Microeconomics Theory And Applications With Calculus 5th Edition Jeffrey M. Perloff - Solutions

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1. The following information describes the demand schedule for a unique type of apple. This type of apple can only be produced by two firms because they own the land on which these unique trees spontaneously grow. As a result, the marginal cost of production is zero for these duopolists, causing
generates the same outcome as a monopolistic market
Describe the conditions under which an oligopolistic market
3. In general, does advertising tend to decrease competition and raise prices to con- sumers or increase competition and reduce prices to consumers? Why?
2. Did the use of the Nike name and the Nike "swoosh" provide any information? Explain.
1. A friend watches the Nike advertisement with you and says, "What a waste of society's resources. I didn't learn anything about Nike golf equipment from that ad. I think there should be government regulations requiring ads to be informative in some way." Explain to your friend what you did learn
20. Which of the following firms has the least incentive to advertise? a manufacturer of home heating and air conditioninga. b. C. a manufacturer of breakfast cereal a wholesaler of crude oild. a restaurant
19. Defenders of the use of brand names argue that brand namesa. provide information about the quality of the product.b. give firms incentive to maintain high quality.c. are useful even in socialist economies such as the former Soviet Union.d. do all of the above.
18. Which of the following is not an argument put forth by economists in support of the use of advertising?a. Advertising provides information to customers about prices, new products, and location of retail outlets.b. Advertising provides a creative outlet for artists and writers.c. Advertising
17. Expensive television commercials that appear to provide no specific information about the product being advertiseda. are most likely used by firms that are perfect competitors.b. should be banned by regulators because they add to the cost of the product without providing the consumer with any
16. Which of the following is not put forth as a criticism of advertising and brand names? Advertising manipulates people's tastes to create a desire that otherwise would not exist.a. b. Advertising increases competition, which causes unnecessary bankruptcies and layoffs.c. Advertising increases
15. For the economy as a whole, what percentage of firm revenue is spent on advertising? 3. 1 percentb. 2 percent C. 4 percentd. e. 6 percent 10 percent
14. Which of the following firms is most likely to spend a large percentage of their revenue on advertising?a. the manufacturer of an undifferentiated commodityb. a perfect competitor C. the manufacturer of an industrial productd. the producer of a highly differentiated consumer productc. the
13. The use of the word "monopoly" in the name of the market structure called "mo- nopolistic competition" refers to the fact thata. a monopolistically competitive firm faces a downward-sloping demand curve for its differentiated product and so does a monopolist.b. monopolistically competitive
12. The use of the word "competition" in the name of the market structure called "monopolistic competition" refers to the fact thata. monoplistically competitive firms charge prices equal to the minimum of their average total cost just like competitive firms.b. monopolistically competitive firms
11. When firms enter a monopolistically competitive market and the business-stealing externality is larger than the product-variety externality, thena. there are too many firms in the market and market efficiency could be increased if firms exited the market.b. there are too few firms in the market
10. One source of inefficiency in monopolistic competition is thata. because price is above marginal cost, surplus is redistributed from buyers to sellers.b. because price is above marginal cost, some units are not produced that buyers value in excess of the cost of production and this causes a
9. Which of the following is true with regard to monopolistically competitive firms' scale of production and pricing decisions? Monopolistically competitive firms produce 2. at the efficient scale and charge a price equal to marginal cost.b. at the efficient scale and charge a price above marginal
8. Exhibit 4 depicts a monopolistically competitive firm 2. generating profits in the short run.b. generating losses in the short run.c. generating zero profits in the long run.d. It is impossible to determine from this graph whether the firm is generating profits or losses.
7. Which of the following is true regarding the production and pricing decisions of monopolistically competitive firms? Monopolistically competitive firms choose the quantity at which marginal cost equalsa. average total cost and then use the demand curve to determine the price con- sistent with
6. The monopolistically competitive market shown in Exhibit 3 will, in the long run,a. attract new producers into the market, which will shift the demand faced by incumbent firms to the right.b. attract new producers into the market, which will shift the demand faced by incumbent firms to the left.
5. If the monopolistic competitor described by Exhibit 3 is producing at the profit- maximizing (loss-minimizing) level of output, ita. is generating losses.b. is generating profits.c. is generating zero profits.d. could be generating either profits or losses depending on what quantity it chooses
4. In the short run, if the price is above average total cost in a monopolistically com- petitive market, the firm makesa. losses and firms enter the market.b. losses and firms exit the market.c. profits and firms enter the market.d. profits and firms exit the market.
