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business
introduction to economic
The Micro Economy Today 14th Edition Bradley Schiller, Karen Gebhardt - Solutions
According to Table 11.2, in how many markets do fewer than four firms produce at least 80 percent of total output?
How might the high concentration ratio in the credit card industry (Table 11.2) affect the annual fees and interest charges for credit card services? LO11
f an oligopolist knows rivals will match a price cut, would it ever reduce its price? LO11-3
Why was the Saudi Arabia oil minister “happy” with OPEC’s production decision (World View, p. 250)? Would he have been happier with less production and higher prices? LO11-2
Why does RC Cola depend on advertising to gain market share? (See News, p. 244.) Why not offer cheaper sodas than Coke or Pepsi? LO11-3
What entry barriers exist in (a) the fast-food industry,(b) cable television, (c) the auto industry, (d) illegal drug trade, (e) potato chips, and ( f ) beauty parlors? LO11-1
How many bookstores are on or near your campus? If there were more bookstores, how would the price of new and used books be affected? LO11-1
If a competitive industry confronted the same demand and costs, how much output would it produce in the short run?
What are the values of MR and MC at the profit-maximizing rate of output? MR MC(g) What are total profits at that output rate?
The following table summarizes the weekly sales and cost situation confronting a monopolist:LO10-3 LO10-2 LO10-2(a) Complete the table.(b) Graph the demand, MR, and MC curves on the following graph.(c) At what rate of output is total revenue maximized within this range?(d) What are the values of MR
By how much did the price of the heart drug for babies increase when a monopoly was established (News, p. 223)? $
According to the News on page 228,(a) What was the annual cost saving for the rocket monopoly (in $ millions)?(b) How much of this saving did the FTC expect to be reflected in reduced rocket prices?(c) According to economic theory, which is likely to be higher, A: the merged monopoly price;or B:
If the on-campus demand for soda is as follows:Price (per can) $0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 Quantity demanded(per day) 100 90 80 70 60 50 40 30 and the marginal cost of supplying a soda is 50 cents, what price will students end up paying in(a) A perfectly competitive market?(b) A
The following table indicates the prices various buyers are willing to pay for a MiniCooper car:Buyer Maximum Price Buyer Maximum Price Buyer A $50,000 Buyer D $20,000 Buyer B 40,000 Buyer E 10,000 Buyer C 30,000 Buyer F 0 The cost of producing the cars includes $40,000 of fixed costs and a
Complete the following table:Price $24 $21 $18 $15 $12 $9 $6 $3 Quantity demanded 1 2 3 4 5 6 7 8 Marginal revenue(b) At what rate of output does marginal revenue turn negative?(c) If marginal cost is constant at $12, what is the profit-maximizing rate of output?(d) What price should be charged at
Use Figures 10.2 and 10.3 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 (partial unit okay)?(d) What rate of output maximizes total
In view of the profits being made, more firms will enter into Frisbee production, shift the market supply curve to the right, and push price down. At what equilibrium price are all profits eliminated?(g) How many firms will be producing Frisbees at this long-term price?
Suppose that the monthly market demand schedule for Frisbees is Price $8 $7 $6 $5 $4 $3 $2 $1 Quantity demanded 1,000 2,000 4,000 8,000 16,000 32,000 64,000 128,000 Suppose further that the marginal and average costs of Frisbee production for every competitive firm are Rate of output 100 200 300
According to the World View on page 193,(a) How many brands entered the flat-panel TV market between 2002 and 2007?(b) What will economic profit be in the long run?(c) Will the number of firms producing TVs (A) increase, (B) decrease, or (C) stay the same between now and then?
According to Table 9.1,(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?(c) What price would prevail in long-term equilibrium? Illustrate your answers on the graphs.LO9-1 LO9-3
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 is 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 here.(b) Draw the market supply curve on the right graph, assuming 8 firms identical to
According to Table 9.1,(a) What were the fixed costs of production for the firm?(b) At what rate of output was profit per computer maximized? (Choose the highest output level.)(c) At what output rate was total profit maximized?
According to the World View on page 204, between 2000 and 2011 in India,(a) By what percentage did the price of a phone minute decline after competition emerged?(b) By what percentage did the quantity demanded increase?(c) What was the apparent price elasticity of demand?Note: Use the midpoint
What will drive the price of an iPad down to $99? How long will it take?
What would happen to iPad sales and profits if Apple kept price and profit margins high? LO9-1
Can phone rates keep falling in India? What will cause them to rise? (See World View, p. 204.) LO9-4
What does the “bleeding” highlighted in the News on page 191 refer to? What causes it? What cures it? LO9-3
Why have flat-panel TV prices fallen so much? (See World View, p. 193.) LO9-2
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 $10, how much output will the firm supply?(b) How much profit or loss will it make?(c) At
Illustrate on the accompanying graph the impact on desired output of(a) Reduced feed prices.(b) Higher wage rates.(c) Increased profits tax.
