Monopoly and Monopsony Labor Market Behavior


 Phyllis Edwards
 1 years ago
 Views:
Transcription
1 Monopoly and Monopsony abor Market Behavior 1 Introduction For the purposes of this handout, let s assume that firms operate in just two markets: the market for their product where they are a seller) and the labor market where they are a buyer) 1. If the firm faces a competitive output market, regardless of what quantity they produce they get the constant market price P for each unit sold. If they face a competitive labor market, regardless of how many people they hire they have to pay each worker the constant market wage w. Sometimes firms have market power  the ability to manipulate the price of the market good based on the quantity they use or produce. In the extreme case, firms may be the only seller or buyer in a market. If the firm is the only seller, it is called a monopolist, and can change P depending on how much it produces. If it is the only buyer, it is a monopsonist, and can change w depending on how much labor it employs. 2 Review of the General abor Supply Model et there be only one input in production  labor. Profit maximizing firms choose labor by setting the marginal cost of labor equal to the marginal benefit or marginal revenue product) of labor. In a competitive model, both P and w are taken as given  the only thing that isn t determined by market forces is the marginal product of labor. The first order conditions FOC) for profit maximization are 2 MRP = MC MP MR = MC 1) 1 In reality, firms may operate in many markets, selling multiple goods and using multiple inputs in production. They may face competitive markets in some and have market power in others. 2 The FOC is a result of a generic maximization problem such as max P Q)) Q) C) where the maximization is done over. Prepared by Nick Sanders, UC Davis Graduate Department of Economics 2006
2 where MP = doutput dabor = d MR = drevenue doutput = dr MC = dcosts dabor = dc d When firms take output price and wage as given, 1) simplifies to MP P = w 2) Now let s consider how things change when P or w is allowed to change with Q and, respectively. 3 The Monopolist abor Decision Since a monopolist is the only producer in a market, they see the entire demand curve when making their production decision. As such, the more they produce, the lower the price in the market. We represent this with an inverse demand curve where price is presented as a function of quantity supplied, or P P Q), where dp < 0. Returning to equation 1), MC is still w, because the firm takes the price of its inputs as given. MR, however, is no longer simply P, but is now MR monopolist dp Q) Q) = = P Q) + dp Q = P 1 + dp ) Q P = P ) 3) 2
3 where is the elasticity of demand percentage change in quantity demanded divided by percentage change in price) which is assumed to be negative 3. So for a monopolist MR monopolist = P 1 some nonzero number) < P which reflects that each additional unit sold in the market lowers the price of all other units sold, and at a given wage monopolists will hire less labor than perfectly competitive firms. As monopolists employ less labor, they have lower production and thus generate a higher market price than competitive firms. 3.1 Monopolist example et the firm face the inverse demand function P Q) = 50 2Q and a cost function C) = 50. The marginal productivity of labor is constant at 5, i.e. Q) = 5. Find the optimal level of employment for the firm, the optimal quantity produced, and the price in the market Solution Since the marginal productivity of labor is constant at 5, the only variation in the marginal revenue product of labor will be marginal revenue. To find marginal revenue, we first need to construct the revenue function, which is price times quantity, or 50 2Q) Q. The marginal revenue function is then d 50 2Q) Q) = d 50Q 2Q2 ) = 50 4Q 4) Equation 4) times the marginal product of labor gives the marginal revenue product of labor. Since we know the marginal product of labor d equals 5 as Q) = 5), MRP = Note that in the case of perfect competition, firms face a perfectly elastic demand curve, which implies that =. This means that for perfect competition 1 = 1 = 0 and 3) is back to 2). 3
