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business
introduction to economic
The Micro Economy Today 12th Edition Bradley Schiller - Solutions
Use Figures 9.2 and 9.3 to answer the following questions:(a) What is the highest price the monopolist could charge and still sell fish?(b) What is total revenue at that highest price?(c) What rate of output maximizes total revenue?(d) What rate of output maximizes total profit?(e) What is MR at
How do colleges price discriminate? Why do they do it? LO1
How might consumers benefit from the merger of XM and Sirius (News, p. 213)? How might they lose? LO3
What entry barriers helped protect the following? LO1(a) The Russian sable monopoly (World View, p. 201).(b) The Live Nation monopoly (News, p. 206).(c) The CNN monopoly (World View, p. 214).(d) The rocket monopoly (News, p. 212).
What would have happened to iPod prices and features if Apple had not faced competition from iPod clones(Chapter 8)? LO1
In 1990, a federal court decided that Eastman Kodak had infringed on Polaroid’s patent when it produced similar instant-photo cameras. The court ordered Kodak to stop producing Polaroid look-alikes and to compensate Polaroid for damages. What was the nature of the damages to Polaroid? How could
According to the Federal Trade Commission (News, p. 212), how often do monopolies lead to higher prices?Why, then, did the rocket merger get approved? LO1
Discuss the pros and cons of monopoly.
Explain how monopoly and competitive outcomes differ.
Calculate how a monopolist sets price.
According to the World View on page 179,(a) How many brands entered the flat-panel TV market between 2002 and 2007?(b) Where will long-run economic profit end up?(c) Will more firms enter the market between now and then?
According to Table 8.1 ,(a) What was the prevailing computer price in 1978?(b) How much total profit did the typical firm earn?(c) At what price would profits have been zero?(d) At what price would the firm have shut down?
Suppose the typical catfish farmer was incurring an economic loss at the prevailing price p1.(a) Illustrate these losses on the firm and market graphs. (b) What forces would raise the price?What price would prevail in long-term equilibrium? Illustrate your answers on the graphs.
Suppose the following data describe the demand for liquid-diet beverages:Price $11 $10 $9 $8 $7 $6 $5 $4 $3 $2 Quantity demanded 7 10 13 16 19 22 25 28 31 34 Five identical, perfectly competitive firms are producing these beverages. The cost of producing these beverages at each firm are the
Suppose the following data summarize the costs of a perfectly competitive firm:Quantity 0 1 2 3 4 5 6 7 8 Total cost $100 101 103 106 110 115 121 128 136(a) Draw the firm’s MC curve on the graph on the left below.(b) Draw the market supply curve on the right graph, assuming 8 firms identical to
According to Table 8.1 ,(a) What were the fixed costs of production for the firm?(b) At what rate of output was profit per computer maximized?(c) At what output rate was total profit maximized?
According to the News on page 188,(a) How many years elapsed between IBM’s entry and exit of the home computer market?(b) By what percent did IBM cut the price of its low-end computer in a single year?
What will drive the price of an iPhone down to $99?How long will it take? LO2
How far are mobile-phone prices likely to fall in India?(See World View, p. 190.) LO3
What might cause catfish prices to rise far enough to eliminate losses in the industry? (See News, p. 176.) LO2
Why have flat-panel TV prices fallen so much? (See World View, p. 179.) LO2
Describe how society benefi ts from perfect competition.
Explain why economic profi ts approach zero in competitive markets.
Identify the market characteristics of perfect competition.
A firm has leased plant and equipment to produce video game cartridges, which can be sold in unlimited quantities at $21 each. The following figures describe the associated costs of production:Rate of output (per day) 0 1 2 3 4 5 6 7 8 Total cost (per day) $50 $55 $62 $75 $96 $125 $162 $203 $248(a)
Complete the following table:Total Marginal Average Average Output Cost Cost Total Cost Variable Cost 0 $100 5 110 10 130 15 170 20 220 25 290 30 380 35 490 According to the table above,(a) If the price is $8, how much output will the firm supply?(b) How much profit or loss will it make?(c) At what
Suppose labor is the only variable cost in fish farming and that a new minimum-wage law increases wages by 40 percent.(a) What will the new output rate be for the firm in Figure 7.7 ?(b) How much profit will it make?
Using the data from Problem 5 (at the original price of $17), determine how many ties the producer would supply if(a) A tax of $2 per tie were collected from the producer.(b) A property tax of $2 were levied.(c) Profits were taxed at 50 percent.
Complete the following cost schedules:Quantity 0 1 2 3 4 5 6 7 Total cost $9 $12 $16 $21 $30 $40 $52 $66 ATC MC Assuming the price of this product is $12, at what output rate is(a) Total revenue maximized?(b) ATC minimized?(c) Profit per unit maximized?(d) Total profit maximized?