Were the fixed costs of maintaining Ford’s Australian plants (World View, p. 180) more or less than $140 million per year?
Using the data from Problem 5 (at the original price of $21), 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.
Assume that the price of silk ties in a perfectly competitive market is $21 and that the typical firm confronts the following costs:Quantity(ties per day) 0 1 2 3 4 5 6 7 8 9 10 Total cost $10 $17 $26 $37 $50 $65 $82 $101 $122 $145 $170(a) What is the profit-maximizing rate of output for the
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 $60 $ 50 1 60 60 2 60 90 3 60 140 4 60 200 5 60 280(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 $7 per bushel, use Figure 8.7 to determine the(a) Profit-maximizing output.(b) Profit or loss per bushel.(c) Total profit or loss.
If the owner of the Table 8.1 drugstore hired a manager for $10 an hour to take his place, how much of a change would show up in(a) Accounting profits?(b) Economic profits?
How does an employer-paid Social Security tax on wages affect a competitive firm’s supply curve?
What was the opportunity cost of Hiroshi Fujishige’s farm? (See News, p. 165.) Is society better off with another Disney theme park? Explain. LO8-1
What costs did GM eliminate when it shut down its plants? (World View, p. 180.) How about Ford? LO8-4
7. Suppose (A) the hourly wage rate is $24 in the United States and $3 in China, and (B) productivity is 20 units per hour in the United States and 4 units per hour in China. What are unit labor costs in(a) The United States?(b) China?
6. According to the World View on page 157, (a) which nation had the biggest loss of competitive (a)position in years 2007–2011? (b) Which nation had the biggest gain? (b)
Are there economies of scale in these plant size choices????? ???????? ???????? ???????? ???????? ???????? ???????? ???????? ???????? ???????? ????????????
Which plant(s) should be used to produce 100 units?
Which plant(s) should be used to produce 40 units?
5. 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
At what amount of labor input does the law of diminishing returns first become apparent in your graph of marginal physical product?(d) Is total output still increasing when MPP begins to diminish?(e) When total output stops increasing, what is the value of MPP?LO7-2 LO7-4 LO7-2 160 PROBLEMS FOR
4. Refer to the production table for jeans (Table 7.1). Suppose a firm has two sewing machines and can vary only the amount of labor input.(a) Graph the production function for jeans given the two sewing machines.(b) Compute and graph the marginal physical product curve.
If the company sold the building and then leased it back, what would be the change in(i) Accounting costs?(ii) Economic costs?
3. Suppose a company incurs the following costs: labor, $500; equipment, $300; and materials,$200. 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?
2. At what level of labor input in Figure 7.2 does marginal physical product(a) First diminish?(b) Become zero?(c) Turn negative?
1. (a) Complete the following cost schedule:Average Average Rate of Total Marginal Average Variable Total Output Cost Cost Fixed Cost Cost Cost 0 $ 600 1 800 2 1,050 3 1,400 4 1,800 5 2,300(b) Use the cost data to plot the ATC and MC curves on the accompanying graph.(c) At what output rate is ATC
10. What causes unit labor costs to rise in some nations and fall in others (World View, p. 157)?159 PROBLEMS FOR CHAPTER 7 Name:
9. What is the economic cost of doing this homework?LO7-4
8. How would your productivity in completing coursework be measured? Has your productivity changed since you began college? What caused the productivity changes?How could you increase productivity further? LO7-1
7. Why don’t more U.S. firms move to Mexico to take advantage of low wages there? Would an identical plant in Mexico be as productive as its U.S. counterpart? LO7-1
6. Are colleges subject to economies of scale or diseconomies?LO7-5
5. Corporate funeral giants have replaced small family-run funeral homes in many areas, in large part because of the lower costs they achieve. What kind of economies of scale exist in the funeral business? Why doesn’t someone build one colossal funeral home and drive costs down further? LO7-5
4. Owner/operators of small gas stations rarely pay themselves an hourly wage. How does this practice affect the economic cost of dispensing gasoline? LO7-4
3. How many batteries will Tesla want to produce in its new gigafactory? (See News, p. 154.) LO7-1
2. Suppose all your friends offered to help wash your car.Would marginal physical product decline as more friends helped? Why or why not? LO7-2
1. What are the production costs of your economics class?What are the fixed costs? The variable costs? What’s the marginal cost of enrolling more students? LO7-3
Do larger firms have a cost advantage over smaller firms?
How do the costs of production vary with the rate of output?
