Fundamentals Of Economics 6th Edition William Boyes, Michael Melvin - Solutions

12. Aluminum is extracted from a mineral called baux ite. Before World War II, the Aluminum Company of America owned many bauxite deposits and tried to buy new deposits as they were discovered. Use the concepts discussed in this chapter to explain why Alcoa bought all that bauxite.
11. List two ways that a firm can create barriers to entry.
10. A firm will have a (lower,higher)price elasticity of demand if customers believe its product is better than its competitors’ products than it would if customers believe its product is the same as its competitors’ products.
9. The following graph shows a market with free entry, with price and quantity determined by the point where demand and supply cross. Mark the area of consumer surplus with horizontal lines.Price SD Quantity
8. If entry into a market is restricted, consumer surplus will become (larger, smaller) than if entry is not restricted.
7. In monopolistic competition, firms that earn(economic profits, economic losses, normal profits) in the long run will not remain in business.
6. The existing firms in a perfectly competitive market are currently receiving economic losses. In the long run, firms will (enter, exit) the market, driving the market price(up, down) and economic profits(up, down). This will continue until firms are receiving profits.
5. The existing firms in a perfectly competitive market are currently receiving economic profits. In the long run, firms will (enter, exit) the market, driving the market price(up, down) and economic profits (up, down).This will continue until firms are receiving profits.
4. In the short run, new firms (do,do not) have time to enter a market. In the long run, new firms (do, do not) have time to enter a market.
3. Which type of market is also called a commodity market?
9. If there are economies of scale, then&a. a larger firm can produce a product at a lower cost than a small firm can.&b.alarger firm can produce a product at a higher cost than a small firm can.&c. a larger firm can produce a product at the same cost that a small firm can.&d.small firms make more
7. In game theory, a strategy that produces the best results no matter what strategy the opposing player follows is called&a. a dominant strategy&b.a Nash equilibrium&c. a paramount strategy.&d.a facilitating practice.&e. a prisoners’ dilemma.
6. Collusion refers to a situation where&a. rivals agree to lower prices as much as possible.&b.rivals refuse to deal with each other.&c. rivals agree not to reduce prices.&d.rivals form an organization to help with advertising.&e. rivals merge to become one big firm.
5. What is the most important determinant of whether or not firms receive economic profits in the long run?&a. howeasy it is for new firms to enter the market&b.the size of the firms in a market&c. the size of the market overall&d.the amount of taxes firm owners pay&e. the amount of taxes the
4. In which market structures do firms receive just a normal profit in the long run?&a. monopoly and perfect competition&b.monopolistic competition and perfect competition&c. monopoly and monopolistic competition&d.monopoly and oligopoly&e. monopolistic competition and oligopoly
3. When the owner of a firm is getting zero economic profit,&a. the owner should exit that market in the short run.&b.the owner should exit that market in the long run.&c. the owner cannot make any more money by exiting the market and doing something else with her resources.&d.the owner is not
2. Regardless of market structure, a firm maximizes its profits by producing the quantity of output at which&a. P ¼ MR.&b.P ¼ MC.&c. MR ¼MC.&d.MC ¼D.&e. D ¼MR.
1. Which of the following market characteristics are not used to define market structures?&a. the number of firms in the market&b.the ease of entry into the market by new competitors&c. the percentage of the firm’s income that is paid in taxes&d.the type of product produced (identical or
15. The South American cocaine industry consists of several “families” that obtain the raw material, refine it, and then ship it to the United States. It is not a difficult business to enter, particularly on the retail end where drug dealers sell the drug to con sumers in the United States.
14. You and your rival must simultaneously decide what price to advertise in the weekly newspaper. If you each charge a low price, you each earn zero profits. If you each charge a high price, you each earn profits of $3. If you charge different prices, the one charging the higher price loses $5 and
13. Under what circumstances would a large size pro vide an advantage to a firm? How could it serve as a barrier to entry?