3. The monopolist faces a downward-sloping demand curve while the monopolistic competitor faces an elastic demand curve.b. The monopolist makes economic profits in the long run while the monopolistic competitor makes zero economic profits in the long run.c. Both the monopolist and the monopolistic
2. Which of the following products is least likely to be sold in a monopolistically competitive market?a. video gamesb. breakfast cerealc. beerd. cotton 3. Which of the following is true regarding the similarities and differences in mo- nopolistic competition and monopoly?
1. Which of the following is not a characteristic of a monopolistically competitive market?a. many sellersb. differentiated productsc. long-run economic profitsd. free entry and exit
10. Summarize the arguments in opposition to advertising and brand names.
9. Summarize the arguments in support of advertising and brand names.
8. Is the long-run equilibrium in monopolistic competition efficient? Explain.
7. How does the long-run equilibrium in monopolistic competition differ from the long-run equilibrium in perfect competition?
6. Is it possible for a monopolistically competitive firm to generate economic profits in the long run? Why or why not?
5. How does a monopolistically competitive firm choose the quantity and price that maximizes its profits?
4. What characteristics does monopolistic competition have in common with perfect competition?
3. What characteristics does monopolistic competition have in common with a monopoly?
2. The market for vitamins and dietary supplements is dominated by five firms. What type of market structure does it represent? Explain.
1. What are the two types of imperfect competition? Describe them.
3. For each of the following pairs of firms, which firm would likely spend a higher proportion of its revenue on advertising? Explain.a. the maker of Bayer Aspirin or the maker of generic aspirinb. a firm introducing a low-quality ice cream or a firm introducing a high-quality ice cream that each
2. Suppose that there are many restaurants in the city and that each has a somewhat different menu. 3. In Exhibit 1, draw the diagram of the cost curves (average total cost and marginal cost), demand curve, and marginal-revenue curve for Mario's Pizza when it is in long-run equilibrium.b. Is
1. In which market structure-monopoly, oligopoly, monopolistic competition, or perfect competition-would you place each of the following products? Why?a. Retail market for electricityb. Principles of economics textbooksc. Principles of Economics by N. Gregory Mankiwd. Photographic filme. Retail
Provide an argument in support of and in opposition to the use of brand names
Provide an argument in support ofand in opposition to the use of advertising
Discuss the inefficiencies ofmonopolistically competitive market~
20. If marginal revenue exceeds marginal cost, a monopolist shoulda. increase output.b. decrease output.c. keep output the same because profits are maximized when marginal revenue exceeds marginal cost.d. raise the price.
19. A monopoly is able to continue to generate economic profits in the long run because potential competitors sometimes don't notice the profits.a. b. there is some barrier to entry to that market.c. the monopolist is financially powerful.d. antitrust laws eliminate competitors for a specified
18. If regulators break up a natural monopoly into many smaller firms, the cost of productiona. will fall.b. will rise.c. will remain the same.d. could either rise or fall depending on the elasticity of the monopolist's supply curve.
17. Which of the following statements about price discrimination is not true?a. Price discrimination can raise economic welfare.b. Price discrimination requires that the seller be able to separate buyers according to their willingness to pay.c. Perfect price discrimination generates a deadweight
16. Public ownership of natural monopoliesa. tends to be inefficient.b. usually lowers the cost of production dramatically. C. creates synergies between the newly acquired firm and other government-owned companies.d. does none of the above.
15. The purpose of antitrust laws is toa. regulate the prices charged by a monopoly.b. increase competition in an industry by preventing mergers and breaking up large firms.c. increase merger activity to help generate synergies that reduce costs and raise efficiency.d. create public ownership of
14. Using government regulations to force a natural monopoly to charge a price equal to its marginal cost will improve efficiency.a. b. C. attract additional firms to enter the market. raise the price of the good.d. cause the monopolist to exit the market.
13. The monopolist's supply curvea. is the marginal-cost curve above average variable cost. is the upward-sloping portion of the average-total-cost curve.b. is the marginal-cost curve above average total cost.c. d.e. does not exist. is the upward-sloping portion of the average variable cost.
12. Compared to a perfectly competitive market, a monopoly market will usually generate higher prices and higher output.a. b. higher prices and lower output.c. lower prices and lower output.d. lower prices and higher output.
11. The inefficiency associated with monopoly is due toa. the monopoly's profits.b. the monopoly's losses.c. overproduction of the good.d. underproduction of the good.
