question
Chp. 12 HW
Imagine you're in a meeting with the owner of a restaurant who is trying to decide whether to keep his restaurant open or to invest his time and money another way. In order to make the correct decision, the restaurant owner needs to consider his _______.
Imagine you're in a meeting with the owner of a restaurant who is trying to decide whether to keep his restaurant open or to invest his time and money another way. In order to make the correct decision, the restaurant owner needs to consider his _______.
answer
Economic profit
question
Chp. 12 HW
Self-employed business owners frequently overestimate their profit levels because they underestimate their __________.
Self-employed business owners frequently overestimate their profit levels because they underestimate their __________.
answer
Implicit costs
question
Chp. 12 HW
If a firm experiences diminishing marginal product, then it means that total output decreases with additional variable inputs.
True/False
If a firm experiences diminishing marginal product, then it means that total output decreases with additional variable inputs.
True/False
answer
False
Diminishing marginal product means that the increase in total output is getting smaller, not that total output is getting smaller. Each additional input adds less to the total output than the previous unit of input added.
Diminishing marginal product means that the increase in total output is getting smaller, not that total output is getting smaller. Each additional input adds less to the total output than the previous unit of input added.
question
Chp. 12 HW
Suppose that a pharmaceutical company wants to grow in size but is constrained in the short run by its production capacity. What are some of the steps the company can take in the long run to overcome these constraints?
Expand the size of current factories
Hire additional workers
Build more factories
Use cheaper materials
Suppose that a pharmaceutical company wants to grow in size but is constrained in the short run by its production capacity. What are some of the steps the company can take in the long run to overcome these constraints?
Expand the size of current factories
Hire additional workers
Build more factories
Use cheaper materials
answer
Expand the size of current factories
Build more factories
Build more factories
question
Chp. 12 Quiz
Suppose Bev's Bags makes two kinds of handbags—large and small. Bev rents an industrial space where she keeps the fabric, the industrial sewing machine, her measuring board and cutting shears, extra needles, thread and buttons, and labels. If Bev were to produce no bags, which of the following is true regarding Bev's costs?
Suppose Bev's Bags makes two kinds of handbags—large and small. Bev rents an industrial space where she keeps the fabric, the industrial sewing machine, her measuring board and cutting shears, extra needles, thread and buttons, and labels. If Bev were to produce no bags, which of the following is true regarding Bev's costs?
answer
The variable cost of fabric would drop to zero.
question
Chp. 12 Quiz
The total cost curve:
All
is always above the variable cost curve.
is the sum of the variable cost curve and fixed cost curve.
is parallel to the variable cost curve.
The total cost curve:
All
is always above the variable cost curve.
is the sum of the variable cost curve and fixed cost curve.
is parallel to the variable cost curve.
answer
All
question
Chp. 12 Quiz
When economic profits are negative, accounting profits could be:
Pos.
Neg.
Zero
All
When economic profits are negative, accounting profits could be:
Pos.
Neg.
Zero
All
answer
All
question
Chp. 12 Quiz
When a firm is on the portion of its long run ATC curve that slopes upward, it is experiencing:
When a firm is on the portion of its long run ATC curve that slopes upward, it is experiencing:
answer
diseconomies of scale
question
Chp. 12 Quiz
A long-run ATC curve shows:
which size firm can capture the lowest costs per unit for an industry.
what size firms can capture economies of scale by expanding.
All
the minimum average total cost possible for every possible size firm across an industry.
A long-run ATC curve shows:
which size firm can capture the lowest costs per unit for an industry.
what size firms can capture economies of scale by expanding.