12. Why might society prefer a situation in which entry can occur to a situation in which entry is restricted?
11. Using demand curves, illustrate the effect of product differentiation on haircutters.
10. Describe profit maximization in terms of marginal revenue and marginal costs.
9. Draw a perfectly elastic demand curve on top of a standard U-shaped, average-total-cost curve. Now add in the marginal cost and marginal revenue curves. Find the profit-maximizing point, MR ¼MC. Indicate the firm’s total revenue and total costs.
8. Use the information in the table of question 4 to calculate total revenue, marginal revenue, and mar ginal costs. Indicate the profit-maximizing level of output. What market structure is this firm operating in? What would change if the structure were monopolistic competition?
7. Why will a firm choose to produce where MR ¼MC? Why not choose a quantity where MR > MC?
6. Give 10 examples of differentiated goods or services.Explain what differentiates them.
5. Explain why firms advertise.
4. Complete the following table.Output Price Total Costs Total Revenue(P 3 Q)1$5$10 2 5 12 3 5 15 4 5 19 5 5 24 6 5 30 7 5 45
3. A monopolist has no rivals. Yet it cannot simply set an exorbitantly high price. Do you agree with this statement? Explain.
2. Which would you think best characterizes the fol lowing businesses—a commodity market, a market with differentiation, or a monopoly?a. airlinesb. fast foodc. computer chipsd. corne. diamonds
1. Using a single industry, contrast and compare per fect competition and monopoly. For instance, using the coffee shop example, explain how its behavior might differ if it had many rivals who would and could copy whatever it does, or if it had no rivals.
Pollution Improvement:Tons Reduced per Day Marginal Benefits Marginal Costs 12 34$ 10 million 5 million 2 million 1 million$ 1 million 4 million 10 million 30 million 1. The plant should reduce pollution by tons per day.2. Explain why you chose this amount.
Suppose you are the head of the Environmental Pro tection Agency (EPA), and you have to decide how much, if any, pollution a particular water treatment plant should be allowed to produce. Right now, the plant produces 4 tons of pollutants per day. The plant is owned by the federal government, so
I Profit Maximization and Pollution Reduction The ideas of profit maximization and of comparing marginal revenue and marginal cost to find the profit maximizing output level can be useful even for organiza tions that are not involved in profit maximization. All organizations need to find the most
. If the government provides a license to operate the business, which only the prof itable business has been able to get, then we expect the profitable firm to earn a positive economic profit for how long? .
11. When a firm earns more than enough revenue to pay all of the costs, including the opportunity costs of owners and/or investors, then we can expect others to . Ifit isrelativelyeasyforothers to enter a business and begin competing with the profitable firm, then we know that economic profit will
10. You have opened a coffee shop near the campus.You have a special attribute in that your coffee tastes better than that offered by other shops. You have costs that come to $.80 per cup you sell, and you sell the coffee at $1.50 per cup. If your special attribute can be readily copied, you will
9. If the marginal revenue from selling another unit of output is (more, less) thanthe marginal cost, the firm should produce another unit.
8. Last year, the accountant for Joe’s Gourmet Hamburgers gave Joe the following information:Revenues Labor costs Land costs Debt costs Equity costs$200,000 140,000 10,000 20,000 50,000a. Joe’s economic profit was .b. Joe received a (negative,positive, zero) economic profit.c. Based on Joe’s
7. Fill in the blanks on the following questions.a. If Joe’s Gourmet Hamburgers and other similar restaurants are currently receiving a (negative,positive, zero)economic profit, other people are likely to open similar restaurants.b. If Joe’s Gourmet Hamburgers and other similar restaurants are
6. If the marginal cost is greater than the average total cost, the average total cost will(rise, not change, fall).
5. The ATC and MC curves are shaped like the letter .
4. Use the following total cost table for Joe’s Gourmet Hamburgers to calculate Joe’s ATC and MC. Then plot the TC curve on graph (a) below, and plot the ATC and MC curves on graph (b).Burgers TC ATC MC 01 23 45 67 89 10$5.50 $ $9.00 10.00 10.50 11.50 13.00 15.00 17.50 20.50 24.00 28.00(a)
3. Diminishing marginal returns happen in any type of business firm because the efficiency of variable resources depends on the of the .