10. The efficient price and quantity are represented by pointa. A.b. B. C. C.d. D.c. None of the above is correct.
9. The deadweight loss associated with monopoly pricing is represented by the areaa. P.ABP.b. PACP,. C. ABD.d. PBCPe. None of the above is correct.
8. The profit earned by the profit-maximizing monopolist is represented by the areaa. PABP,.b. PACP,.c. P,AQ,0.d. P,DQ,0.e. None of the above is correct.
7. The profit-maximizing monopolist will choose the price and quantity represented by pointa. A.b. B.c. C.d. D.e. None of the above is correct.
6. South-Western is a monopolist in the production of your textbook because South-Western owns a key resource in the production of textbooks.b. South-Western is a natural monopoly.c. the government has granted South-Western exclusive rights to produce this textbook.d. South-Western is a very large
5. Which of the following statements about price and marginal cost in competitive and monopolized markets is true?a. In competitive markets, price equals marginal cost; in monopolized markets, price equals marginal cost.b. In competitive markets, price exceeds marginal cost; in monopolized markets,
4. A monopolist maximizes profit by producing the quantity at whicha. marginal revenue equals marginal cost.b. marginal revenue equals price.c. marginal cost equals price.d. marginal cost equals demand.c. none of the above occurs.
3. When a monopolist produces an additional unit, the marginal revenue generated by that unit must bea. above the price because the output effect outweighs the price effect.b. above the price because the price effect outweighs the output effect. below the price because the output effect outweighs
2. A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as aa. perfect competitor.b. natural monopoly.c. government monopoly.d. regulated monopoly.
1. Which of the following is not a barrier to entry in a monopolized market?a. The government gives a single firm the exclusive right to produce some good.b. The costs of production make a single producer more efficient than a large number of producers.c. A key resource is owned by a single firm.d.
10. What are some of the problems associated with regulating the price charged by a natural monopoly?
9. Should antitrust laws be utilized to stop all mergers? Why or why not?
8. What are the four ways that policymakers can respond to the problem of monopoly?
7. What is the necessary condition for a monopolist to be able to price discriminate?
6. Is perfect price discrimination efficient? Explain. Who receives the surplus?
5. Are the monopolist's profits part of the social cost of monopoly? Explain.
4. Why does a monopolist produce less than the socially efficient quantity of output?
3. Does a monopolist charge the highest possible price for its output? Why or why not? How does a monopolist choose the price it will charge for its product?
2. If a natural monopoly is forced through regulation to charge a price equal to its marginal cost, will the outcome be efficient? Why or why not?
1. What is a barrier to entry? What are the three sources of barriers to entry that allow a monopoly to remain the sole seller in a market?
3.a. What type of market is represented in Exhibit 2: perfect competition, monopoly, or natural monopoly? Explain.b. Show the profit or loss generated by this firm in Exhibit 2 assuming that the firm maximizes profit.c. Suppose government regulators force this firm to set the price equal to itsd.
8. If the monopolist is able to costlessly and perfectly price discriminate, is the outcome efficient? Explain. What is the value of consumer surplus, producer surplus, and total surplus? Explain.
2. Suppose a firm has a patent on a special process to make a unique smoked salmon. The following table provides information about the demand facing this firm for this unique product. Pounds of Salmon Price (P x Q) Total Revenue (ATR/AQ) Marginal Revenue $20a. b. 1 18 2 16 3 14 12 4 5 10 6 8 7 6
1.a. What are the three sources of the barriers to entry that allow a monopoly to remain the sole seller of a product?b. What is the entry barrier that is the source of the monopoly power for the following products or producers? List some competitors that keep these products or producers from
Show why forcing a natural monopoly to charge its marginal cost of production creates losses for the monopolist
show the profit earned by a monopolist
Use a monopolist's cost curves and the demand curve it faces to
I List three reasons why a monopoly can remain the sole seller ofa product in a market '
5.1 Governments generally limit the amount of the childcare subsidy. For example, in Washington State, the 2015 maximum subsidy for an infant is $31.47 per day. A binding limit on the subsidy creates a kink in the budget constraint. Show how a limit changes the analysis in the Challenge Solution.
*4.18 The government collects a specific tax of t for each hour worked. Thus, a worker whose wage is w keeps w - t after taxes and supplies H(w - t) hours of work. The government wants to know if its tax revenue will increase or decrease if it lowers t. Show that how the tax revenue changes depends
4.17 In Solved Problem 5.5, suppose that Lance’s parents will not give Lance Y* if he drops out of high school to work. Use two figures to show that he might or might not choose to start working when the wage increases.