All
the minimum average total cost possible for every possible size firm across an industry.
answer
All
question
Chp. 12 Quiz
Doug wants to start up his own business, and needs $25,000 to get it off the ground. He can either withdraw it from his savings account, where he currently earns 3 percent, or he can take out a loan for $25,000 and pay 5 percent interest. Doug should compare:
Doug wants to start up his own business, and needs $25,000 to get it off the ground. He can either withdraw it from his savings account, where he currently earns 3 percent, or he can take out a loan for $25,000 and pay 5 percent interest. Doug should compare:
answer
the implicit cost of $750 to the explicit cost of $1,250 and choose to use his savings.
question
Chp. 13 HW
A market is in long-run equilibrium and firms in this market have identical cost structures. Suppose demand in this market decreases. Which of the following are correct descriptions of what happens to the individual firms and the whole market as the market first leaves and then returns to long-run equilibrium?
Firms will enter into the market in the long run
Individual firms' profit-maximizing output will decrease in the long-run
Market price will decrease in the short-run
Individual firms' profit-maximizing output will decrease in the short-run
Firms will exit the market in the long run
Market quantity will remain the same in the long-run
Market quantity will decrease in the long-run.
Market price will decrease in the long-run.
A market is in long-run equilibrium and firms in this market have identical cost structures. Suppose demand in this market decreases. Which of the following are correct descriptions of what happens to the individual firms and the whole market as the market first leaves and then returns to long-run equilibrium?
Firms will enter into the market in the long run
Individual firms' profit-maximizing output will decrease in the long-run
Market price will decrease in the short-run
Individual firms' profit-maximizing output will decrease in the short-run
Firms will exit the market in the long run
Market quantity will remain the same in the long-run
Market quantity will decrease in the long-run.
Market price will decrease in the long-run.
answer
Market price will decrease in the short-run
Individual firms' profit-maximizing output will decrease in the short-run
Firms will exit the market in the long run
Market quantity will decrease in the long-run.
When demand decreases, the market price will decrease. For the individual firm, this means that the profit-maximizing output, where MR = MC, will be at a lower quantity. In the short run, the individual firm will produce less (and may even shut down if the price falls below AVC). In the long run, firms will begin to exit because they are facing negative profits. As firms exit, the supply curve shifts to the left, causing price to rise. This will continue until price returns to the minimum of ATC. Because price will return to its original level before demand decreased, each individual firm that remains in the market will increase output to the original level.
Individual firms' profit-maximizing output will decrease in the short-run
Firms will exit the market in the long run
Market quantity will decrease in the long-run.
When demand decreases, the market price will decrease. For the individual firm, this means that the profit-maximizing output, where MR = MC, will be at a lower quantity. In the short run, the individual firm will produce less (and may even shut down if the price falls below AVC). In the long run, firms will begin to exit because they are facing negative profits. As firms exit, the supply curve shifts to the left, causing price to rise. This will continue until price returns to the minimum of ATC. Because price will return to its original level before demand decreased, each individual firm that remains in the market will increase output to the original level.
question
Chp. 13 Quiz
A good that is perfectly standardized is:
A good that is perfectly standardized is:
answer
indistinguishable to others in the market.
question
Chp. 13 Quiz
If a perfectly competitive firm faces a market price of $3 per unit, and it decides to produce 30,000 units, the market price will likely:
If a perfectly competitive firm faces a market price of $3 per unit, and it decides to produce 30,000 units, the market price will likely:
answer
stay the same.
question
Chp. 13 Quiz
In the long run, firms in a perfectly competitive market:
Earn zero economic profit.
All
Choose the level of output that minimizes average total costs.
Produce a quantity that maximizes profits.
In the long run, firms in a perfectly competitive market:
Earn zero economic profit.
All
Choose the level of output that minimizes average total costs.
Produce a quantity that maximizes profits.
answer
All
question
Chp. 13 Quiz
If the demand decreases in a perfectly competitive market, firms will likely:
All
experience zero profits in the long run.
exit the market in hopes of capturing profits elsewhere.
experience negative profits in the short run.
If the demand decreases in a perfectly competitive market, firms will likely:
All
experience zero profits in the long run.
exit the market in hopes of capturing profits elsewhere.
experience negative profits in the short run.
answer
All
question
Chp. 13 Quiz
A market is in long-run equilibrium and firms in this market have identical cost structures. Suppose demand in this market decreases. Which of the following will happen to the market quantity as the market leaves and then returns to long-run equilibrium?
