answer

Whatever the price is when MC = MR

question

In the short run, when should a firm shut down?

answer

When P < AVC

question

A firm sells its product in a perfectly competitive market where other firms charge a price of $110 per unit. The firm estimates its total costs as C(Q) = 70 + 14Q + 2Q2. Thus, the marginal costs are MC(Q) = 14 + 4Q. How much output should the firm produce in the short run?

answer

24

question

A firm sells its product in a perfectly competitive market where other firms charge a price of $110 per unit. The firm estimates its total costs as C(Q) = 70 + 14Q + 2Q2. Thus, the marginal costs are MC(Q) = 14 + 4Q. What price should the firm charge in the short run?

answer

$110

question

A firm sells its product in a perfectly competitive market where other firms charge a price of $110 per unit. The firm estimates its total costs as C(Q) = 70 + 14Q + 2Q2. Thus, the marginal costs are MC(Q) = 14 + 4Q. What are the firm's short run profits?

answer

$1,082

question

You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q2. Thus, the marginal costs are MC(Q) = 10Q. The profit-maximizing output for your firm is

answer

When MC = 10Q the maximizing output is 5

question

You are the manager of a firm that sells its product in a competitive market at a price of $40. Your firm's cost function is C = 60 + 4Q2. Thus, the marginal costs are MC(Q) = 8Q. The profit-maximizing output for your firm is

answer

When MC = 8Q the maximizing output is 5

question

You are the manager of a firm that sells its product in a competitive market at a price of $60. Your firm's cost function is C = 50 + 3Q2. Thus, the marginal costs are MC(Q) = 6Q. The profit-maximizing output for your firm is

answer

When MC = 6Q the maximizing output is 10

question

You are the manager of a firm that sells its product in a competitive market at a price of $14. Your firm's cost function is C = 10 + 4Q + 0.5Q2. Thus, the marginal costs are MC(Q) = 4 + Q. The profit-maximizing output for your firm is

answer

When MC = 4 + Q the maximizing output is 10

question

When is the monopolist's profit-maximizing level of output?

answer

For monopolist it is when MC = MR

question

When is the monopolist's profit-maximizing price?

answer

For monopolist, the output where MC = MR, go up on that line to where it intersects with the demand curve line and the price that correlates with is the profit-maximizing price.

question

Total Revenue = ____ x _____

answer

Price x Quantity

question

How do you find Total Cost at the profit-maximizing output if you are a monopoly?

answer

You use the price that correlates where the ATC line intersects the MR line at the profit-maximizing output.

question

How do you calculate profit using profit-maximizing output and price?

answer

Total Revenue - Total Cost.

question

The inverse demand for Harley Davidson motorcycles is given by:

𝑃 = 40,000−10𝑄

where P is the price in dollars, and Q measures the number of units sold each month. Harley Davidson is currently producing motorcycles at a constant marginal and average cost of $16,000. Assume Harley Davidson is a monopoly.

What is the profit-maximizing quantity?

𝑃 = 40,000−10𝑄

where P is the price in dollars, and Q measures the number of units sold each month. Harley Davidson is currently producing motorcycles at a constant marginal and average cost of $16,000. Assume Harley Davidson is a monopoly.

What is the profit-maximizing quantity?

answer

1200

question

The inverse demand for Harley Davidson motorcycles is given by:

𝑃 = 40,000−10𝑄

where P is the price in dollars, and Q measures the number of units sold each month. Harley Davidson is currently producing motorcycles at a constant marginal and average cost of $16,000. Assume Harley Davidson is a monopoly.

What is the profit-maximizing price?

𝑃 = 40,000−10𝑄

where P is the price in dollars, and Q measures the number of units sold each month. Harley Davidson is currently producing motorcycles at a constant marginal and average cost of $16,000. Assume Harley Davidson is a monopoly.

What is the profit-maximizing price?

answer

$28,000

question

The inverse demand for Harley Davidson motorcycles is given by:

𝑃 = 40,000−10𝑄

where P is the price in dollars, and Q measures the number of units sold each month. Harley Davidson is currently producing motorcycles at a constant marginal and average cost of $16,000. Assume Harley Davidson is a monopoly.

Heavy tariffs on imported steel drive up Harley's marginal and average cost by $2,000. What is the new profit-maximizing quantity?

𝑃 = 40,000−10𝑄

where P is the price in dollars, and Q measures the number of units sold each month. Harley Davidson is currently producing motorcycles at a constant marginal and average cost of $16,000. Assume Harley Davidson is a monopoly.

Heavy tariffs on imported steel drive up Harley's marginal and average cost by $2,000. What is the new profit-maximizing quantity?

answer

1100

question

The inverse demand for Harley Davidson motorcycles is given by:

𝑃 = 40,000−10𝑄

where P is the price in dollars, and Q measures the number of units sold each month. Harley Davidson is currently producing motorcycles at a constant marginal and average cost of $16,000. Assume Harley Davidson is a monopoly.

Heavy tariffs on imported steel drive up Harley's marginal and average cost by $2,000. What is the new profit-maximizing price?

