Questions and Answers of The Law Of Healthcare Administration

1 Diagrammatically identify the quantity of output a monopolistic competitor produces and the price it charges.
14 Explain the price leadership theory of oligopoly.
13 How are oligopoly and monopolistic competition alike?How are they different?
12 Give an example of a prisoner’s dilemma situation other than the ones mentioned in this chapter.
11 Market theories are said to have the happy consequence of getting individuals to think in more focused and analytical ways. Is this true for you? Give examples to illustrate.
10 Concentration ratios have often been used to note the tightness of an oligopoly market. A high concentration ratio indicates a tight oligopoly market, and a low concentration ratio indicates a
9 Why does the interdependence of firms play a major role in oligopoly but not in perfect competition or monopolistic competition?
8 There are 60 types or varieties of product X on the market.Is product X made in a monopolistic competitive market?Explain your answer.
7 Does the theory of contestable markets shed any light on oligopoly pricing theories? Explain your answer.
6 Would you expect cartel formation to be more likely in industries comprised of a few firms or in those that include many firms? Explain your answer.
5 Will there be profits in the long run in a monopolistic competitive market? Explain your answer.
4 Why might a producer use a designer label to differentiate her product from that of another producer?
3 “Excess capacity is the price we pay for production differentiation.”Evaluate this statement in terms of monopolistic competition.
2 What causes the unusual appearance of the marginal revenue curve in the kinked demand curve theory?
1 What, if anything, do all firms in all four market structures have in common?
6 Redraw the figure and label consumers’ surplus whenthe market is perfectly competitive and when it ismonopolized. P 90 90 50 0 50 MR 100 D MC = ATC
5 If the market is a monopoly market, what does profitequal? P 90 90 50 0 50 MR 100 D MC = ATC
4 If the market is perfectly competitive, what does profit equal? P 90 90 50 0 50 MR 100 D MC = ATC
3 Suppose a single-price monopolist sells its output (Q1) at P1. Then it raises its price to P2 and its output falls to Q2. In terms of Ps and Qs, what does marginal revenue equal?
2 A monopoly firm is currently earning positive economic profit, and the owner decides to sell it. He asks for a price that takes into account the economic profit. Explain and diagrammatically show
1 Draw a graph that shows a monopoly firm incurring losses.
14 A firm maximizes its total revenue. Does it automatically maximize its profit too? Why or why not?
13 In general, coupons are more common on small-ticket items than they are on big-ticket items. Explain why.
12 Fast-food stores often charge higher prices for their products in high-crime areas than they charge in low-crime areas. Is this an act of price discrimination? Why or why not?
11 Make a list of market monopolies and a list of government monopolies. Which list is longer? Why do you think this is so?
10 For many years in California, car washes would advertise Ladies’ Day. On one day during the week, a woman could have her car washed for a price lower than what a man would pay. Some people
9 Make a list of real-world price discrimination practices. Do they meet the conditions posited for price discrimination?
8 Occasionally, students accuse their instructors, rightly or wrongly, of practicing grade discrimination. These students claim that the instructor “charges” some students a higher price for a
7 Rent seeking is individually rational but socially wasteful.Explain.
6 A perfectly competitive firm will produce more output and charge a lower (per-unit) price than a single-price monopoly firm. Do you agree or disagree with this statement? Explain your answer.
5 Under what condition will a monopoly firm earn losses?
4 Is there a deadweight loss if a firm produces the quantity of output at which price equals marginal cost? Explain.
3 When a single-price monopolist maximizes profits, price is greater than marginal cost. In other words, buyers are willing to pay more for additional units of output than the units cost to produce.
2 Because the monopolist is a single seller of a product with no close substitutes, is it able to obtain any price for its good that it wants? Why or why not?
1 The perfectly competitive firm exhibits resource allocative efficiency (P MC), but the single-price monopolist does not. What is the reason for this difference?
10 Suppose all firms in a perfectly competitive market are in long-run equilibrium. Illustrate what a perfectly competitive firm will do if market demand rises.
9 Why does the MC curve cut the ATC curve at the latter’s lowest point?
8 In the following figure, what area(s) represent(s) the following at Q1?a. Total costb. Total variable costc. Total revenued. Loss (negative profit) Price and Cost P 0 ATC 3 AVC 2 1 d, MR Quantity
7 Why is the perfectly competitive firm’s supply curve the portion of its marginal cost curve that is above its average variable cost curve?
Draw the following:a. A perfectly competitive firm that earns profits.b. A perfectly competitive firm that incurs losses but that will continue operating in the short run.c. A perfectly competitive
Explain how a market supply curve is derived.
Is the firm in question 3 a perfectly competitive firm?Explain your answer.
Using the following table, what quantity of output should the firm produce? Explain your answer. Q TR TC 0 $0 $0 123456 100 50 2 200 110 300 180 400 260 500 360 600 480
If total revenue increases at a constant rate, what does this imply about marginal revenue?
Given the following information, state whether the perfectly competitive firm should shut down or continue to operate in the short run.a. Q = 100; P = $10; AFC = $3; AVC = $4.b. Q = 70; P = $5; AFC =
Do firms in a perfectly competitive market exhibit productive efficiency? Why or why not?
16 Many plumbers charge the same price for coming to your house to fix a kitchen sink. Is this because plumbers are colluding?
15 Why is the marginal revenue curve for a perfectly competitive firm the same as its demand curve?
14 Suppose the government imposes a production tax on one perfectly competitive firm in an industry. For each unit the firm produces, it must pay $1 to the government. Will consumers in this market
13 In long-run competitive equilibrium, P MC SRATC LRATC. Because P MR, we can write the condition as P MR MC SRATC LRATC. Now let’s look at the condition as consisting of four parts:
12 Explain why a perfectly competitive firm will shut down in the short run if price is lower than the average variable cost but will continue to produce if price is below the average total cost but
11 Why study the theory of perfect competition if no real-world market completely satisfies all of the theory’s assumptions?