4 The marginal cost of labor is the derivative of the cost function with respect to, or d50) d = 50, which is the same as saying the wage in the labor market is 50. Setting marginal cost equal to marginal revenue product then gives = = = Total production is Q2) = 5 2 = 10, and price is given by P 10) = ) = The Monopsonist abor Decision Since a monopsonist is the only buyer in a market, they see the entire supply curve when making their purchasing decisions. If they are a monopsonist in the labor market, the more people they hire, the higher the wage. Assuming they are a nondiscriminating monopsonist, hiring one additional worker means they have to pay all workers employed the now higher wage. The marginal cost of labor is now a function of the quantity hired, or MC MC ). Again going back to equation 1), now MR = P because the firm takes the price of its good as given, but assuming labor is the only factor of production) MC monopsonist = dcosts d d[w) ] = d = w) + dw d = w 1 + dw ) d w 5) where dw d > 0 due to an upward sloping labor supply curve4 ) and w 4 Under perfect competition, the firm s labor hiring decision cannot affect the wage, so dw d simplifies to w ) w, and we re back to the usual competitive result of MC = w. 4 dw > 0, so d w > 0 and = 0. That means 5)
5 w 1 + dw d w) > w. Since each worker costs more for a monopsonist to hire than it would for a perfectly competitive firm, for a given price monopsonists hire less labor than firms in perfect competition. 4.1 Monopsonist Example et a nondiscriminating firm face a perfectly elastic demand curve with a price of $5 note that saying their demand curve is perfectly elastic is equivalent to saying they face a fixed price that doesn t change with production). Their marginal productivity of labor is constant at 10 Q) = 10), and labor is the only factor of production. They face a labor supply curve equal to s = 8w 32. Find the optimal amount of labor hired and the wage in the market Solution The marginal revenue product of the monopsonist is constant here, since M R = P = 5 and MP = 10. But their marginal cost of labor is changing since with each person they hire, they need to pay all workers a higher wage. To find MC, we first need to construct the cost curve, and then take the derivative of that with respect to labor. The cost curve is the amount of labor hired times the wage, or w. The wage is given by the labor supply function, which we can mess with to get w. = 8w 32 8w = + 32 w = ) 5
6 which means the cost function C) and the marginal cost function MC are C) = 8 + 4) MC ) = dc)) d = ) We can now set marginal revenue product of labor equal to marginal cost of labor 7) and solve for. MRP = MC MP MR = MC 10 5 = = = 184 Plugging that in to 6) gives w = = 27. We can also get quantity produced, since Q) = 10 Q184) = We don t need to calculate price, since that is taken as fixed an is independent of labor hired/quantity produced. A1 Appendix  Proofs Assuming Decreasing MP No need to worry about learning and memorizing the stuff in this section... this is just for those people that like to have mathematical intuition with their results. Again, I repeat, do not spend your time trying to memorize this. That being said, for those of you that are still reading, I ll continue. If we assume decreasing marginal productivity of labor, we can prove mathematically that monopolists and monopsonists hire less labor than competitive firms under the same wages and prices, respectively). 6
7 A1.1 Monopolist Given some wage w, let s compare the first order conditions for competitive firm labor demand and the monopolist labor demand. For both, at the optimal equation 1) holds. But for the ) monopolist, the left hand side of 1) is MP P while for the perfectly competitive firm it is MP P. This implies MP monopolist MP monopolist P ) ) = MP competitive = MP competitive P Since ) < 1, it must be that MP monopolist > MP competitive, which implies that for the optimal, monopolist < competitive remember marginal product of labor is decreasing in ). A1.2 Monopsonist Given some price P, using the FOC for the monopsonist and the fact that MRP competitive MRP monopsonist MP monopsonist 1 + dw d w MP monopsonist = w 1 + dw ) d w monopsonist MP 1 + dw d w P ) = MP competitive P by 2) = MP competitive 1 + dw ) d w P ) = w = w Since ) 1 + dw d w > 1, it must be that at the optimal amount of labor, MP monopsonist > MP competitive. 7
How Wages Are Determined in Labor Markets
ACTIVITY 45 How Wages Are Determined in Labor Markets This activity examines how wages and employment are determined in two types of labor s. A perfectly competitive labor is one in which all buyers and
More informationc 2009 Je rey A. Miron
Lecture 22: Factor Markets c 2009 Je rey A. Miron Outline 1. Introduction 2. Monopoly in the Output Market 3. Monopsony 4. Upstream and Downstream Monopolies 1 Introduction The analysis in earlier lectures
More informationChapter 6 MULTIPLECHOICE QUESTIONS
Chapter 6 MULTIPLECHOICE QUETION 1. Which one of the following is generally considered a characteristic of a perfectly competitive labor market? a. A few workers of varying skills and capabilities b.