(a) Complete the following cost and revenue schedules:Total Total Marginal Quantity Price Revenue Cost Cost 0 $70 $ 50 1 70 70 2 70 110 3 70 170 4 70 240 5 70 320(b) Graph MC and p .(c) What rate of output maximizes profit?(d) What is MC at that rate of output?
If the price of catfish fell from $13 to $9 per bushel, use Figure 7.7 to determine the(a) Profit-maximizing output.(b) Profit or loss per bushel.(c) Total profit or loss.
If a perfectly competitive firm raises its price above the prevailing market rate, how much of its sales might it lose? Why? Can a competitive firm ever raise its prices?If so, when? LO1
Is Apple Computer a perfectly competitive firm?Explain your answer. LO1
What was the opportunity cost of Mr. Fujishige’s farm?(See News, p. 153.) Is society better off with another Disney theme park? Explain. LO2
What costs did GM eliminate when it shutdown its plants? (News, p. 167.) How about Dell? LO3
What rate of output is appropriate for a “nonprofit” corporation (such as a hospital)? LO2
Why wouldn’t a profit-maximizing firm want to produce at the rate of output that minimizes average total cost? LO2
If a firm is incurring an economic loss, would society be better off if the firm shut down? Would the firm want to shut down? Explain. LO2
How can the demand curve facing a firm be horizontal if the market demand curve is downward-sloping? LO1
What economic costs will a large corporation likely overlook when computing its “profits”? How about the owner of a family-run business or farm? LO2
Discuss how a competitive fi rm’s supply curve is derived.
Explain how a competitive fi rm maximizes profi t.
Describe what a perfectly competitive fi rm is.
Suppose ( A ) the hourly wage rate is $18 in the United States and $1 in China, and ( B ) productivity is 20 units per hour in the U.S. and 1 unit per hour in China. What are unit labor costs in(a) The United States?(b) China?
According to the World View on page 144, which nation had the biggest loss of competitive position in years 2000–2007?
The following table indicates the average total cost of producing varying quantities of output from three different plants:Rate of output 10 20 30 40 50 60 70 80 90 100 Average total cost Small firm $ 600 $500 $400 $500 $600 $700 $800 $900 $1,000 $1,100 Medium firm 800 650 500 350 200 300 400 500
Refer to the production table for jeans ( Table 6.1 ). Suppose a firm has three sewing machines and can vary only the amount of labor input.(a) Graph the production function for jeans given the three sewing machines.(b) Compute and graph the marginal physical product curve.(c) At what amount of
Suppose a company incurs the following costs: labor, $500; equipment, $200; and materials, $100.The company owns the building, so it doesn’t have to pay the usual $800 in rent.(a) What is the total accounting cost?(b) What is the total economic cost?(c) If the company sold the building and then
Based on the News on page 141, what is the ATC per dollar of sales at a(a) Large funeral home?(b) Small funeral home?
(a) Complete the following cost schedule:Average Average Rate of Total Marginal Average Variable Total Output Cost Cost Fixed Cost Cost Cost 0 $1000 1 1200 2 1450 3 1750 4 2100 5 2500(b) Use the cost data to plot the ATC and MC curves on the accompanying graph.(c) At what output rate is ATC
What is the economic cost of doing this homework? LO1
Corporate funeral giants have replaced small family-run funeral homes in many areas, in large part because of the lower costs they achieve. (See News, p. 141.) What kind of economies of scale exist in the funeral business?Why doesn’t someone build one colossal funeral home and drive costs down
How many chip sets will Intel want to produce in China?(See World View, p. 139.) LO1
Describe how the various measures of cost are related.
Explain the law of diminishing returns.
Interpret the production function.
Using averages where appropriate, compute the price elasticity of demand for PlayStation 3 (News, p. 100).
Use the following data to illustrate the ( a ) demand curve and ( b ) total revenue curve:Price $ 1 2 3 4 5 6 7 8 9 10 Quantity 20 18 16 14 12 10 8 6 4 2(a) At what price is total revenue maximized? $(b) At that price what is the elasticity of demand? E 5(c) Between what prices is demand elastic?
If Washington, DC, incomes declined by 2 percent in 2008, what is the income elasticity of demand for lottery tickets (News, p. 105)?
According to the calculation on page 104, by how much will popcorn sales increase if average income goes up by 10 percent? %
If the price of a pack of cigarettes (including taxes) was $4 before the 2009 tax hike (see News, p. 99),(a) What was the price after the tax hike?(b) What was the (average) percentage increase in price?(c) What was the price elasticity of demand?
