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Economics
For each of the following examples, explain how and why a monopoly would try to price discriminate. a. Air transport for businesspeople and tourists b. Serving food on weekdays to businesspeople and
A monopolist's revenues vary directly with price. Is it maximizing its economic profits? Why or why not?
A new competitor enters the industry and competes with a second firm, which had been a monopolist. The second firm finds that although demand is not perfectly elastic, it is now more elastic. What
A monopolist's marginal cost curve has shifted upward. What is likely to happen to the monopolist's price, output rate, and economic profits?
Demand has fallen. What is likely to happen to the monopolist's price, output rate, and economic profits?
Recently, a top constitutional law expert who had been licensed to practice law in Massachusetts and was under consideration for nomination to the California Supreme Court failed the California bar
Suppose that it is the year 2038. Exclusive ownership of a resource found to be required for the production of fusion power has given a firm monopoly power in the provision of this good. What is true
The following table depicts the daily output, price, and costs of a monopoly dry cleaner located near the campus of a remote college town.a. Compute revenues and profits at each output rate. b. What
A manager of a monopoly firm notices that the firm is producing output at a rate at which average total cost is falling but is not at its minimum feasible point. The manager argues that surely the
Use the following graph to answer the questions below.a. What is the monopolist's profit-maximizing output? b. At the profit-maximizing output rate, what are average total cost and average
The marginal revenue curve of a monopoly crosses its marginal cost curve at $30 per unit and an output of 2 million units. The price that consumers are willing to pay for this output is $40 per unit.
Consider the revenue and cost conditions for a monopolist that are depicted in the figure below.a. What is this producer's profit-maximizing (or loss-minimizing) output? b. What are the firm's
Explain why the following are examples of monopolistic competition. a. There are a number of fast-food restaurants in town, and they compete fiercely. Some restaurants cook their hamburgers over open
Categorize each of the following as an experience good, a search good, or a credence good or service, and justify your answer. a. Services of a carpet cleaning company b. A new cancer treatment c.
In what ways do credence goods share certain characteristics of both experience goods and search goods? How do credence goods differ from both experience goods and search goods? Why does advertising
Is each of the following items more likely to be the subject of an informational or a persuasive advertisement? Why? a. An office copying machine b. An automobile loan c. A deodorant d. A soft drink
Discuss the special characteristics of an information product, and explain the implications for a producer's short-run average and marginal cost curves. In addition, explain why having a price equal
A firm that sells e-books-books in digital form downloadable from the Internet-sells all e-books relating to do-it-yourself topics (home plumbing, gardening, and the like) at the same price. At
Consider the diagram at the right depicting the demand and cost conditions faced by a monopolistically competitive firm.a. What are the total revenues, total costs, and economic profits experienced
The table at the top of the facing page depicts the prices and total costs a local used-book store faces. The bookstore competes with a number of similar stores, but it capitalizes on its location
Calculate total average costs for the bookstore in Problem 25-3. Illustrate the store's short-run equilibrium by plotting demand, marginal revenue, average total costs, and marginal costs. What is
Suppose that after long-run adjustments take place in the used-book market, the business in Problem 25-3 ends up producing 4 units of output. What are the market price and economic profits of this
It is a typical Christmas electronics shopping season, and makers of flat-panel TVs are marketing the latest available models through their own Web sites as well as via retailers such as Best Buy and
Classify each of the following as an example of direct, interactive, and/or mass marketing. a. The sales force of a pharmaceutical company visits physicians' offices to promote new medications and to
Classify each of the following as an example of direct, interactive, and/or mass marketing. a. A cosmetics firm pays for full-page display ads in a number of top women's magazines. b. A magazine
Categorize each of the following as an experience good, a search good, or a credence good or service, and justify your answer. a. A heavy-duty filing cabinet b. A restaurant meal c. A wool
Suppose that the distribution of sales within an industry is as shown in the table. Firm Share of Total Market Sales A ......................... 15% B ......................... 14 C
Explain why network effects can cause the demand for a product either to expand or to contract relative to what it would be if there were no network effects.
