1 of 25 5/1/2014 4:28 PM

Size: px
Start display at page:

Download "1 of 25 5/1/2014 4:28 PM"

Transcription

1 1 of 25 5/1/2014 4:28 PM Any point on the budget constraint Gives the consumer the highest level of utility. Represent a combination of two goods that are affordable. Represents combinations of two goods that yield the same utility. Reflects the price of one good divided by the price of another good. Any point on the budget constraint line represents a combination of the two goods that are affordable. Any point beyond the budget constraint line is unaffordable. Learning Objective: How consumers maximize utility. The slope of the budget constraint, when a consumer has reached optimal consumption of two goods, is equal to the Marginal rate of substitution. Cross-price elasticity of the two goods. Total utility for the two goods. Marginal rate of indifference. The marginal rate of substitution is the rate at which a consumer is willing to exchange one good for another the slope of the indifference curve. Because the optimal consumption combination is at the point where the budget line is tangent to (just touches) an indifference curve, the slopes will be equal at that point. Learning Objective: Why demand curves are downward sloping.

2 2 of 25 5/1/2014 4:28 PM Which of the following is used to depict all combinations of goods that are affordable with a given income and given prices? An indifference curve. An indifference map. A demand curve. A budget constraint. Consumption possibilities are limited by available income. The budget constraint illustrates this limitation. Learning Objective: Why demand curves are downward sloping. Rosa is willing to pay $200 for the iphone, but the actual price is $400. This means Rosa will enjoy a consumer surplus of $200 if she buys the iphone. Rosa will not enjoy any consumer surplus from purchasing the iphone. Rosa will buy this product. The iphone is overpriced. Rosa will not purchase the iphone because she is not willing to pay the $400 price. If she were willing to pay $500 for the iphone, she would buy it and enjoy $100 of consumer surplus. Learning Objective: The nature and source of consumer surplus. The of the demand curve corresponds to the idea that the marginal utility for the first few goods is. top; lower bottom; lower top; higher bottom; higher The first few goods consumed have a higher marginal utility. This corresponds to the top of the demand curve, where consumers are willing to pay a higher price if a good has a higher marginal utility. Learning Objective: Why demand curves are downward sloping.

3 3 of 25 5/1/2014 4:28 PM The law of diminishing marginal utility suggests that People are willing to buy additional quantities of a good only if its price falls. People will substitute lower-priced goods for more expensive goods, ceteris paribus. Price and quantity demanded are directly related. As marginal utility decreases, the willingness to pay increases. The more marginal utility a product delivers, the more a consumer will be willing to pay for it. Marginal utility diminishes as increasing quantities of a product are consumed; therefore consumers are willing to pay progressively less for additional quantities of a product. Learning Objective: Why demand curves are downward sloping.

4 4 of 25 5/1/2014 4:28 PM Refer to Figure The total consumer surplus in this market is equal to $950. $900. $850. $800. The total consumer surplus is the total of the differences between each individual's maximum willingness to pay and the actual price. The total for the three consumers is ($600 - $100) + ($400 - $100) + ($200 - $100) = $900. Learning Objective: The nature and source of consumer surplus.

5 5 of 25 5/1/2014 4:28 PM If a successful advertising campaign increases brand loyalty, the Supply of the advertised good will become less elastic. Demand for the advertised good will become less elastic. Supply of substitutes for the advertised good will increase. Total level of consumption will decrease. Increasing brand loyalty will reduce consumer responsiveness to price increases, which allows a firm to increase prices and revenues. Learning Objective: How consumers maximize utility.

6 6 of 25 5/1/2014 4:28 PM Complete Table 19.2 below: In Table 19.2, the total utility when two units are consumed is The total utility when one unit is consumed is 15 and the second unit adds 9 additional utils, which causes total utility to increase to 24. Learning Objective: How consumers maximize utility.