More informationEmployment and Pricing of Inputs
Employment and Pricing of Inputs Previously we studied the factors that determine the output and price of goods. In chapters 16 and 17, we will focus on the factors that determine the employment level
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MBA 640 Survey of Microeconomics Fall 2006, Quiz 6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly is best defined as a firm that
More informationEconS 301 Review Session #8 Chapter 11: Monopoly and Monopsony
EconS 301 Review Session #8 Chapter 11: Monopoly and Monopsony 1. Which of the following describes a correct relation between price elasticity of demand and a monopolist s marginal revenue when inverse
More informationLABOR UNIONS. Appendix. Key Concepts
Appendix LABOR UNION Key Concepts Market Power in the Labor Market A labor union is an organized group of workers that aims to increase wages and influence other job conditions. Craft union a group of
More informationAP Microeconomics Chapter 12 Outline
I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.
More informationEC130 FOUNDATIONS OF ECONOMIC ANALYSIS
EC130 FOUNDATIONS OF ECONOMIC ANALYSIS 20042005 DEPARTMENT OF ECONOMICS UNIVERSITY OF WARWICK Topic 7 The Firm's Factor Markets: (i) The Labour Market Derived Demand for Labour Marginal Productivity Analysis
More informationSurplus Effects of Vertical Integration With and Without Double Marginalization  Examples 1
Surplus Effects of Vertical Integration With and Without Double Marginalization  Examples 1 What is Double Marginalization? When firms have market power, they will set price above marginal cost, which
More informationUnit 7: Factor Markets
Unit 7: Factor Markets Factor Market Markets in which the factors of production are bought and sold. A factor input is either land, labor, capital, or entrepreneurship Entrepreneurship is not purchased
More informationPART A: For each worker, determine that worker's marginal product of labor.
ECON 3310 Homework #4  Solutions 1: Suppose the following indicates how many units of output y you can produce per hour with different levels of labor input (given your current factory capacity): PART
More informationIntegrating the Input Market and the Output Market when Teaching Introductory Economics
1 Integrating the Input Market and the Output Market when Teaching Introductory Economics May 2015 Clark G. Ross Frontis Johnston Professor of Economics Davidson College Box 7022 Davidson, NC 280357022
More informationPreTest Chapter 25 ed17
PreTest Chapter 25 ed17 Multiple Choice Questions 1. Refer to the above graph. An increase in the quantity of labor demanded (as distinct from an increase in demand) is shown by the: A. shift from labor
More informationI. Output Decisions by Firms
University of PacificEconomics 53 Lecture Notes #8B I. Output Decisions by Firms Now that we have examined firm costs in great detail, we can now turn to the question of how firms decide how much output
More informationCHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY
CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY EXERCISES 3. A monopolist firm faces a demand with constant elasticity of .0. It has a constant marginal cost of $0 per unit and sets a price to maximize
More informationECON 202: Principles of Microeconomics. Chapter 11 Firms in Perfectly Competitive Markets
ECON 202: Principles of Microeconomics Chapter 11 Firms in Perfectly Competitive Markets Firms in Perfectly Competitive Markets 1. Market Structures. 2. Perfectly Competitive Markets. 3. Maximizing Profit
More informationUNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES. Monopolistic Competition
UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES Monopolistic Competition Market Structure Perfect Competition Pure Monopoly Monopolistic Competition Oligopoly Duopoly Monopoly The further right on
