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microeconomics

Questions and Answers of Microeconomics

=+c. Indicate the monopolist's output level, and label it Q.
=+b. Indicate the price that a profit-maximizing mo- nopolist would charge, and label it P.
=+a. Explain why the industry is likely to be monopo- lized.
=+ 15. The diagram shows demand and long-run cost con- ditions in an industry.
=+ What is your maximum weekly profit?
=+ What output should you pro- duce?
=+c. Given your demand and cost estimates, what price should you charge if you want to maximize your weekly profit?
=+what should you do if you want to maxi- mize profits?
=+b. Assuming you are currently charging $55 per table set,
=+a. Fill in the missing revenue and cost schedules.
=+ 14. Suppose that you produce and sell children's tables in a local market. Past experience enables you to es- timate your demand and marginal cost schedules. This information is presented in the
=+ What regulated price will it set so that Gouge-em makes only a normal rate of return on its investment?
=+b. Now suppose the Backwater County Public Util- ity Commission has the data and believes that ca- ble subscription rates in the county are too expen- sive and that Gouge-em's profits are unfairly
=+a. What price will Gouge-em charge for its cable services? What are its profits at this price?
=+fixed costs total $640,000monthly. The marginal cost of adding an- other subscriber to its system is constant at $2 per month. Gouge-em's demand curve can be deter- mined from the data in the
=+13. Gouge-em Cable Company is the only cable televi- sion service company licensed to operate in Back- water County. Most of its costs are access fees and maintenance expenses. These
=+12. "My uncle just bought 1,000 shares of Microsoft, one of the largest and most profitable companies in the United States. Given Microsoft's high profit rate, he will make a bundle from this
=+Do you think the U.S. economy is more or less competitive today than it was 100 years ago? Explain. *
=+What impact do lower transportation costs have on the market power of individual producers?
=+11. Historically, the real cost of transporting both goods and people has declined substantially.
=+ How can game theory help us understand the decisions made by oligopolists? *
=+ Other times licenses are automatically granted to anyone wanting to operate a taxi.
=+9. In large cities, taxi fares are often set above the mar- ket equilibrium rate. Sometimes the number of li- censes is limited in order to maintain the above- market price.
=+8. Why is oligopolistic collusion more difficult when there is product variation than when the products of all firms are identical?
=+ Are competitive pressures pres- ent in markets with high barriers to entry? Discuss. *
=+ What are some of the factors that complicate the regulatory function?
=+Does economic theory suggest that a regulatory agency will in fact follow a proper regulation policy?
=+ 5. Does economic theory indicate that an ideal regula- tory agency that forces a monopolist to charge a price equal to either marginal or average total cost will im- prove economic efficiency?
=+Compare the price and output policy of a purely competitive industry with the policy that would be established by a profit-maximizing monopolist or trade associa- tion. Who benefits and who is hurt
=+4. The retail liquor industry is potentially a competi- tive industry. However, the liquor retailers of a southern state, with the cooperation of the state leg- islature, organized a trade
=+3. Do monopolists charge the highest prices for which they can sell their products?
=+2. "Monopoly is good for producers but bad for con- sumers. The gains of the former offset the losses of the latter. On balance, there is no reason to think that monopoly is bad for the economy."
=+*1. "Barriers to entry are crucial to the existence of long-run profits, but they cannot guarantee the exis- tence of profits." Evaluate.
=+ a Will competition keep large firms in check in markets that have high barriers to entry?
=+When are oligopolists likely to collude?
=+ Does monopoly guarantee the ability to make a profit?
Challenge Question: Recall the relationship be- tween elasticity of demand, price changes, and their impact on total revenues. As Rod lowers his price from 9,000to9,000to5,000, his total revenues
=+ Can you guess what might happen at prices below $4,000? Explain.
=+ When Rod lowers his price from $5,000 to $4,000, his total revenues stay the same. Is demand in this price range elas- tic, inelastic, or unit elastic?
=+h. Challenge Question: Recall the relationship be- tween elasticity of demand, price changes, and their impact on total revenues. As Rod lowers his price from $9,000 to $5,000, his total revenues
=+What will happen to the profitability of the boat dealers in the future once the entry/exit has occurred?
=+ Will more boat dealers open in the area, or will some of the existing ones go out of business?
=+g. If Rod's profits are typical of all firms in the boat sales business, what might be expected to happen in the future?
=+f. At the price and sales level where profits are max- imized, has Rod sold all boats that have higher marginal revenue than marginal cost?
=+e. What will Rod's profits be per week at this price and sales volume?
=+d. How many boats will Rod sell per week at the profit-maximizing price?