List three products that you think are subject to network effects. For each product, indicate whether, in your view, all or just a few firms within the industry that produces each product experience
The table below shows recent worldwide market shares of producers of inkjet printers. Firm Share of Worldwide Market Sales Brother ........................... 3% Canon
Characterize each of the following as a positive-sum game, a zero-sum game, or a negative-sum game. a. Office workers contribute $10 each to a pool of funds, and whoever best predicts the winners in
Characterize each of the following as a positive sum game, a zero-sum game, or a negative-sum game. a. You play a card game in your dorm room with three other students. Each player brings $5 to the
Last weekend, Bob attended the university football game. At the opening kickoff, the crowd stood up. Bob therefore realized that he would have to stand up as well to see the game. For the crowd (not
Consider two strategically dependent firms in an oligopolistic industry, Firm A and Firm B. Firm A knows that if it offers extended warranties on its products but Firm B does not, it will earn $6
Take a look back at the data regarding the inkjet-printer industry in Problem 26-2, and answer the following questions. Problem 26-2 Firm Share of Worldwide Market Sales Brother
Consider the following payoff matrix. Firm 1 and Firm 2 are seeking to choose between Format A and Format B for their products, under the assumption that there are not any network effects. Will they
Consider the payoff matrix at the right, in which Firm 1 and Firm 2 seek to choose between product Format A and Format B, under the assumption that there are network effects. Will they desire to
Local cable television companies are sometimes granted monopoly rights to service a particular territory of a metropolitan area. The companies typically pay special taxes and licensing fees to local
Suppose that a business has developed a very high quality product and operates more efficiently in producing that product than any other potential competitor. As a consequence, at present it is the
Consider the following fictitious sales data (in thousands of dollars) for books sold both over the Internet and in physical retail establishments. Firms have numbers instead of names, and Firm 1
A package delivery company provides both overnight and second-day delivery services. It charges almost twice as much to deliver an overnight package to any world location as it does to deliver the
A firm that sells both Internet-security software and computer antivirus software will sell the antivirus software as a stand-alone product. It will only sell the Internet-security software to
Recently, a food retailer called Whole Foods sought to purchase Wild Oats, a competitor in the market for organic foods. When the Federal Trade Commission (FTC) sought to block this merger on
A local cable company, the sole provider of cable television service, is regulated by the municipal government. The owner of the company claims that she is normally opposed to regulation by
The table below depicts the cost and demand structure a natural monopoly faces.a. Calculate total revenues, marginal revenue, and marginal cost at each output level. If this firm is allowed to
As noted in the chapter, separating the production of electricity from its delivery has led to considerable deregulation of producers. a. Briefly explain which of these two aspects of the sale of
Are lemons problems likely to be more common in some industries and less common in others? Based on your answer to this question, should government regulatory activities designed to reduce the scope
Research into genetically modified crops has led to significant productivity gains for countries such as the United States that employ these techniques. Countries such as the European Union's member
Do you think that the regulation described in Problem 27-6 is more likely an example of the capture hypothesis or the share-the-gains, share the pains theory? Why? Problem 27-6 Research into
Prices of tickets for seats on commercial passenger planes are typically in the hundreds of dollars, whereas trips can be made by automobile at much lower cost. Accident rates per person per trip in
In 2003, the U.S. government created a "Do Not Call Registry" and forbade marketing firms from calling people who placed their names on this list. Today, an increasing number of companies are sending
The following table depicts the output of a firm that manufactures computer printers. The printers sell for $100 each. Labor Input Total Physical Output (workers per week) (printers per week) 10
A profit-maximizing monopolist hires workers in a perfectly competitive labor market. Employing the last worker increased the firm's total weekly output from 110 units to 111 units and caused the
A monopoly firm hires workers in a perfectly competitive labor market in which the market wage rate is $20 per day. If the firm maximizes profit, and if the marginal revenue from the last unit of
The current market wage rate is $10, the rental rate of land is $1,000 per unit, and the rental rate of capital is $500. Production managers at a firm find that under their current allocation of
The current wage rate is $10, and the rental rate of capital is $500. A firm's marginal physical product of labor is 200, and its marginal physical product of capital is 20,000. Is the firm
Refer back to your answers to Problem 28-1 in answering the following questions. a. What is the maximum wage the firm will be willing to pay if it hires 1$ workers? b. The weekly wage paid by
Explain what happens to the elasticity of demand for labor in a given industry after each of the following events. a. A new manufacturing technique makes capital easier to substitute for labor. b.
Explain how the following events would affect the demand for labor. a. A new education program administered by the company increases labor's marginal product. b. The firm completes a new plant with a
The following table depicts the product market and labor market an MP3 player manufacturer faces.a. Calculate the firm's marginal physical product, total revenue, and marginal revenue product at each
Recently, there has been an increase in the market demand for products of firms in manufacturing industries. The production of many of these products requires the skills of welders. Because welding
Since the early 2000s, there has been a significant increase in the price of corn-based ethanol. a. A key input in the production of corn-based ethanol is corn. Use an appropriate diagram to explain
A firm hires labor in a perfectly competitive labor market. Its current profit-maximizing hourly output is 100 units, which the firm sells at a price of $5 per unit. The marginal physical product of
Explain why the short-term effects of outsourcing on U.S. wages and employment tend to be more ambiguous than the long-term effects.
Discuss three aspects of collective bargaining that society might deem desirable.