A market is in long-run equilibrium and firms in this market have identical cost structures. Suppose demand in this market decreases. Which of the following will happen to the market quantity as the market leaves and then returns to long-run equilibrium?
answer
Equilibrium market quantity will decrease.
question
Chp. 13 Quiz
Suppose an individual firm is one of many firms in a perfectly competitive market. Which of the following describes why this means that the firm's marginal revenue will be equal to the market price?
Suppose an individual firm is one of many firms in a perfectly competitive market. Which of the following describes why this means that the firm's marginal revenue will be equal to the market price?
answer
The firm can always sell one more unit at the existing market price.
question
Chp. 13 Quiz
Consider that a perfectly competitive industry is in long-run equilibrium. Every firm is producing at minimum average total cost, and all firms are identical.
If demand increases, the price will ______, which will signal firms to produce _____. Existing firms will make positive profits.
Thus, in the ________, firms will ______ until price ______
Therefore, demand changes in an industry like this will cause price changes in _______, but not the long run, all other things equal.
Consider that a perfectly competitive industry is in long-run equilibrium. Every firm is producing at minimum average total cost, and all firms are identical.
If demand increases, the price will ______, which will signal firms to produce _____. Existing firms will make positive profits.
Thus, in the ________, firms will ______ until price ______
Therefore, demand changes in an industry like this will cause price changes in _______, but not the long run, all other things equal.
answer
If demand increases, the price will INCREASE, which will signal firms to produce MORE. Existing firms will make positive profits.
Thus, in the LONG RUN, firms will ENTER until price RETURNS TO THE ORIGINAL PRICE.
Therefore, demand changes in an industry like this will cause price changes in THE SHORT RUN, but not the long run, all other things equal.
Thus, in the LONG RUN, firms will ENTER until price RETURNS TO THE ORIGINAL PRICE.
Therefore, demand changes in an industry like this will cause price changes in THE SHORT RUN, but not the long run, all other things equal.
question
Chp. 14 HW
Suppose that a producer in a previously competitive market is granted the sole right to produce in the market. Given that demand in the market is unchanged, but now all consumers must purchase from the same producer, which of the following statements are correctly describing the producer before and after becoming a monopoly?
Marginal revenue (MR) is less than price after becoming a monopoly
Price equals marginal revenue (MR) after becoming a monopoly
The producer will produce the output where MR = MC both before and after becoming a monopoly.
Price equals marginal revenue (MR) before becoming a monopoly
The producer will produce the same level of output before and after becoming a monopoly
The producer will produce the efficient level of output only before becoming a monopoly.
Suppose that a producer in a previously competitive market is granted the sole right to produce in the market. Given that demand in the market is unchanged, but now all consumers must purchase from the same producer, which of the following statements are correctly describing the producer before and after becoming a monopoly?
Marginal revenue (MR) is less than price after becoming a monopoly
Price equals marginal revenue (MR) after becoming a monopoly
The producer will produce the output where MR = MC both before and after becoming a monopoly.
Price equals marginal revenue (MR) before becoming a monopoly
The producer will produce the same level of output before and after becoming a monopoly
The producer will produce the efficient level of output only before becoming a monopoly.
answer
Marginal revenue (MR) is less than price after becoming a monopoly
The producer will produce the output where MR = MC both before and after becoming a monopoly.
Price equals marginal revenue (MR) before becoming a monopoly
The producer will produce the efficient level of output only before becoming a monopoly.
The producer will produce the output where MR = MC both before and after becoming a monopoly.
Price equals marginal revenue (MR) before becoming a monopoly
The producer will produce the efficient level of output only before becoming a monopoly.
question
Chp. 14 HW
Suppose you are advising a mayoral candidate in your town. The candidate's platform includes strong opposition to monopoly suppliers because consumer welfare is compromised by monopoly pricing. Which of the following statements would present your candidate with an alternative view about why it may make sense to tolerate the existence of some monopoly firms?