More informationA Detailed Price Discrimination Example
A Detailed Price Discrimination Example Suppose that there are two different types of customers for a monopolist s product. Customers of type 1 have demand curves as follows. These demand curves include
More informationFinance 360 Problem Set #5 Solutions
Finance 360 Problem Set #5 Solutions 1) Suppose that the demand curve for video rentals has been estimated to be Q = 500 50P Further, your average costs of supplying videos is equal to AC = 8.006Q +.00000Q
More informationEconomics 201 Fall 2010 Introduction to Economic Analysis Problem Set #6 Due: Wednesday, November 3
Economics 201 Fall 2010 Introduction to Economic Analysis Jeffrey Parker Problem Set #6 Due: Wednesday, November 3 1. Cournot Duopoly. Bartels and Jaymes are two individuals who one day discover a stream
More informationAP Microeconomics Unit V: The Factor (Resource) Market Problem Set #5
1. /15 2. /20 3. /15 4. /25 Total: /75 Name: Team: AP Microeconomics Unit V: The Factor (Resource) Market Problem Set #5 1. ( /15) Define the term and explain a situation that demonstrates the real world
More informationor, put slightly differently, the profit maximizing condition is for marginal revenue to equal marginal cost:
Chapter 9 Lecture Notes 1 Economics 35: Intermediate Microeconomics Notes and Sample Questions Chapter 9: Profit Maximization Profit Maximization The basic assumption here is that firms are profit maximizing.
More informationTopic 3.1a ShortRun Labour Demand. Professor H.J. Schuetze Economics 370
Topic 3.1a ShortRun Labour Demand Professor H.J. Schuetze Economics 370 Labour Demand Let s turn our attention away from employees to focus on the behaviour of employers or firms. Recall that labour demand
More informationChapter 14. Markets for Factor Inputs
Chapter 14 Markets for Factor Inputs Competitive Factor Markets Characteristics 1. Large number of sellers of the factor of production 2. Large number of buyers of the factor of production 3. The buyers
More informationChapter 6 Competitive Markets
Chapter 6 Competitive Markets After reading Chapter 6, COMPETITIVE MARKETS, you should be able to: List and explain the characteristics of Perfect Competition and Monopolistic Competition Explain why a
More informationChapter 16 Monopolistic Competition and Product Differentiation
Goldwasser AP Microeconomics Chapter 16 Monopolistic Competition and Product Differentiation BEFORE YOU READ THE CHAPTER Summary This chapter develops the model of monopolistic competition. It also discusses
More informationFind the competitive equilibrium. The competitive equilibrium is where supply equals demand. Since MC=S, where MC = 2Q/3
Problem Set #13Key Sonoma State University Economics 305Intermediate Microeconomic Theory Dr. Cuellar (1) Consider the following demand and cost functions for a monopolistic firm. The industry demand
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapter 11 Monopoly practice Davidson spring2007 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly industry is characterized by 1) A)
More informationProfit Maximization. 2. product homogeneity
Perfectly Competitive Markets It is essentially a market in which there is enough competition that it doesn t make sense to identify your rivals. There are so many competitors that you cannot single out
More informationCHAPTER 13 MARKETS FOR LABOR Microeconomics in Context (Goodwin, et al.), 2 nd Edition
CHAPTER 13 MARKETS FOR LABOR Microeconomics in Context (Goodwin, et al.), 2 nd Edition Chapter Summary This chapter deals with supply and demand for labor. You will learn about why the supply curve for
More informationMicroeconomics Instructor Miller Practice Problems Labor Market
Microeconomics Instructor Miller Practice Problems Labor Market 1. What is a factor market? A) It is a market where financial instruments are traded. B) It is a market where stocks and bonds are traded.