7 7 of 25 5/1/2014 4:28 PM The four determinants of demand that are held constant when we consider a movement along a demand curve include all of the following except Price. Income. Tastes. Availability and price of substitute goods. A movement along a demand curve corresponds to a change in price only, holding income, tastes, and the availability of substitutes constant. Learning Objective: Why demand curves are downward sloping. Sociopsychiatric explanations of consumer behavior include the Desire for ego and status. Level of income. Level of wealth. Prices of other goods. Sociologists offer explanations for our consumption behavior not just to "keep up with the Joneses" but to surpass them. Learning Objective: Why demand curves are downward sloping. Total utility is The additional utility from consuming one more unit of a good. The sum of the marginal utilities from the consumption of good. A function that always falls as a buyer enjoys more units of a good. How much utility a seller gets from producing a good. Total utility can be calculated by summing up all of the marginal utilities that the buyer has enjoyed from each subsequent unit of a good. Learning Objective: Why demand curves are downward sloping.

8 8 of 25 5/1/2014 4:28 PM The point where the budget constraint and an indifference curve are tangent Represents maximum total revenue. Indicates the optimal level of production. Represents the optimal consumption point. Indicates profit maximization. The objective is to reach the highest indifference curve that is compatible with our budget constraint. We can afford only those consumption combinations that are on or inside the budget line. Therefore, the optimal consumption combination the one that maximizes the utility of spendable income lies at the point where the budget line is tangent to (just touches) an indifference curve. Learning Objective: Why demand curves are downward sloping. Which of the following is most likely an inferior good? Rolex watches. Nike running shoes. Generic canned food. A custom-built mansion. With low incomes, people buy discount clothes, used textbooks, and generic brand items, and they eat at home. Learning Objective: What the income elasticity of demand tells us. Which of the following products will have more inelastic demand? New cars. Fresh flowers. Fast food. Medicines. Demand is more inelastic if there are fewer substitute goods; medicines are necessities and will have more inelastic demand. Learning Objective: How to compute price elasticity of demand.

9 9 of 25 5/1/2014 4:28 PM In Figure 20.1, at what price is the elasticity of demand unitary? $40. $100. $160. $200. At a price levels less than $100, a decrease in the price causes revenue to decrease, which implies that demand is inelastic. At price levels greater than $100, a decrease in the price causes revenue to increase, which implies that demand is elastic. Therefore, demand must be unitary elastic at a price of $100. Learning Objective: The relationships between price changes; price elasticity; and total revenue.

10 10 of 25 5/1/2014 4:28 PM Sam owns a taco restaurant, and he conducted a consumer survey that indicates that the price elasticity of demand for his restaurant is 3.5. You would advise Sam to Raise his price to increase revenues. Keep his price the same to maximize revenues. Lower his price to increase revenue. Offer more high-priced products. If the elasticity of demand is 3.5 (in absolute value), it indicates that demand is very elastic. Consumers have a lot of substitutes available. Therefore Sam should lower his price to increase total revenue because the quantity demanded will increase. Learning Objective: The relationships between price changes; price elasticity; and total revenue. If incomes fall by 5 percent and the quantity demanded for new cars falls by 10 percent, New cars are a normal good, and the income elasticity is +.5. New cars are an inferior good, and the income elasticity is New cars are a normal good, and the income elasticity is New cars are an inferior good, and the income elasticity is The formula for income elasticity is the percentage change in quantity demanded for new cars divided by the percentage change in income. So 10%/5%= +2, which indicates that new cars are a normal good; the demand for them rises when incomes increase. Learning Objective: What the cross-price elasticity of demand measures. If demand is perfectly elastic, The demand curve is vertical. The demand curve is very steep. The demand curve is horizontal. The demand curve has a zero slope. A perfectly elastic demand curve is horizontal, which means that any increase in price causes quantity demanded to fall to zero. Learning Objective: How to compute price elasticity of demand.