While monopolies reduce consumer surplus they increase overall social welfare through increased producer surplus
Some goods may not exist if it were not for the monopoly profits that a patent ensures to create incentives for research and development
Some goods are too dangerous or important to let "just anyone" produce them
Monopolies reduce average total cost when there are very large fixed costs in production.
Suppose you are advising a mayoral candidate in your town. The candidate's platform includes strong opposition to monopoly suppliers because consumer welfare is compromised by monopoly pricing. Which of the following statements would present your candidate with an alternative view about why it may make sense to tolerate the existence of some monopoly firms?
While monopolies reduce consumer surplus they increase overall social welfare through increased producer surplus
Some goods may not exist if it were not for the monopoly profits that a patent ensures to create incentives for research and development
Some goods are too dangerous or important to let "just anyone" produce them
Monopolies reduce average total cost when there are very large fixed costs in production.
answer
Some goods may not exist if it were not for the monopoly profits that a patent ensures to create incentives for research and development
Some goods are too dangerous or important to let "just anyone" produce them
Monopolies reduce average total cost when there are very large fixed costs in production.
Some goods are too dangerous or important to let "just anyone" produce them
Monopolies reduce average total cost when there are very large fixed costs in production.
question
Chp. 14 HW
The monopoly can choose any price it wants.
The monopoly can choose any price it wants.
answer
False
question
Chp. 14 HW
In some industries, competition between two or more firms simply doesn't make much sense because:
In some industries, competition between two or more firms simply doesn't make much sense because:
answer
economies of scale are so powerful
question
Chp. 14 Quiz
Protecting intellectual property rights:
Protecting intellectual property rights:
answer
encourages research and development.
question
Chp. 14 Quiz
The monopolist is always constrained by:
The monopolist is always constrained by:
answer
the amount demanders are willing to buy at any given price.
question
Chp. 14 Quiz
For a monopolist, the quantity effect:
For a monopolist, the quantity effect:
answer
is the increase in revenues from selling a greater quantity at a lower price.
question
Chp. 14 Quiz
For a monopoly, when the price effect outweighs the quantity effect of increased production:
For a monopoly, when the price effect outweighs the quantity effect of increased production:
answer
the demand must be price inelastic.
question
Chp. 14 Quiz
The advantages of maintaining monopolies:
The advantages of maintaining monopolies:
answer
is a normative argument that has no right answer.
question
Chp. 14 Quiz
Antitrust activities can cause inefficiencies by:
Antitrust activities can cause inefficiencies by:
answer
breaking up a natural monopoly.
creating many small firms that cannot capture available economies of scale.
creating many small firms that cannot capture available economies of scale.
question
Chp. 14 Quiz
At any point other than the intersection of marginal cost and demand:
At any point other than the intersection of marginal cost and demand:
answer
total surplus is reduced.
question
Chp 15 HW
Restaurants offer related but differentiated products to their consumers. In the long run, new restaurants enter the market and imitate the cuisine and atmosphere of successful competitors. With this in mind, which of the following statements would be correct about a restaurant's prices in the long run?
As more competitors and substitutes enter, the demand curve for a particular restaurant will shift to the right
Price will be equal to ATC in the long run for firms in a monopolistically competitive market
In the long run, profits will be normal for the restaurants in a monopolistically competitive market
In the long run some restaurants will leave the market, creating economic profits for those restaurants who stay
Price will be equal to MC and be greater than ATC in the long run
In the long run, restaurants will enter the market as long as there are positive profits
Restaurants offer related but differentiated products to their consumers. In the long run, new restaurants enter the market and imitate the cuisine and atmosphere of successful competitors. With this in mind, which of the following statements would be correct about a restaurant's prices in the long run?