More informationModule 2 Lecture 5 Topics
Module 2 Lecture 5 Topics 2.13 Recap of Relevant Concepts 2.13.1 Social Welfare 2.13.2 Demand Curves 2.14 Elasticity of Demand 2.14.1 Perfectly Inelastic 2.14.2 Perfectly Elastic 2.15 Production & Cost
More informationLabor Demand. Labor Economics VSE Praha March 2009
Labor Demand Labor Economics VSE Praha March 2009 Labor Economics: Outline Labor Supply Labor Demand Equilibrium in Labor Market et cetera Labor Demand Model: Firms Firm s role in: Labor Market consumes
More informationLearning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly
Chapter 6 The Two Extremes: Perfect Competition and Pure Monopoly Learning Objectives List the four characteristics of a perfectly competitive market. Describe how a perfect competitor makes the decision
More informationPricing and Output Decisions: i Perfect. Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young
Chapter 9 Pricing and Output Decisions: i Perfect Competition and Monopoly M i l E i E i Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young Pricing and
More informationPerfect Competition. Chapter 12
CHAPTER CHECKLIST Perfect Competition Chapter 12 1. Explain a perfectly competitive firm s profit maximizing choices and derive its supply curve. 2. Explain how output, price, and profit are determined
More informationLabelling Graph Axis Correctly
Labelling Graph Axis Correctly The Industry Price S D The Firm Quantity MC AC AR=MR Output Perfect Competition All of the units are sold at the same price because no single buyer or seller is large enough
More informationProduction Functions
Short Run Production Function. Principles of Microeconomics, Fall ChiaHui Chen October, ecture Production Functions Outline. Chap : Short Run Production Function. Chap : ong Run Production Function. Chap
More informationMarket Structure: Perfect Competition and Monopoly
WSG8 7/7/03 4:34 PM Page 113 8 Market Structure: Perfect Competition and Monopoly OVERVIEW One of the most important decisions made by a manager is how to price the firm s product. If the firm is a profit
More informationOVERVIEW. 7. In perfectly competitive markets, wages are determined by supply and demand.
15 DEMAND FOR INPUTS OVERVIEW 1. Each firm is involved in two markets, a market for its output and a market for inputs. Decisions the firm makes in one market affect its decisions in the other market.
More informationIntermediate Microeconomics. Chapter 13 Monopoly
Intermediate Microeconomics Chapter 13 Monopoly Noncompetitive market Price maker = economic decision maker that recognizes that its quantity choice has an influence on the price at which it buys or sells
More informationECON 600 Lecture 3: Profit Maximization Π = TR TC
ECON 600 Lecture 3: Profit Maximization I. The Concept of Profit Maximization Profit is defined as total revenue minus total cost. Π = TR TC (We use Π to stand for profit because we use P for something
More informationChapter 11. Pricing with Market Power
Chapter 11 Pricing with Market Power Topics to be Discussed(Sec. 11.111.4) Capturing Consumer Surplus Price Discrimination Intertemporal Price Discrimination and PeakLoad Pricing The TwoPart Tariff
More information1. An economic institution that combines factors of production into outputs for consumers is a(n): A) industry. B) plant. C) firm. D) multinational.
Miami Dade College ECO 2023 Principles of Microeconomics Summer B 2014 Practice Test #3 1. An economic institution that combines factors of production into outputs for consumers is a(n): A) industry. B)
More information(Perfect) Competition
(Perfect) Competition (Perfect) Competition The model of perfect competition is based on the following assumptions: (Perfect) Competition The model of perfect competition is based on the following assumptions:
More informationAP Microeconomics Review
AP Microeconomics Review 1. Firm in Perfect Competition (LongRun Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with FairReturn
More informationMicroeconomics Instructor Miller Practice Problems Monopolistic Competition
Microeconomics Instructor Miller Practice Problems Monopolistic Competition 1. A monopolistically competitive market is described as one in which there are A) a few firms producing an identical product.
More informationAgenda. Productivity, Output, and Employment, Part 1. The Production Function. The Production Function. The Production Function. The Demand for Labor
Agenda Productivity, Output, and Employment, Part 1 31 32 A production function shows how businesses transform factors of production into output of goods and services through the applications of technology.
