Unit 3 Study Guide (Chapters 19-21) Units Total Utility Marginal Utility 0 0 10 A 2 B 3 22 C 1. Using the above graph. What are A, B, and C 2. When does marginal utility become negative? 3. What are the characteristics of consumer behavior? 4. How is marginal utility per dollar calculated? 5. How is MU/P used to determine when to buy one product over another? 6. What is diminishing marginal utility? 7. Why does a consumer's demand curve slope downward? 8. Explain the paradox of value. 9. What is the difference between economic profit versus accounting profit? 10. If a business has an implicit cost of $200,000 and an explicit cost of $1 million in a year. If the firm sells 50,000 units of output at $50 per unit. What are the accounting and economic profits (losses 11. What specifies the "short-run"? 12. What kinds of adjustments can be made in the long-run? 13. What is the law of diminishing returns? Product AP Labor 14. According to the image above, at what point does diminishing marginal returns come into affect?_ 15. What are fixed costs? Provide an example17. How could you use the graph below to determine the AFC (@ quantity of 70)? 18. What is the TFC? DOLLARS PER $16 DETECTOR 14 12 AVC." 10 8 6 10 20 30 40 50 60 70 80 90 19. When MC is below AVC is AVC rising or falling? 20. What are economies of scale? Diseconomies of scale? 21. How can they be portrayed graphically? 22. When does a natural monopoly occur? 23. What are characteristics of the four market models? 24. Draw a side by side graph with a profitable firm in the short run. Shade in the profit. 25. What will happen to this industry in the long run? 26. At what point would the firm gain a normal profit only? 27. What is allocation efficiency? What must happen for it to be achieved? 28. What is productive efficiency? What must happen for it to be achieved?10. 11. 12. 13. 14. 15. 16. Unit 4 Study Guide (Chapters 22-23] Why can monopolists gain economic profits in the long-run? What is a monopolist's barrier to entry? In regards to the marginal revenue curve, identify when the industry is producing in the elastic, unit elastic and inelastic region. Average Total Marginal total Marginal 1 $100 $100 $100.00 8 30 2 90 80 63.00 26 3 80 60 52.67 32 4 70 40 49.50 40 5 60 20 49.60 50 6 50 0 50.00 52 'i' 40 -20 52.29 66 8 30 40 55.75 80 9 20 -60 60.67 |00 10 10 80 67.60 130 Using the Graph above. What is the prot maximizing quantity and price? What is the prot for the rm? Draw two different monopoly graphs: one with an economic profit and one with an economic loss. Draw a monopoly graph and indicate profit maximizing, fair return price, and social optimum price. Out of these three which would the government most likely regulate to (assuming they legally can} provides the best efficiency? What is price discrimination? When a monopolistically competitive firms demand curve is more elastic...what happens to the industries differentiation of products and number of firms? What if the curve is more inelastic? Is a monopolistically competitive firm's demand curve more or less elastic then a monopoly (typically)? Why? Draw a monopolistically competitive firm with an economic profit? Is it in long or short run?I Monopolistically competitive industries are inefficient. Why do some people still like them? What is an oligopoly? What is a concentration ratio and a Herfindahl index? What would you imagine was occurring if there was an industry concentration ratio of 80 and a Herfindahl index of 1600? What does an industry with a concentration ratio of 100 and a Herfindahl index of 10,000 look like? What if the Herfindahl was 5,000 instead of 10,000? 400 400 NO 250 250 , 700 500 , 500 What is the dominant strategy for the rms if they exist? Without collusion what will be the outcome of the game? Is there a Nash Equilibrium? How many and where? Using the above payoff matrix. If collusion occurs what will be the outcome of the game be (presuming no cheating occurs)? Company A Left Company A Right Company B High 300 , 200 650 , 400 Company B Low 700 , 500 500 , 200 17. What is the dominant strategy for the firms if they exist? With collusion what will be the outcome of the game? Is there a Nash Equilibrium? How many and where? 17. What assumption is the kinked demand curve based off of? (Hint: think logically) 18. When a cartel exists, what happens to the price and output of the industry? What kind of business structure does it most resemble in its actions? 19. When would you expect collusion to be easier? 20. Why do oligopolistic advertise? 21. What does advertising do for the efficiency of the industry? Why