As more competitors and substitutes enter, the demand curve for a particular restaurant will shift to the right
Price will be equal to ATC in the long run for firms in a monopolistically competitive market
In the long run, profits will be normal for the restaurants in a monopolistically competitive market
In the long run some restaurants will leave the market, creating economic profits for those restaurants who stay
Price will be equal to MC and be greater than ATC in the long run
In the long run, restaurants will enter the market as long as there are positive profits
answer
Price will be equal to ATC in the long run for firms in a monopolistically competitive market
In the long run, profits will be normal for the restaurants in a monopolistically competitive market
In the long run, restaurants will enter the market as long as there are positive profits
In the long run, more restaurants will enter the market as long as there are positive profits. As more competitors and substitutes enter, the demand curve for a particular restaurant will shift to the left (each individual restaurant serves a smaller fraction of the the entire restaurant market). This will continue until there are no longer economic profits. Price will be equal to ATC in the long run for firms in a monopolistically competitive market.
In the long run, profits will be normal for the restaurants in a monopolistically competitive market
In the long run, restaurants will enter the market as long as there are positive profits
In the long run, more restaurants will enter the market as long as there are positive profits. As more competitors and substitutes enter, the demand curve for a particular restaurant will shift to the left (each individual restaurant serves a smaller fraction of the the entire restaurant market). This will continue until there are no longer economic profits. Price will be equal to ATC in the long run for firms in a monopolistically competitive market.
question
Chp 15 HW
The U.S. Postal Service (USPS) has a government monopoly on home mail delivery, but several private companies, such as FedEx, UPS, and DHL, compete with the USPS for other types of delivery service.
In each of the following scenarios, rate producer and consumer surplus and overall social welfare compared with the other scenarios:
Monopoly
Oligopoly
Perfect Competition
The U.S. Postal Service (USPS) has a government monopoly on home mail delivery, but several private companies, such as FedEx, UPS, and DHL, compete with the USPS for other types of delivery service.
In each of the following scenarios, rate producer and consumer surplus and overall social welfare compared with the other scenarios:
Monopoly
Oligopoly
Perfect Competition
answer
Monopoly. PS Highest CS L SW. L
Oligopoly PS Middle CS M SW M
Perfect Competition PS Lowest CS H SW. H
The USPS has a monopoly on every type of mail or package.
Consumer surplus is lowest in this scenario. Zero competition is the least beneficial to consumers because monopoly pricing is the highest of the three scenarios. Consequently, producer surplus is the highest in this scenario. With the highest deadweight loss, monopoly brings the lowest overall social welfare.
Consumers are allowed to choose between USPS, UPS, FedEx, and DHL for home mail delivery.
Consumers are better off in this scenario. The introduction of some competition will move price lower and quantity higher, closer to the efficient outcomes. Consequently, producer surplus is reduced and so is deadweight loss.
There are an infinite number of local and national mail providers.
Consumer surplus is highest and producer surplus is the lowest in this scenario. Under perfect competition, price is the lowest (and quantity highest). Total surplus or overall social welfare is maximized under perfect competition.
Oligopoly PS Middle CS M SW M
Perfect Competition PS Lowest CS H SW. H
The USPS has a monopoly on every type of mail or package.
Consumer surplus is lowest in this scenario. Zero competition is the least beneficial to consumers because monopoly pricing is the highest of the three scenarios. Consequently, producer surplus is the highest in this scenario. With the highest deadweight loss, monopoly brings the lowest overall social welfare.
Consumers are allowed to choose between USPS, UPS, FedEx, and DHL for home mail delivery.
Consumers are better off in this scenario. The introduction of some competition will move price lower and quantity higher, closer to the efficient outcomes. Consequently, producer surplus is reduced and so is deadweight loss.
There are an infinite number of local and national mail providers.
Consumer surplus is highest and producer surplus is the lowest in this scenario. Under perfect competition, price is the lowest (and quantity highest). Total surplus or overall social welfare is maximized under perfect competition.
question
Chp 15 HW
Suppose a new product is developed and is supplied by a monopolist with a patent. Compared with the monopoly outcome, indicate whether consumer surplus, producer surplus, and total surplus increase, decrease, or remain the same under the following scenarios.
a. Another producer creates a similar product and colludes with the original producer.
b. Another producer creates a similar product and competes with the original producer.
c. The patent expires.
