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1) The idea that the demand for auto workers stems from the demand for automobiles is
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B) Derived Demand
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2) When a large amount of output is produced per unit of the input, the input is said to exhibit
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A) high productivity.
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3) A car manufacturing company adopts a new technology that, ceteris paribus, increases the productivity of capital. At the same time, workers unionize and demand higher wages. Assume that for this firm capital and labor are substitutable. Which of the following is most likely to occur?
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A) Capital will be substituted for labor.
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4) If the marginal product of a worker for a calculator manufacturer is 10 calculators, and the price of a calculator is $10, the firm's marginal revenue product is
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C) $100.00.
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5) Refer to Table 10.1. The marginal revenue product of the fourth worker is
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C) $100
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6) Refer to Table 10.1. The marginal revenue product of the ________ worker is $150.
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A) second
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7) Refer to Table 10.1. If the payment to labor per day is $100, this T-shirt manufacturer is maximizing profits if he will hire ________ employee(s).
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C) four
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8) The formula for the marginal revenue product of labor (L is for labor, X is the output) is
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C) (MPL)(MRX).
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9) Refer to Figure 10.1. This firm is currently hiring 16 workers and paying a wage of $10. This firm should
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B) reduce employment to 15 workers to increase profits.
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10) A firm will continue hiring labor as long as the MRP of labor ________ the market wage rate.
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A) is greater than or equal to
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11) The marginal cost of a unit of labor in a perfectly competitive labor market is
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C) the market wage rate.
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12) Sally's Sandwiches produces sandwiches using one variable input—labor. Sally's Sandwiches is a ________ in the labor market and a ________ in the sandwich market.
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B) consumer; producer
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13) The measure of a firm's ________ is the current market value of its plant, equipment, inventories, and intangible assets.
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C) capital stock
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14) A clothing manufacturer produced 5,000 sweaters, but sold only 4,000 of them. The remaining 1,000 sweaters would be classified as
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B) part of the firm's tangible capital.
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15) Which of the following would constitute depreciation, as economists use the term?
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D) All new software requires Windows 8, and not Windows 7, as an operating system.
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16) A new technology is developed for producing microwave ovens that reduces production costs by 10%. Which of the following is the most likely consequence of this technological change?
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B) Firms must adopt this new technology to remain efficient.
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17) ________ is (are) protected by barriers to entry, specifically ________.
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A) State lotteries; government rules
Diff: 1
Diff: 1
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18) Refer to Figure 13.2. The only firm producing electricity has the long-run average total cost curve shown. The total amount of demand for kilowatts is 100,000 per hour. It makes economic sense for this firm to be the only producer of electricity because this firm
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A) must be realizing economies of scale in producing electricity.
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19) Refer to Figure 13.2. Each electricity producer has the given LRAC curve. The total cost of producing 100,000 kilowatts per hour is minimized with ________ firm(s) in the industry.
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A) one
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20) For a monopoly to be a natural monopoly,
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A) economies of scale must be realized at a scale that is close to total demand in the market.
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21) Monopolists do not have supply curves that are independent of market demand.
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Answer: TRUE
Diff: 1
Diff: 1
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22) The condition for profit-maximization for competitive firms and monopolies is the same: marginal revenue equals marginal cost. Hence, monopolies are efficient.
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Answer: FALSE
Diff: 1
Diff: 1
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23) Products may be homogeneous or differentiated in the ________ market structure.
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D) oligopolistic
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24) A ________ industry has a relatively small number of firms that dominate a market.
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C) concentrated
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25) The market structure in which the behavior of any given firm depends on the behavior of the other firms in the industry is
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D) oligopoly.
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26) Monopolistic competition differs from perfect competition primarily because in
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A) monopolistic competition, firms can differentiate their products.
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27) In monopolistic competition, firms can have some market power
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B) by producing differentiated products.
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3. An oligopolist must take into account how the output and price effects will be influenced by competitors' production decisions, or it must assume competitors' production will not change in response to its own actions.
(Part 1)
(Part 1)
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Duopoly outcome with collusion: Each firm agrees to produce Q=30, earns profit=$900
T-Mobile reneges on the agreement and produces Q=40, what happens to the market price? T-Mobile's profits
Is it in T-Mobiles interest to renege on the agreement?
If both firms renege and Produce Q=40, determine each firm's profits.
T-Mobile reneges on the agreement and produces Q=40, what happens to the market price? T-Mobile's profits
Is it in T-Mobiles interest to renege on the agreement?
If both firms renege and Produce Q=40, determine each firm's profits.
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3. An oligopolist must take into account how the output and price effects will be influenced by competitors' production decisions, or it must assume competitors' production will not change in response to its own actions.
(Part 2)
(Part 2)
answer
If both firms stick to agreement,
each firm's profit = $900
If T-Mobile reneges on agreement and produces Q = 40:
Market quantity = 70, P = $35
T-Mobile's profit = 40 x ($35 - 10) = $1000
T-Mobile's profits are higher if it reneges.
Verizon will conclude the same, so both firms renege, each produces Q = 40:
Market quantity = 80, P = $30
Each firm's profit = 40 x ($30 - 10) = $800
each firm's profit = $900
If T-Mobile reneges on agreement and produces Q = 40:
Market quantity = 70, P = $35
T-Mobile's profit = 40 x ($35 - 10) = $1000
T-Mobile's profits are higher if it reneges.
Verizon will conclude the same, so both firms renege, each produces Q = 40:
Market quantity = 80, P = $30
Each firm's profit = 40 x ($30 - 10) = $800
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Leadbelly Co. sells pencils in a perfectly competitive product market and hires workers in
a perfectly competitive labor market. Assume that the market wage rate for workers is $150 per day.
a. What rule should Leadbelly follow to hire the profit-maximizing amount of labor?
b. At the profit-maximizing level of output, the marginal product of the last worker hired
is 30 boxes of pencils per day. Calculate the price of a box of pencils.
a perfectly competitive labor market. Assume that the market wage rate for workers is $150 per day.
a. What rule should Leadbelly follow to hire the profit-maximizing amount of labor?
b. At the profit-maximizing level of output, the marginal product of the last worker hired
is 30 boxes of pencils per day. Calculate the price of a box of pencils.
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a. Leadbelly should hire workers up to the point where VMP is equal to the wage of $150 per day.
b. Since VMP is equal to $150 at the profit-maximizing level of output, and VMP = MP × P, the price of pencils must be $5 per box.
b. Since VMP is equal to $150 at the profit-maximizing level of output, and VMP = MP × P, the price of pencils must be $5 per box.
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