4.16 Redraw the figure in Solved Problem 5.5 to show that Lance might not choose to work at the higher wage.
4.15 Joe won $365,000 a year for life in the state lottery. Use a labor-leisure choice analysis to answer the following:a. Show how Joe’s lottery winnings affect the position of his budget line.b. Joe’s utility function for goods per day (Y) and hours of leisure per day (N) is U = Y +
4.14 Derive Sarah’s labor supply function given that she has a quasilinear utility function, U = Y0.5 + 2N, and her income is Y = wH. What is the slope of her labor supply curve with respect to a change in the wage? (Hint: See Solved Problem 5.3.) M
4.9 George views leisure as a normal good. He works at a job that pays w an hour. Use a labor-leisure analysis to compare the effects on the hours he works from a marginal tax rate on his wage, v, or a lump-sum tax (a tax collected regardless of the number of hours he works), T. If the per-hour tax
*4.8 As of 2015, at least 41 countries—including most of the formerly centrally planned economies of Central and Eastern Europe and Eurasia—use a flat personal income tax. Show that if each person is allowed a“personal deduction” whereby the first $10,000 earned by the person is untaxed,
4.6 Taxes during the fourteenth century were very progressive. The 1377 poll tax on the Duke of Lancaster was 520 times that on a peasant. A poll tax is a lump-sum (fixed amount) tax per person, which is independent of the hours a person works or earns. Use a graph to show the effect of a poll tax
4.1 Under a welfare plan, poor people are given a lumpsum payment of $L. If they accept this welfare payment, they must pay a high marginal tax rate, v = 1 2, on anything they earn. If they do not accept the welfare payment, they do not have to pay a tax on their earnings. Show that whether an
3.8 Governments increasingly use educational vouchers in various parts of the United States. Suppose that the government offers poor people $5,000 education vouchers that they may use only to pay for education.Doreen would be better off with $5,000 in cash than with the educational voucher. In a
3.7 Federal housing choice vouchers ($19 billion in 2015)and food stamps ($74 billion in 2014) are two of the largest in-kind transfer programs for the poor. Many poor people are eligible for both programs: 30% of housing assistance recipients also used food stamps, and 38% of food stamp
3.6 Recipients of federal housing choice vouchers can use the vouchers only for housing. Several empirical studies found that recipients increase their nonhousing expenditures by 10% to 20% (Harkness and Newman, 2003). Show that recipients might—but do not necessarily—increase their spending on
3.4 Is a poor person more likely to benefit from $100 a month worth of food stamps (that can be used only to buy food) or $100 a month worth of clothing stamps (that can be used only to buy clothing)? Why?3.5 If a relatively wealthy person spends more on food than a poor person before receiving
2.9 Fangwen’s utility function is U(q1, q2) = q1 + q2.The price of each good is $1, and her monthly income is $4,000. Her firm wants her to relocate to another city where the price of q2 is $2, but the price of q1 and her income remain constant. What would be her equivalent variation or
2.8 Kwabena’s utility function is U(q1, q2) = min (q1, q2).The price of each good is $1, and his monthly income is $4,000. His firm wants him to relocate to another city where the price of q2 is $3, but the price of q1 and his income remain constant. Obviously, he would be worse off due to the
2.7 Marcia spends her money on coffee and sugar, which she views as perfect complements. She adds one tablespoon of sugar to each cup of coffee. A cup of coffee costs $1, a tablespoon of sugar cost $0.20, and she spends $16.80 on coffee every week. Use graphs to show her compensating variation and
2.6 The local swimming pool charges nonmembers $10 per visit. If you join the pool, you can swim for $5 per visit, but you have to pay an annual fee of F. Use an indifference curve diagram to find the value of F such that you are indifferent between joining and not joining. Suppose that the pool
2.5 Marvin has a Cobb-Douglas utility function, U = q1 0.5 q2 0.5, his income is Y = 100, and, initially he faces prices of p1 = 1 and p2 = 2. If p1 increases to 2, what are his CV, ∆CS, and EV? (Hint: See Solved Problems 5.1 and 5.2.) M
2.4 Suppose that Lucy’s quasilinear utility function in Solved Problem 5.2 is U(q1, q2) = 2q1 0.5 + q2, p1 = 2, p2 = 4, p1 = 4, q1 = q1(p1) = 4, q1 = q1(p1) = 1. Compare her CV, EV, and ∆CS. M

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Microeconomics Theory And Applications With Calculus 5th Edition Jeffrey M. Perloff - Solutions

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