More informationCASE FAIR OSTER PEARSON
CASE FAIR OSTER PEARSON Publishing as Prentice Hall PRINCIPLES OF MICROECONOMICS E L E V E N T H E D I T I O N Prepared by: Fernando Quijano w/shelly Tefft 2of 35 Input Demand: The Labor and Land Markets
More informationLECTURE #13: MICROECONOMICS CHAPTER 15
LECTURE #13: MICROECONOMICS CHAPTER 15 I. WHY MONOPOLIES ARISE A. Competitive firms are price takers; a Monopoly firm is a price maker B. Monopoly: a firm that is the sole seller of a product without close
More informationTHE LABOUR MARKET ECONOMY LEVEL OCCUPATION LEVEL INDIVIDUAL FIRM
THE LABOUR MARKET ECONOMY LEVEL OCCUPATION LEVEL INDIVIDUAL FIRM DEMAND FOR LABOUR IS DERIVED DEMAND Derived demand: occurs when the demand for a factor of production arises from the demand for the output
More informationShortRun Production and Costs
ShortRun Production and Costs The purpose of this section is to discuss the underlying work of firms in the shortrun the production of goods and services. Why is understanding production important to
More informationMULTIPLE CHOICE QUESTIONS
MULTIPLE CHOICE QUESTIONS 1. Refer to Figure 1. After a tax is imposed on diet soda, the price of a can of diet soda increases from $.50 to $.55. The area that represents the excess burden is (a) ABCE.
More informationPure Competition Pure Monopoly Monopolistic Competition Oligopoly
Pure Competition Pure Monopoly Monopolistic Competition Oligopoly Characteristics: Rare in the real world But helps analyze industries which are similar to pure competition Many sellers means that no one
More informationDeriving Demand Functions  Examples 1
Deriving Demand Functions  Examples 1 What follows are some examples of different preference relations and their respective demand functions. In all the following examples, assume we have two goods x
More informationPreTest Chapter 26 ed17
PreTest Chapter 26 ed17 Multiple Choice Questions 1. Which of the following describes a purely competitive labor market? A. MRP < Wage Rate. B. MRP > Wage Rate. C. Wage Rate = MRC. D. Wage Rate < MRC.
More informationMidterm Exam #1  Answers
Page 1 of 9 Midterm Exam #1 Answers Instructions: Answer all questions directly on these sheets. Points for each part of each question are indicated, and there are 1 points total. Budget your time. 1.
More informationManagerial Economics & Business Strategy Chapter 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets
Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets I. Perfect Competition Overview Characteristics and profit outlook. Effect
More informationPerfect Competition. We will use the second concept in here and your text, chapter 11.
Perfect Competition There are two concepts of competition normally used in Economics: 1. The manner or process in which firms compete with one another for market share. 2. A description of a particular
More informationUnit 5.3: Perfect Competition
Unit 5.3: Perfect Competition Michael Malcolm June 18, 2011 1 Market Structures Economists usually talk about four market structures. From most competitive to least competitive, they are: perfect competition,
More informationProblems on Perfect Competition & Monopoly
Problems on Perfect Competition & Monopoly 1. True and False questions. Indicate whether each of the following statements is true or false and why. (a) In longrun equilibrium, every firm in a perfectly
More informationSolution to Selected Questions: CHAPTER 12 MONOPOLISTIC COMPETITION AND OLIGOPOLY
Chulalongkorn University: BBA International Program, Faculty of Commerce and Accountancy 900 (Section ) Chairat Aemkulwat Economics I: Microeconomics Spring 05 Solution to Selected Questions: CHAPTER MONOPOLISTIC
More informationFirm Supply: Market Structure & Perfect Competition
Firm Supply: Market Structure & Perfect Competition Firm Supply How does a firm decide how much to supply at a given price? This depends upon the firm s goals; technology; market environment; and competitors
More informationPreTest Chapter 22 ed17
PreTest Chapter 22 ed17 Multiple Choice Questions 1. Refer to the above diagram. At the profitmaximizing level of output, total revenue will be: A. NM times 0M. B. 0AJE. C. 0EGC. D. 0EHB. 2. For a pure
More informationSummary Chapter 12 Monopoly
Summary Chapter 12 Monopoly Defining Monopoly  A monopoly is a market structure in which a single seller of a product with no close substitutes serves the entire market  One practical measure for deciding
More informationPractice Questions Week 8 Day 1
Practice Questions Week 8 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants
More informationAns homework 5 EE 311
Ans homework 5 EE 311 1. Suppose that Intel has a monopoly in the market for microprocessors in Brazil. During the year 2005, it faces a market demand curve given by P = 9  Q, where Q is millions of microprocessors
More informationLearning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to:
Learning Objectives After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Discuss three characteristics of perfectly competitive
More informationTutorial 1. Monopoly and Price Discrimination.