Suppose a new product is developed and is supplied by a monopolist with a patent. Compared with the monopoly outcome, indicate whether consumer surplus, producer surplus, and total surplus increase, decrease, or remain the same under the following scenarios.
a. Another producer creates a similar product and colludes with the original producer.
b. Another producer creates a similar product and competes with the original producer.
c. The patent expires.
answer
a. Consumer surplus, producer surplus, and total surplus all stay the same. A colluding duopoly has the same outcomes as a monopoly.
b. Consumer surplus increases; producer surplus decreases; total surplus increases.
c. Consumer surplus increases; producer surplus decreases; total surplus increases.
b. Consumer surplus increases; producer surplus decreases; total surplus increases.
c. Consumer surplus increases; producer surplus decreases; total surplus increases.
question
Chp 15 HW
Suppose that the market for e-readers is an oligopoly controlled by Amazon.com, Barnes & Noble, Sony, and Apple. Now, Barnes & Noble is considering increasing its output. Which of the following are likely outcomes of this decision?
Barnes & Noble would see an increase in their profits as long as the quantity effect outweighs the price effect
Barnes & Noble's decision is unlikely to impact the other oligopolists very much
Profit will increase for the other oligopolists who did not lower their price
Barnes & Noble would see a decrease in their profits due to the lower price
Barnes & Noble would have to decrease price to increase output
Profit will decrease for the other oligopolists who did not increase quantity.
Suppose that the market for e-readers is an oligopoly controlled by Amazon.com, Barnes & Noble, Sony, and Apple. Now, Barnes & Noble is considering increasing its output. Which of the following are likely outcomes of this decision?
Barnes & Noble would see an increase in their profits as long as the quantity effect outweighs the price effect
Barnes & Noble's decision is unlikely to impact the other oligopolists very much
Profit will increase for the other oligopolists who did not lower their price
Barnes & Noble would see a decrease in their profits due to the lower price
Barnes & Noble would have to decrease price to increase output
Profit will decrease for the other oligopolists who did not increase quantity.
answer
Profit will decrease for the other oligopolists who did not increase quantity
Barnes and noble would have to decrease price to increase output
Barnes & Noble would see an increase in their profits as long as the quantity effect outweighs the price effect.
If one producer in an oligopoly increases output, the price will eventually fall for all producers because no producer wants to lose all their revenue. The oligopolist that increased quantity will increase profits as long as the quantity effect outweighs the price effect (that is, as long as the increase in sales outweighs the decrease in price). Profit will decrease for the other oligopolists who did not increase quantity because they will be selling the same quantity as before, but at a lower price.
Barnes and noble would have to decrease price to increase output
Barnes & Noble would see an increase in their profits as long as the quantity effect outweighs the price effect.
If one producer in an oligopoly increases output, the price will eventually fall for all producers because no producer wants to lose all their revenue. The oligopolist that increased quantity will increase profits as long as the quantity effect outweighs the price effect (that is, as long as the increase in sales outweighs the decrease in price). Profit will decrease for the other oligopolists who did not increase quantity because they will be selling the same quantity as before, but at a lower price.
question
Chp 15 HW
Compare perfectly competitive markets, monopoly markets, and oligopoly markets on the following economic behavior by indicting in which market structure the behavior is true:
Compare perfectly competitive markets, monopoly markets, and oligopoly markets on the following economic behavior by indicting in which market structure the behavior is true:
answer
Producers maximize profit by producing where MR = MC in ALL THREE TYPES OF MARKETS
The efficient outcome is to produce where P = MC in ALL THREE TYPES OF MARKETS
The efficient outcome is achieved in PERFECTLY COMPETITIVE MARKETS ONLY
Market price is greater than marginal revenue (MR) in MONOPOLY AND OLIGOPOLY MARKETS ONLY
Some form of barriers to entry exist in MONOPOLY AND OLIGOPOLY MARKETS ONLY
If they collude, oligopolies will produce at the same level as MONOPOLIES
The efficient outcome is to produce where P = MC in ALL THREE TYPES OF MARKETS
The efficient outcome is achieved in PERFECTLY COMPETITIVE MARKETS ONLY
Market price is greater than marginal revenue (MR) in MONOPOLY AND OLIGOPOLY MARKETS ONLY
Some form of barriers to entry exist in MONOPOLY AND OLIGOPOLY MARKETS ONLY
If they collude, oligopolies will produce at the same level as MONOPOLIES
question
Chp 15 HW
In a monopoly or in competitive or collusive oligopolies, there is deadweight loss caused by the transactions that did not take place because the market equilibrium was at a higher _______ and lower ______ than would be efficient.