10 The term price taker can apply to buyers as well as sellers.A price-taking buyer is one who cannot influence price by changing the amount she buys. What goods do you buy for which you are a price
9 In your own words, explain resource allocative efficiency.
8 Suppose you read in a business magazine that computer firms are reaping high profits. With the theory of perfect competition in mind, what do you expect to happen over time to the following:
7 The perfectly competitive firm does not increase its quantity of output without limit even though it can sell all it wants at the going price. Why not?
6 For a perfectly competitive firm, profit maximization does not conflict with resource allocative efficiency. Do you agree? Explain your answer.
5 Explain why one firm sometimes appears to be earning higher profits than another but in reality is not.
4 Suppose all firms in a perfectly competitive market structure are in long-run equilibrium. Then demand for the firms’product increases. Initially, price and economic profits rise.Soon afterward,
3 “Firm A, one firm in a competitive industry, faces higher costs of production. As a result, consumers end up paying higher prices.” Discuss.
2 “In a perfectly competitive market, firms always operate at the lowest per-unit cost.” Is the statement true or false?Explain your answer.
1 “The firm’s entire marginal cost curve is its short-run supply curve.” Is the statement true or false? Explain your answer.
7 If the ATC curve is continually declining, what does this imply about the MC curve? Explain your answer.
6 If marginal physical product is continually declining, what does marginal cost look like? Explain your answer.
5 If accounting profit is $400,000 greater than economic profit, what do implicit costs equal?
4 If economic profit equals accounting profit, what do implicit costs equal?
3 Price = $20, quantity = 400 units, unit cost = $15, implicit costs = $4,000. What does economic profit equal?
2 Give a numerical example to show that as marginal physical product (MPP) rises, marginal cost (MC) falls.
1 Determine the appropriate dollar amount for each lettered space. (1) (2) (4) (5) Quantity of Total Total Average (6) Fixed (3) Variable Variable Total Output, Q Cost Average Fixed Cost Cost Cost
19 Under what condition would Bill Gates be the richest person in the United States and earn zero economic profit?
18 Based on your answer to question 17, does MC change if TC changes?
17 The government says that firm X must pay $1,000 in taxes simply because it is in the business of producing a good.What cost curves, if any, does this tax affect?
16 People often believe that large firms in an industry have cost advantages over small firms in the same industry. For example, they might think a big oil company has a cost advantage over a small
15 Explain why a firm might want to produce its good even after diminishing marginal returns have set in and marginal cost is rising.
14 Some people’s everyday behavior suggests that they do not hold sunk costs irrelevant to present decisions. Give some examples different from those presented in this chapter.
13 We know there is a link between productivity and costs.For example, recall the link between the marginal physical product of the variable input and marginal cost. With this in mind, what link
12 Some individuals decry the decline of the small family farm and its replacement with the huge corporate megafarm.Discuss the possibility that this is a consequence of economies of scale.
11 Is studying for an economics exam subject to the law of diminishing marginal returns? If so, what is the fixed input?What is the variable input?
10 When would total costs equal fixed costs?
9 What is the difference between diseconomies of scale and the law of diminishing marginal returns?
8 Why does the AFC curve continually decline (and get closer and closer to the quantity axis)?
7 Explain why earning zero economic profit is not as bad as it sounds.
6 The average variable cost curve and the average total cost curve get closer to each other as output increases. What explains this?
5 “A firm that earns only normal profit is not covering all its costs.” Do you agree or disagree? Explain your answer.
4 Illustrate the average-marginal rule in a noncost setting.
3 Explain why even conscientious workers will shirk more when the cost of shirking falls.
2 Is the managerial coordination that goes on within a business firm independent of market forces? Explain your answer.
1 Explain the difference between managerial coordination and market coordination.
4 Derive a demand curve using indifference curve analysis.
3 Explain why consumer equilibrium is equivalent whether using marginal utility analysis or indifference curve analysis.
2 Explain why indifference curves:a. Are downward sloping.b. Are convex to the origin.c. Do not cross.
1 Diagram the following budget constraints:a. Income = $4,000; PX = $50; PY = $100.b. Income = $3,000; PX = $25; PY = $200.c. Income = $2,000; PX = $40; PY = $150.
7 The marginal utility curve for units 3–5 of good X is below the horizontal axis. Draw the corresponding part of the total utility curve for good X.
6 Draw the marginal utility curve for a good that has constant marginal utility.
5 Given the number of units of each good George purchases in question 4, what is his total utility? Units of Good X TU of Good X (utils) Units of Good Y 12345 20 2 35 48 58 12345 TU of Good Y (utils)
4 If George spends $5 (total) a week on good X and good Y, and if the price of each good is $1 per unit, then how many units of each good does he purchase to maximize utility? Units of Good X TU of
3 The total utilities of the first 5 units of good X are 10, 19, 26, 33, and 40 utils, respectively. In other words, the total utility of 1 unit is 10 utils, the total utility of 2 units is 19 utils,
2 Fill in blanks A–D in the following table. Units of Good Consumed Total Utility (utils) Marginal Utility (utils) 12345 10 19 B 33 35 J DABCD
1 The marginal utility for the third unit of X is 60 utils, and the marginal utility for the fourth unit of X is 45 utils. If the law of diminishing marginal utility holds, what is the minimum total
15 Of two similar houses on a street, one faces the ocean and the other does not. How might we determine the price of an ocean view? Explain your answer.

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