Tutorial 1. Monopoly and Price Discrimination. Question 1. Suppose there are 10 students in a class and teacher brings a bag with 10 candies. Assume all students have identical preferences and have positive
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.
Principles of Microeconomics Fall 2007, Quiz #6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) A monopoly is
More informationMODULE 70: THE MARKETS FOR
MODULE 70: THE MARKETS FOR LAND & CAPITAL SCHMIDTY SCHOOL OF ECONOMICS THE PURPOSE OF THIS MODULE IS TO SHOW HOW WE CAN USE SUPPLY AND DEMAND TO MODEL THE MARKETS FOR THE LAND AND CAPITAL INPUTS. Learning
More informationMicroeconomics Instructor Miller Perfect Competition Practice Problems
Microeconomics Instructor Miller Perfect Competition Practice Problems 1. Perfect competition is characterized by all of the following except A) heavy advertising by individual sellers. B) homogeneous
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapter 11 Perfect Competition  Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Perfect competition is an industry with A) a
More informationGood Luck writing the Mock Exam!!
PASS MOCK EXAM FOR PRACTICE ONLY Course: ECON 1000 B Facilitator: Ben Dates and locations of mock exam take up: FRIDAY DECEMBER 11: 10 12 ME 3380 1 3 ME 3380 It is most beneficial to you to write this
More information12.1 Why and How Firms Price Discriminate
Chapter 12 Pricing and Advertising 12.1 Why and How Firms Price Why does Disneyworld charge local residents $369 for an annual pass and outoftowners $489? Why are airline fares less if you book in advance?
More informationOnline Review Copy. AP Micro Chapter 8 Test. Multiple Choice Identify the choice that best completes the statement or answers the question.
AP Micro Chapter 8 Test Multiple Choice Identify the choice that best completes the statement or answers the question. 1. There would be some control over price within rather narrow limits in which market
More informationOligopoly. What Is Oligopoly? What is Oligopoly?
CHAPTER 13B After studying this chapter you will be able to Oligopoly Define and identify oligopoly Explain two traditional oligopoly models Use game theory to explain how price and output are determined
More informationLabor Economics. Unit 3. Labor Demand
20161 Labor Economics Unit 3. Labor Demand Prof. Minjung, Kim Department of Economics Wonkwang University Textbook : Modern Labor Economics: Theory and Public policy written by Ronald G. Ehrenberg This
More informationUnit 7. Firm behaviour and market structure: monopoly
Unit 7. Firm behaviour and market structure: monopoly Learning objectives: to identify and examine the sources of monopoly power; to understand the relationship between a monopolist s demand curve and
More informationSecond Degree Price Discrimination  Examples 1
Second Degree Discrimination  Examples 1 Second Degree Discrimination and Tying Tying is when firms link the sale of two individual products. One classic example of tying is printers and ink refills.
More informationDEMAND AND SUPPLY IN FACTOR MARKETS
Chapter 14 DEMAND AND SUPPLY IN FACTOR MARKETS Key Concepts Prices and Incomes in Competitive Factor Markets Factors of production (labor, capital, land, and entrepreneurship) are used to produce output.
More information5. The supply curve of a monopolist is A) upward sloping. B) nonexistent. C) perfectly inelastic. D) horizontal.
Chapter 12 monopoly 1. A monopoly firm is different from a competitive firm in that A) there are many substitutes for a monopolist's product but there are no substitutes for a competitive firm's product.