In a monopoly or in competitive or collusive oligopolies, there is deadweight loss caused by the transactions that did not take place because the market equilibrium was at a higher _______ and lower ______ than would be efficient.
answer
Price, Quantity
In all market structures except for perfect competition, deadweight loss exists. This is because in monopolistically competitive markets, oligopolistic markets, and monopoly markets the price is higher and the quantity is lower than is efficient.
In all market structures except for perfect competition, deadweight loss exists. This is because in monopolistically competitive markets, oligopolistic markets, and monopoly markets the price is higher and the quantity is lower than is efficient.
question
Chp 15 HW
The table below shows the monthly demand schedule for a good in a duopoly market. The two producers in this market each face $6000 of fixed costs per month. There are no marginal costs.. If they evenly split the quantity a monopolist would produce, the monthly profit for each duopolist isIf duopolist A decides to increase production by 200 units, the monthly profit for duopolist A is $ 3,000 and for duopolist B $ 0 .
The table below shows the monthly demand schedule for a good in a duopoly market. The two producers in this market each face $6000 of fixed costs per month. There are no marginal costs.. If they evenly split the quantity a monopolist would produce, the monthly profit for each duopolist isIf duopolist A decides to increase production by 200 units, the monthly profit for duopolist A is $ 3,000 and for duopolist B $ 0 .
answer
a. The monopoly outcome is to produce a quantity of 800 and charge a price of $20. If the duopolists split production, each produces 400 and charges $20 per unit for a total revenue of $8,000. Each firm faces a fixed cost of $6000, so profit is $8,000 − $6000 = $2000 for each duopolist.b. If duopolist A increases production by 200 units, price will fall to $15 for all units. Duopolist A will be producing 600 at a price of $15 for a total revenue of $9,000. Profit for duopolist A will be $9,000 − $6000 = $3000. Duopolist B is still producing 400, so total revenue for duopolist B will be 400 × 15 = $6,000. Duopolist B will have profits of $6,000 − $6000 = $0.
question
Chp 15 Quiz
If a monopolistically competitive firm is earning profits in the short run:
If a monopolistically competitive firm is earning profits in the short run:
answer
the entry of competing firms will shift the firm's demand to the left.
question
Chp 15 Quiz
If a firm in a monopolistically competitive market has a demand curve that is shifting to the right, it will only stop shifting when:
the firm is earning zero economic profits.
the firm's price is equal to its average total costs.
All
other firms have no incentive to leave the market.
If a firm in a monopolistically competitive market has a demand curve that is shifting to the right, it will only stop shifting when:
the firm is earning zero economic profits.
the firm's price is equal to its average total costs.
All
other firms have no incentive to leave the market.
answer
All
question
Chp 15 Quiz
The long run outcome of the monopolistically competitive firm:
creates welfare loss.
maximizes total surplus.
does not maximize profits.
occurs where price equals marginal cost.
The long run outcome of the monopolistically competitive firm:
creates welfare loss.
maximizes total surplus.
does not maximize profits.
occurs where price equals marginal cost.
answer
creates welfare loss.
question
Chp 15 Quiz
Monopolistically competitive firms have an incentive to:
Monopolistically competitive firms have an incentive to:
answer
create products that have a unique feature that makes it difficult to substitute.
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