How much output can a firm produce?
12. Suppose that in a week the price of Greek yogurt increases from $1.25/lb to $1.75/lb. At the same time, the quantity of Greek yogurt supplied increases from 100,000 lbs to 180,000 lbs. What is the price elasticity of supply for Greek yogurt?
11. If the cross-price elasticity of demand between printed textbooks and e-books is 1.30,(a) Are e-books and textbooks complementary (C) or substitute (S) goods?(b) If textbook prices increase by 6 percent, by how much will e-book demand change?
10. If a gasoline price hike of 5 percent caused the SUV sales drop described in the News on page 128, what is the cross-price elasticity of demand between gasoline and SUVs?
9. According to the calculation on page 129, by how much will popcorn sales increase if average income goes up by 12 percent? %
8. If the price of a pack of cigarettes (including taxes) was $6 before the proposed 2015 tax hike(see the News, p. 121),(a) What was the price after the tax hike?(b) What was the (average) percentage increase in price?(c) If cigarette sales decline by 7.2 percent, what is the price elasticity of
7. From Figure 6.1, compute (a) the price elasticity between each of the following points and(b) the total revenue at each point.Price Elasticity Total Revenue Point C to D At point C DH to I H I
6. Suppose consumers buy 40 million packs of cigarettes per month at a price of $5 per pack. If a$1 tax is added to that price,(a) By what percentage does price change? (Use the midpoint formula on p. 119.) %(b) By what percentage will cigarette sales decline in the short run? (See Table 6.1 for a
5. What was the price elasticity of demand for gasoline in 2011 (News, p. 122)?
4. What is the long-run price elasticity of demand for cigarettes among 18-year-olds (Table 6.2)?
3. According to Professor Becker (News, p. 123), by how much would cigarette prices have to rise to get a 15 percent reduction in smoking in(a) one year? %(b) three years? %
2. What was the price elasticity of demand for iPhones in 2007 (News and text, p. 121)?
1. By changing the denominator in each case, compute the percentage change in the iPhone’s price(see text and News, p. 127), from(a) The initial price.(b) The final price.(c) The average price.
10 percent. If the price elasticity of supply is 2, what should happen to the price of the product
11. Suppose that quantity supplied for a product falls by
10. Is the demand for iPhones price inelastic or elastic?Why? Is income elasticity high or low? LO6-4
9. What would happen to unit sales and total revenue for this textbook if the bookstore reduced its price? LO6-2
8. If the elasticity of demand for coffee is so low (Table 6.1), why doesn’t Starbucks raise the price of coffee to$10 a cup? LO6-2
7. How has the Internet affected the price elasticity of demand for air travel? LO6-1
6. If you owned a movie theater, would you want the demand for movies to be elastic or inelastic? LO6-2
5. Why does the price elasticity of demand for cigarettes differ for teenagers and adults (see Table 6.2)? LO6-1
4. Identify two pairs each of products that are (a) substitute goods and (b) complementary goods. LO6-3
3. Identify two goods each whose demand exhibits (a) high income elasticity, (b) low income elasticity, (c) high price elasticity, and (d) low price elasticity. What accounts for the differences in elasticity? LO6-4
2. If the price of gasoline doubled, how would consumption of (a) cars, (b) public transportation, and (c) in-theater movies be affected? How quickly would these adjustments be made? LO6-3
How do changes in income affect the quantity demanded of various goods and services?
How do changes in the price of other products affect the amount of a product we buy?
The relationships between price changes, price elasticity, and total revenue.
Use the following data to illustrate the relevant demand curve:Price $ 1 2 3 4 5 6 7 8 9 10 Quantity 20 18 16 14 12 10 8 6 4 2(a) If the price increases from $4 to $8, by how much does the quantity demanded decline?(b) If a successful advertising campaign increases the quantity demanded at every
Suppose the following table reflects the total satisfaction derived from consumption of pizza slices and Pepsis. Assume that pizza costs $1 per slice and a large Pepsi costs $2. With $20 to spend, what consumption mix will maximize satisfaction?
Suppose the graph on the next page depicts the demand for football tickets at Grand University.(a) What is total revenue at the price of $24? $(b) If the price drops to $12, how many tickets would consumers purchase?(c) What is total revenue at that point? $(d) If the team has a losing streak and
What is the total revenue (price 3 quantity) received by the car dealer in Figure 5.4 if he charges(a) A uniform price of $750,000?(b) Maximum individual prices to Fred, Michel, Hua, Carlos, John, and Marty?
What is the combined consumer surplus for the five consumers in Figure 5.4 who buy Spyders when the price drops to $800,000?
In Figure 5.4, how much consumer surplus is received by(a) Fred?(b) Carlos?(c) John?
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