More informationEconomics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013
Economics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on
More informationRutgers University Economics 102: Introductory Microeconomics Professor Altshuler Fall 2003
Rutgers University Economics 102: Introductory Microeconomics Professor Altshuler Fall 2003 Answers to Problem Set 10 Chapter 15 1. The following table shows revenue, costs, and profits, where quantities
More informationSample Exam According to Figure 6.1, A. Soup is a normal good C. Soup is a Giffen good B. Soup is an inferior good D. Bread is an inferior good
Sample Exam 2 1. Suppose the base year for a Lespeyres index is 2001. The value of the index is 1.3 in 2004 and 1.6 in 2006. By how much did the cost of the bundle increase between 2004 and 2006? A..3%
More informationA Dynamic Analysis of Price Determination Under Joint Profit Maximization in Bilateral Monopoly
A Dynamic Analysis of Price Determination Under Joint Profit Maximization in Bilateral Monopoly by Stephen Devadoss Department of Agricultural Economics University of Idaho Moscow, Idaho 838442334 Phone:
More informationAP Microeconomics 2003 Scoring Guidelines
AP Microeconomics 2003 Scoring Guidelines The materials included in these files are intended for use by AP teachers for course and exam preparation; permission for any other use must be sought from the
More informationg. Less h. More i. Price j. Price k. Purchase a product l. Quantity supplied
Section 1 Word list a. Ability & willingness b. Chart form c. Decrease d. Demand e. Graph form f. Increase g. Less h. More i. Price j. Price k. Purchase a product l. Quantity supplied m. Responsiveness
More informationPART 1: MULTIPLE CHOICE
ECN 201, Winter 1999 NAME: Prof. Bruce Blonigen SS#: MIDTERM 2  Version A Tuesday, February 23 **************************************************************************** Directions: This test is comprised
More informationA. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost.
1. The supply of gasoline changes, causing the price of gasoline to change. The resulting movement from one point to another along the demand curve for gasoline is called A. a change in demand. B. a change
More informationMonopoly: static and dynamic efficiency M.Motta, Competition Policy: Theory and Practice, Cambridge University Press, 2004; ch. 2
Monopoly: static and dynamic efficiency M.Motta, Competition Policy: Theory and Practice, Cambridge University Press, 2004; ch. 2 Economics of Competition and Regulation 2015 Maria Rosa Battaggion Perfect
More informationBertrand with complements
Microeconomics, 2 nd Edition David Besanko and Ron Braeutigam Chapter 13: Market Structure and Competition Prepared by Katharine Rockett Dieter Balkenborg Todd Kaplan Miguel Fonseca Bertrand with complements
More informationEssential Graphs for Microeconomics
Essential Graphs for Microeconomics Basic Economic Concepts roduction ossibilities Curve Good X A F B C W Concepts: oints on the curveefficient oints inside the curveinefficient oints outside the curveunattainable
More informationThe Revenue of a Competitive In perfect competition, average revenue equals the price of the good. Total revenue Average Revenue = = The Revenue of a
In this chapter, look for the answers to these questions: What is a perfectly competitive market? What is marginal revenue? How is it related to total and average revenue? How does a competitive firm determine
More informationMonopolistic Competition 13A CHAPTER
Monopolistic Competition 13A CHAPTER After studying this chapter you will be able to Define and identify monopolistic competition Explain how output and price are determined in a monopolistically competitive
More informationUNIT 6. Pricing under different market structures. Perfect Competition
UNIT 6 ricing under different market structures erfect Competition Market Structure erfect Competition ure Monopoly Monopolistic Competition Oligopoly Duopoly Monopoly The further right on the scale, the
More informationECON 103, 20082 ANSWERS TO HOME WORK ASSIGNMENTS
ECON 103, 20082 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of June 23 Chapter 8 WRITE [4] Use the demand schedule that follows to calculate total revenue and marginal revenue at each quantity. Plot
More informationChapter 8. Competitive Firms and Markets
Chapter 8. Competitive Firms and Markets We have learned the production function and cost function, the question now is: how much to produce such that firm can maximize his profit? To solve this question,
More information