2. The short run is a period of time just short enough so that of theresources is .
1. You calculate marginal costs (MC) by using this equation: .
How many students must Miss Andrea have in the new ballet class to make it worthwhile to offer the class?&a. 1 or more students&b.2 or more students&c. 3 or more students&d.4 or more students&e. 5 or more students Practice Questions and Problems
5. Miss Andrea’s Dance Studio is considering offering an additional ballet class for adult students 21 years of age or older. The market rate is $10 per student per class. Miss Andrea can teach the class herself or pay another teacher $20 per class. She doesn’t think her utility or insurance
4. Afirm can increase its profit by producing another unit of output when&a. total revenue is more than total cost.&b.total revenue is less than total cost.&c. total revenue is equal to total cost.&d.marginal revenue is more than marginal cost.&e. marginal revenue is less than marginal cost.
3. Afirm is getting normal profit when&a. revenue just pays all opportunity costs.&b. it has a zero economic profit.&c. revenue just pays the cost of all resources except capital.&d.all of the above are true.&e. only a and b are true.
2. The primary objective of business firms is to&a. sell as much as possible.&b.keep their total costs to the minimum.&c. keep their marginal costs to the minimum.&d.maximize profit.&e. pay their employees more than other workers earn.
1. According to the law of diminishing marginal returns, as successive units of a variable resource are added to some fixed resources, the additional output will&a. initially rise but will eventually decline.&b. initially decline but will eventually rise.&c. continually rise.&d.continually
10. Use the following information to calculate account ing profit and economic profit:Sales Employee expenses Inventory expenses Value of owner’s labor in any other enterprise$100 40 20 40
9. Can accounting profit be positive if economic profit is negative? Can accounting profit be negative and economic profit positive? Explain.
8. Explain why a firm will be unable to earn positive economic profit in the long run if other firms can freely enter and compete with the existing firm.Explain why that firm will not earn negative economic profit in the long run.
7. What follows is some accounting information for each of the firms shown. Can you tell which firm is the most successful? Explain.Boeing Goodyear Liz Claiborne Circuit City Sales Profits$5,601$254$423$26.9$622$56.2$1,767$31.6
6. Suppose the marginal costs of producing the good in exercise 5 is a constant $10 per unit of output. What quantity of output will the firm sell?
5. Using the following demand schedule, compute marginal and average revenue:Price$100 $95 $88 $80 $70 $55 $40 $22 Quantity 1 2 3 4 5 6 7 8
4. In the following figure, if the firm has average total costs ATC1, which rectangle measures total profit?If the firm has average costs ATC2, what is total profit?
3. Describe the relation between marginal and average total costs.
2. Use the completed table for exercises a and b.a. Plot each of the cost curves.b. At what quantity of output do marginal costs equal average total costs?
1. Use the table below and find average total costs and marginal costs.Output Costs ATC MC 01 23 45$100 $ $175 225 255 300 400
3. Southwest makes it difficult to get the discounted tickets by making the discounts available only for a limited time and only via the DING ap,, Given what you know about the elasticity of demand for busi ness travelers and vacation travelers, Southwest must think that (business, vacation)
2. Does Southwest think the demand for airline tickets for vacation travel is elastic, inelastic, or unit elastic?Explain your answer.
1. Will the main customers for Southwest’s discounted tickets via its DING application be people whose demand for air travel is elastic or inelastic?
Southwest Airlines touts an application called DING.The potential buyer downloads the application to his or her phone or computer, and it sends an alert when exclu sive, limited-time-only airfare deals are available. The deals are only available through DING. The logic is that customers who are
3. British Columbia was hoping the carbon tax would decrease the use of carbon fuels and therefore improve air quality. Given the elasticity of demand for gasoline, would this relatively small increase in the price dramatically decrease the consumption of gasoline?
2. Use the determinants of demand elasticity discussed in Section 3 of the chapter to explain why you would expect the demand for gasoline to be elastic or inelastic.
1. In British Columbia, the demand elasticity for gaso line over this price range is .(Round to 2 decimal places). Demand for this prod uct is (elastic, inelastic).