=+c. If Rod wants to maximize his profits, what price should he charge per boat?
=+b. Find Rod's marginal revenue and marginal cost from the sale of each additional boat.
=+a. Find Rod's economic profits at each alternative price by calculating the difference between total revenue and total cost.
=+*17. Rod N. Reel owns a dealership that sells fishing boats in an open, price-searcher market. To develop his pricing strategy, Rod hired an economist to esti- mate his demand curve. Columns (1)
=+d. How will the situation change over time?
=+c. How much revenue will the firm receive in this situation? How much is total cost? Total profit?
=+b. What price will the firm charge?
=+a. What level of output will maximize the firm's profit level?
=+ 16. The accompanying graph shows the short-run de- mand and cost situation for a price searcher in a market with low barriers to entry.
=+influence the following: (a) the cost efficiency of producers. (b) the quality of products, and (c) the discovery and development of new products? Ex- plain your answers.
=+Is competition necessary for markets to work well? Why or why not? How does competition
=+13. What is the primary requirement for a market to be competitive?
=+*12. "When competition is really severe, only the big firms survive. The little guy has no chance." True or false? Explain.
=+Why do colleges often charge students different prices, based on their family income?
=+How does price discrimination affect the total amount of gains from exchange? Explain.
=+ 11. Is price discrimination harmful to the economy?
=+Is there an offsetting advantage to the other investments?
=+The group believes each endeavor has the same profit potential. Which is the safer (less likely to result in a substantial capital loss) investment? Why?
=+ Each new business would require about the same amount of capital and personnel hiring.
=+The group is considering either building a new hotel complex or starting a new local airline serving that market.
=+10. Suppose that a group of investors wants to start a business operated out of a popular Utah ski area.
=+ If a firm goes out of business, what happens to the firm's as- sets, workers, and customers?
=+9. Would our standard of living be higher if the gov- ernment "bailed out" troubled businesses?
=+b. What determines whether small firms, medium- size firms, or large firms will dominate in a market?
=+8.a. What determines whether corporations, individ- ual proprietorships, employee-owned firms, consumer cooperatives, or some other form of business structure will dominate in a market?
=+ Do you think you would get more or less for your con- sumer dollar under restrictions like these? Discuss. *
=+ Would you like to live in a country where government regulation restricted the use of quality and style competition? Why or why not?
=+6. Is quality and style competition as important as price competition?
=+What determines whether the new product will be a success or failure?
=+ 5. What must an entrepreneur do in order to introduce a new innovative product?
=+What would happen as a result to the average quality of automobiles if the proceeds of the tax were used to subsidize a government-operated lottery?
=+4. How would imposing a per-unit tax of $2,000 on each new U.S. automobile affect (a) higher-quality, higher- priced cars (those selling for more than the median price) compared to (b)
=+ Why do you think there are only a few different varieties of toothpicks but lots of different types of napkins on the market? *
=+3. What determines the variety of styles, designs, and sizes of different products?
=+What do competitive price searchers have to do to make eco- nomic profit? *
=+ In price-searcher markets with low barriers to entry, will the firms be able to make economic profit in the long run? Why or why not?
=+ 2. Since price searchers can set their prices, does this mean that their prices are unaffected by market con- ditions?
=+ How will the firm's marginal cost compare with its price at the profit-maximum output?
=+ What price will maximize the profits of a price searcher?
=+1. Price searchers can set the prices of their products. Does this mean that they will charge the highest possible price for their products?
=+ Why do some economists criticize price-searcher behavior when entry barriers are low, while others like the results? Is price discrimination bad?
=+ How do the actions of entrepreneurs influence economic progress?
=+Why is the role of the entrepreneur left out of economic models?
=+Are business failures bad for the economy?
=+ Is there a linkage between innovative actions by some firms and business failures by others?
=+ How are price and output determined in such markets?
=+What are the characteristics of competitive price-searcher markets?
=+i. How much would that net profit or loss be?
=+ h. If each firm's total fixed costs are $20 and the price of output is $20, which firm would earn a higher net profit or incur a smaller loss?
=+g. How many units will firm B produce at the $20 price? (Assume that it cannot produce fractional units.)
=+f. How many units will firm A produce if the market price is $20?
=+e. How many units of output will it produce?
=+d. What is the lowest price at which firmB will produce?
=+c. How many units of output will it produce at that price? (Assume that it cannot produce fractional units.)

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