Suppose that for the firm in Problem 29-9, the goods market is perfectly competitive. The market price of the product the firm produces is $4 at each quantity supplied by the firm. What is the amount
The price and wage structure that a firm faces is depicted in the following table.The firm finds that the price of its product changes with the rate of output. In addition, the wage it pays its
What is the amount of monopsonistic exploitation that takes place at the firm examined in Problem 29-11?The price and wage structure that a firm faces is depicted in the following table.The firm
A profit-maximizing clothing producer in a remote area is the only employer of people in that area. It sells its clothing in a perfectly competitive market. The firm pays each worker the same weekly
A single firm is the only employer in a labor market. The marginal revenue product, labor supply, and marginal factor cost curves that it faces are displayed in the diagram below. Use this
Give three reasons why a government might seek to limit the power of a union.
Recently, the Writers Guild of America (WGA), which represents TV and film screenwriters, called for a strike, and most screenwriters stopped working. Nevertheless, writers for certain TV soap
Suppose that the objective of a union is to maximize the total dues paid to the union by its membership. Explain the union's strategy, in terms of the wage level and employment level, under the
Explain why, in economic terms, the total income of union membership is maximized when marginal revenue is zero.
Explain the impact of each of the following events on the market for union labor. a. Union-produced, TV and radio commercials convince consumers to buy domestically manufactured clothing instead of
Why are unions in industries in which inputs such as machines are poor substitutes for labor more likely to be able to bargain for wages higher than market levels?
How is it possible for the average annual earnings of nonunionized workers to exceed those of unionized workers even though unionized workers' hourly wages are more than $2 higher?
In the short run, a tool manufacturer has a fixed amount of capital. Labor is a variable input. The cost and output structure that the firm faces is depicted in the following table:Derive the firm's
Consider the graph below, which depicts Lorenz curves for countries X, Y, and Z.a. Which country has the least income inequality?b. Which country has the most income inequality?c. Countries Y and Z
Suppose that a group of physicians establishes a joint practice in a remote area. This group provides the only health care available to people in the local community, and its objective is to maximize
A government agency determines that the entire community discussed in Problem 30-10 qualifies for a special program in which the government will pay for a number of health care services that most
A government agency notifies the physicians' group in Problem 30-10 that to continue providing services in the community, the group must document its activities. The resulting paperwork expenses
Consider the following estimates from the late 2000s of shares of income to each group. Use graph paper or a hand-drawn diagram to draw rough Lorenz curves for each country. Which has the most nearly
Suppose that the 20 percent of people with the highest incomes decide to increase their annual giving to charities, which pass nearly all the funds on to the 20 percent of people with the lowest
Suppose that a nation has implemented a system for applying a tax rate of 2 percent to the incomes earned by the 10 percent of its residents with the highest incomes. All funds collected are then
Estimates indicate that during the late 2000s, the poorest 40 percent of the population earned about 15 percent of total income in Argentina. In Brazil, the poorest 40 percent earned about 10 percent
Explain why the productivity standard for the distribution of income entails rewarding people based on their contribution to society's total output. Why does the productivity standard typically fail
Identify whether each of the following proposed poverty measures is an absolute or relative measure of poverty, and discuss whether poverty could ever be eliminated if that measure were utilized. a.
Some economists have argued that if the government wishes to subsidize health care, it should instead provide predetermined amounts of payments (based on the type of health care problems experienced)
Suppose that a government agency guarantees to pay all of an individual's future health care expenses after the end of this year, so that the effective price of health care for the individual will be
The market price of insecticide is initially $10 per unit. To address a negative externality in this market, the government decides to charge producers of insecticide for the privilege of polluting
One possible method for reducing emissions of greenhouse gases such as carbon dioxide is to inject the gases into deep saltwater-laden rock formations where they would be trapped for thousands of
Examine the following marginal costs and marginal benefits associated with water cleanliness in a given locale:a. What is the optimal degree of water cleanliness? b. What is the optimal degree of
Consider the diagram below, which displays the marginal cost and marginal benefit of water pollution abatement in a particular city, and answer the following questions.a. What is the optimal
Consider the diagram in Problem 31-4, and answer the following questions.a. Suppose that a new technology for reducing water pollution generates a reduction in the marginal cost of pollution
Under an agreement with U.S. regulators, American Electric Power Company of Columbus, Ohio, has agreed to offset part of its 145 million metric tons of carbon dioxide emissions by paying another
The following table displays hypothetical annual total costs and total benefits of conserving wild tigers at several possible worldwide tiger population levels.a. Calculate the marginal costs and
The following table gives hypothetical annual total costs and total benefits of maintaining alternative populations of Asian elephants.a. Calculate the marginal costs and benefits, and draw marginal
To answer the questions below, consider the following table for the neighboring nations of Northland and West Coast. The table lists maximum feasible hourly rates of production of pastries if no
Based on your answers to Problem 32-1, which nation has a comparative advantage in producing pastries? Which nation has a comparative advantage in producing sandwiches?Problem 32-1
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