According to the law of demand, taxes that increase the price of a product are expected to reduce consumption of the product. Five years ago, British Columbia imposed a carbon tax on gasoline.. The tax raised the price of gas oline by about 4.4%. A government official said gasoline consumption in
18. When consumers have a (long, short) time to react to price changes, demand is more elastic than when consumers have a(long, short) period of time to react.
17. A product that takes a (large, small) portion of a consumer’s budget has a more elastic demand than a product that takes a (large, small)portion.
16. The demand for (newcars,allnew cars) is likely to be (more, less)elastic than the demand for new Chevrolet cars.
15. A product with (many, few)good substitutes would have a more elastic demand than a product with (many, few)good substitutes.
14. Complete the following table.Demand Elasticity Price Change Effect on Total Revenue (Increase, Decrease, Unchanged)Elastic Elastic Inelastic Inelastic Unit elastic Unit elastic Increase Decrease Increase Decrease Increase Decrease
13. If a 5 percent change in the price of heroin causes no change in the amount of heroin bought, ed equals anddemand is (perfectlyelastic, perfectly inelastic).
12. If a 2 percent change in the price of wine causes a 2 percent change in the number of bottles of wine bought, ed equalsanddemand is (elastic, inelastic, unit elastic).
11. If a 6 percent change in the price of coffee causes a 3 percent change in the quantity of coffee bought, ed equals anddemand is (elastic, inelastic, unit elastic).
10. If a 5 percent change in the price of movies causes a 10 percent change in the number of movie tickets sold, ed equals anddemand is (elastic, inelastic, unit elastic).
9. Use the following demand schedule to calculate total revenue, average revenue, and marginal revenue.Be careful doing this one—remember the exact definition of marginal revenue.Price Quantity Total Revenue Average Revenue Marginal Revenue $20 18 16 14 100 200 300 400
8. Use the following demand schedule to calculate total revenue, average revenue, and marginal revenue.Price Quantity Total Revenue Average Revenue Marginal Revenue$5 15 2 5 3 5 4 How does the relationship between price and marginal revenue differ between problem 6 and problem 8?
7. The equation used to calculate the price elasticity of demand is percentage change in ________ percentage change in ________ ed ¼
6. Use the following demand schedule to calculate total revenue, average revenue, and marginal revenue.Price Quantity Total Revenue Average Revenue Marginal Revenue$10 19 2 8 3 7 4
5. Average revenue is the same as
4. Incremental revenue is another term for
3. The equation for calculating marginal revenue is
2. The equation for calculating average revenue is
1. The equation for calculating total revenue is
7. In recent years, U.S. car manufacturers have charged lower car prices in western states in an effort to offset the competition by the Japanese cars. This two-tier pricing scheme has upset many car dealers in the eastern states. Many have called it discrimi natory and illegal. Can you provide
6. Using the following data, calculate total, average, and marginal revenues:Price Quantity Sold$100 90 80 70 60 50 40 30 20 200 250 300 350 400 450 500 550 600
5. Explain why senior citizens often obtain special price discounts.
4. Suppose the price elasticity of demand for movies by teenagers is 0.2 and that by adults is 2.0. What policy would the movie theater implement to increase total revenue?
3. What would a 10 percent increase in the price of movie tickets mean for the revenue of a movie the ater if the price elasticity of demand was, in turn, 0.1, 0.5, 1.0, and 5.0?
2. Below the demand curve plotted in exercise 1, plot the total-revenue curve, measuring total revenue on the vertical axis and quantity on the horizontal axis.
1. Use the table below to complete the following exer cise. Plot the price and quantity data. Indicate the price elasticity value at each price. What happens to the elasticity value as you move down the demand curve?Price%Change in Price Quantity Demanded%Change in Quantity$5 10 15 20 25 30 100 100
8-6 Can discrimination occur in a free market?
8-5 Would a free market for drugs be better for society than the war on drugs?
8-4 Is the free market able to handle environmental accidents?

Showing 500 - 600 of 936

Fundamentals Of Economics 6th Edition William Boyes, Michael Melvin - Solutions

Step by Step Answers