From Figure 5.3 , compute ( a ) the price elasticity between each of the following points and( b ) the total revenue at each point.Price Elasticity Total Revenue Point D to E At point D EG to H G H
Suppose consumers buy 30 million packs of cigarettes per month at a price of $4 per pack.If a $1 tax is added to that price,(a) By what percent does price change? (Use midpoint formula on p. 97.) %(b) By what percent will cigarette sales decline in the short run? (See Table 5.1 for clue.) %(c)
According to Professor Becker (News, p. 101), by how much would cigarette prices have to rise to get a 20 percent reduction in smoking in(a) 1 year? %(b) 3 years? %
If the price elasticity of demand for iPhones were 1.8, by how much would iPhone unit sales have increased if the launch price had been$399 instead of $499? %LO2
Illustrate the following demand on the accompanying graph:Price (per pair) $100 $80 $60 $40 $20 Quantity demanded (pairs per day) 10 14 18 22 26(a) How many pairs will be demanded when the price is $90?(b) How much money will be spent on shoes at a price of (i) $30?(ii) $70?LO1
Is the demand for iPhones price inelastic or elastic?Why? Is income elasticity high or low? LO2
What would happen to unit sales and total revenue for this textbook if the bookstore reduced its price? LO2
If the elasticity of demand for coffee is so low( Table 5.1 ), why doesn’t Starbucks raise the price of coffee to $10 a cup? LO2
How has the Internet affected the price elasticity of demand for air travel? LO2
Why does the price elasticity of demand differ for teenagers and adults? LO2
Why are per capita advertising expenditures so high in the United States and so low in Brazil? (See World View, p. 112.) LO1
Why is the demand for PlayStation 3 (News, p. 100) so much more elastic than the overall market demand for video-game consoles? LO1
If the price of gasoline doubled, how would consumption of ( a ) gasoline, ( b ) cars, and ( c ) public transportation be affected? How quickly would these adjustments be made? LO2
How does total and marginal utility change as you spend more time surfing the Net? LO3
Describe how consumers maximize utility.
Discuss what price and income elasticities of demand measure.
Explain the basis for the law of demand.
According to the News on page 78, what percent of income is spent on lottery tickets by(a) A poor family with income of $18,000 per year?(b) An affluent family with income of $40,000 per year?
Suppose the following data represent the prices that each of three consumers is willing to pay for snowplowing:Quantity Consumer A Consumer B Consumer C 1 $50 $40 $30 2 30 20 20 3 20 15 10(a) Construct the market demand curve for snowplowing on the graph above (right).(b) If the market price of
Suppose the following data represent the market demand for college education:Tuition (per year) $1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Enrollment demanded 8 7 6 5 4 3 2 1(in millions per year)(a) If tuition is set at $4,000, how many students will enroll?Now suppose that society gets an
(a) Assuming a 10 percent sales tax is levied on all consumption, complete the following table:Sales Percent of Income Consumption Tax Income Paid in Taxes$10,000 $12,000 20,000 18,000 40,000 32,000 80,000 60,000(b) Is the sales tax progressive or regressive?
If the average adult produces $75,000 of output per year, how much output is lost as a result of deaths from secondhand smoke, according to the News on page 70? $
In the previous problem’s market equilibrium, what is(a) The market value of the good?(b) The social value of the good?LO1 QUANTITY PRICE Market supply Market demand 0 1 15 15 20 25 23 45 67 89 10 11 12 13 14 15
Assume that the product depicted below generates external costs in consumption of $4 per unit.(a) Draw the social demand curve.(b) What is the socially optimal output? (b)(c) By how much does the market overproduce this good? (c)LO1 LO1 LO1 OTHER GOODS(units per year)CIGARETTES (packs per year)
Use Figure 4.3 to illustrate on the accompanying production possibilities curve(a) The market mix of output ( M ).(b) The optimal mix of output ( X ).
In Figure 4.2 , by how much is the market(a) Overproducing private goods? (a)(b) Underproducing public goods? (b)
Should the government be downsized? Which functions should be cut back? LO2
How does XM Satellite deter nonsubscribers from listening to its transmissions? Does this make radio programming a private good or a public good? LO1
What government actions might cause failures like points G1, G2, and G3 in Figure 4.6 ? Can you give examples? LO3
The government now spends over $700 billion a year on Social Security benefits. Why don’t we leave it to individuals to save for their own retirement? LO1
If smoking generates external costs, should smoking simply be outlawed? How about cars that pollute? LO1
What is the specific market-failure justification for government spending on ( a ) public universities, ( b )health care, ( c ) trash pickup, ( d ) highways, ( e ) police?Would a purely private economy produce any of these services? LO1
Why might Fourth of July fireworks be considered a public good? Who should pay for them? What about airport security? LO1
Could local fire departments be privately operated, with their services sold directly to customers? What problems would be involved in such a system? LO1
If everyone seeks a free ride, what mix of output will be produced in Figure 4.2 ? Why would anyone voluntarily contribute to the purchase of public goods like flood control or snow removal? LO1
Why should taxpayers subsidize public colleges and universities? What external benefits are generated by higher education? LO1
Discuss the meaning of government failure.
Demonstrate how government budgets are fi nanced and spent.
Analyze the nature and causes of market failure.
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