𝑃 = 40,000−10𝑄

where P is the price in dollars, and Q measures the number of units sold each month. Harley Davidson is currently producing motorcycles at a constant marginal and average cost of $16,000. Assume Harley Davidson is a monopoly.

Heavy tariffs on imported steel drive up Harley's marginal and average cost by $2,000. What is the new profit-maximizing price?

answer

$29,000

question

Five networks are vying to receive the exclusive pay-per-view broadcast rights (i.e. monopoly) to the World Series of Yahtzee. Each estimates that the inverse demand for watching this nail-biter of an event is given by:

𝑃 = 100−0.01𝑄

Each can provide the broadcast at a constant marginal cost of $1 per viewer.

What is the profit-maximizing level of output?

𝑃 = 100−0.01𝑄

Each can provide the broadcast at a constant marginal cost of $1 per viewer.

What is the profit-maximizing level of output?

answer

4,950

question

Five networks are vying to receive the exclusive pay-per-view broadcast rights (i.e. monopoly) to the World Series of Yahtzee. Each estimates that the inverse demand for watching this nail-biter of an event is given by:

𝑃 = 100−0.01𝑄

Each can provide the broadcast at a constant marginal cost of $1 per viewer.

What is the profit-maximizing price?

𝑃 = 100−0.01𝑄

Each can provide the broadcast at a constant marginal cost of $1 per viewer.

What is the profit-maximizing price?

answer

$50.5

question

What is the learner index?

answer

It measures the % mark-up above the firms marginal cost.

question

What does the learner index equal?

answer

LI = P-MC/P = 1/IEdI

question

When thinking of optimal decisions, one must think about decisions their _______ make?

answer

Rivals

question

Game Theory is all about?

answer

Strategy

question

What is Game Theory?

answer

A framework that allows us to model and analyze strategic interactions with other firms.

question

What does Game Theory help us do?

answer

Make predictions about decisions firms make and which outcomes are likely/reasonable.

&

Shows us what constitutes on equilibrium in strategic interactions.

&

Shows us what constitutes on equilibrium in strategic interactions.

question

What are the 4 basic elements to every game?

answer

1.) Players - Decision Makers (Firms)

2.) Strategies - Possible Player Choices

3.) Payoffs - Returns to players at the conclusion of the

game

4.) Information - Specify what players know when they make their move

2.) Strategies - Possible Player Choices

3.) Payoffs - Returns to players at the conclusion of the

game

4.) Information - Specify what players know when they make their move

question

What is a Simultaneous or Static game?

answer

Decisions are made at the same time; decisions are made without knowing what your rivals are doing.

question

What is a Dynamic or Sequential game?

answer

Decisions are made in sequence; able to observe the decisions of others and respond.

question

What is Nash Equilibrium?

answer

In game theory, the result of all players' playing their best strategy given what their competitors are doing.

question

What is Dominant Strategy in Game Theory?

answer

A strategy that is best for a player in a game and yields the highest payoff regardless of the strategies chosen by the other players

question

What is a zero-sum game?

answer

When the two players payoffs in each box add to zero. Think the Matching Pennies game.

question

What happens to both players In a Zero-Sum Game?

answer

Both of their payoffs will equal zero.

question

How do you prevent resale?

answer

1. Require Identification with consumption of the good. Ex: Students showing ID to watch the game.

2. Link Individual to Good

Ex: Airline ticket, whoever buys it uses it

3. Limit the discount to one person

2. Link Individual to Good

Ex: Airline ticket, whoever buys it uses it

3. Limit the discount to one person

question

What is 1st degree price discrimination?

answer

Firms can perfectly observe the demand of its consumers

Firms charge each customer their max willingness to pay (WTP)

Ex: Buying a car, College Tuition, etc...

Firms charge each customer their max willingness to pay (WTP)

Ex: Buying a car, College Tuition, etc...

question

1st degree price discrimination results in?

answer

The maximum possible profit for a frim.

question

What is 2nd degree price discrimination?

answer

Firms charge different amounts based on how much is bought.

Ex: Utility pricing, bulk discounting, season tickets.

Ex: Utility pricing, bulk discounting, season tickets.

question

What does the profit from 2nd degree price discrimination look like?

answer

Profit from 2nd degree PD < Profit from 1st degree PD

Profit from 2nd degree PD > Profit from no PD

Profit from 2nd degree PD > Profit from no PD

question

Consider a person has a demand for up to 2 Red Bulls in a given week

WTP for 1st = $3

WTP for 2nd = $2

For vendor, suppose MC = $1.50

If the firm just set one uniform price, what would it be?

WTP for 1st = $3

WTP for 2nd = $2

For vendor, suppose MC = $1.50

If the firm just set one uniform price, what would it be?

answer

If P = $3, producer surplus (PS) would

PS = (3 x 1) - (1:50 x 1)

PS = $1.50

If PS = 2

PS = (2 x 2) - (1.50 x 2)

PS = $1

They would charge $3 and sell 1 drink.

PS = (3 x 1) - (1:50 x 1)

PS = $1.50

If PS = 2

PS = (2 x 2) - (1.50 x 2)

PS = $1

They would charge $3 and sell 1 drink.

question

When solving with the inverse demand what must you do to the quantity in the price function?

answer

Double it