11 11 of 25 5/1/2014 4:28 PM Maximum total revenue occurs when Total revenue is The absolute value of the price elasticity of demand is 1.0. Price multiplied by quantity is 1.0. The absolute value of the price elasticity of demand is 100. Higher prices result in higher total revenue only if demand is inelastic. If demand is elastic, lower prices result in higher revenues. Therefore, to maximize revenue, a firm should charge the price at the point where elasticity goes from elastic to inelastic in other words is equal to 1. Learning Objective: The relationships between price changes; price elasticity; and total revenue. Technically the elasticity number is negative because When price falls quantity demanded will rise, but for simplicity economists take the absolute value of the elasticity number. When price falls quantity demanded will fall, but for simplicity economists take the absolute value of the elasticity number. When price rises quantity demanded will rise, but for simplicity economists take the absolute value of the elasticity number. The demand curve is always upward-sloping. If there is a percentage change increase in price, the percentage change in quantity demanded will fall, so the elasticity number is always negative. For simplicity, economists take the absolute value of the elasticity number (they drop the negative sign). Learning Objective: How to compute price elasticity of demand. When demand is price-inelastic, ceteris paribus, an increase in Price leads to lower total revenue. Total revenue means quantity rises. Total revenue indicates a reduction in price. Price leads to greater total revenue. Higher prices result in higher total revenue only if the price elasticity of demand is inelastic (price elasticity is less than 1). Learning Objective: How to compute price elasticity of demand.

12 12 of 25 5/1/2014 4:28 PM When demand is inelastic The percentage change in price is greater than the percentage change in quantity demanded. Buyers are very sensitive to changes in price. The product in demand has many substitute goods. The percentage change in quantity demanded is greater than the percentage change in price. When demand is inelastic, the percentage change in price is greater than the percentage change in quantity demanded. Learning Objective: How to compute price elasticity of demand.

13 13 of 25 5/1/2014 4:28 PM What is the marginal cost of the 120 th unit of output in Figure 21.2? $1.20. $ $ $ According to the graph, marginal cost is equal to $288 at the quantity 120. Learning Objective: How the various measures of cost relate to each other.

14 14 of 25 5/1/2014 4:28 PM When the size of a factory (and all its associated inputs) doubles and, as a result, output more than doubles, The law of diminishing returns must not apply in the smaller factory. Economies of scale must exist. The short-run ATC curve must be declining. Marginal costs must be declining. Economies of scale (or increasing returns to scale) exist when all inputs double but output more than doubles, which implies that the average costs have decreased. Learning Objective: What (dis)economies of scale are. If a fifth unit of labor was added to Table 21.1, its MPP would most likely be Zero. 7. Less than 7. Greater than 7. The MPP of the fifth worker would likely be less than 7 because diminishing marginal returns have already set in and the MPP of the fourth worker is 7. Learning Objective: How the various measures of cost relate to each other.

15 15 of 25 5/1/2014 4:28 PM Complete Table 21.3 below: What is the marginal physical product of the second unit of labor in Table 21.3? The marginal physical product is the difference in total output associated with one additional unit of input, which is 33 (66-30). Learning Objective: How the various measures of cost relate to each other.

16 16 of 25 5/1/2014 4:28 PM Which of the following costs do not change when output changes in the short run? Average variable costs. Variable costs. Average fixed costs. Fixed costs. Fixed costs such as the cost of the basic plants and equipment do not vary with the rate of output. Learning Objective: How the various measures of cost relate to each other. The marginal cost curve intersects the minimum of the curve representing TC. ATC. AFC. MPP. The MC curve will always intersect both the ATC and AVC curves at their lowest. Learning Objective: How the various measures of cost relate to each other. Average total cost is equal to Total cost divided by fixed cost. Total cost multiplied by quantity. The sum of average variable cost and marginal cost. Total cost divided by quantity produced. Average total cost or unit cost per item is total cost divided by the quantity produced. Learning Objective: How the various measures of cost relate to each other.

17 17 of 25 5/1/2014 4:28 PM Average total cost is important to a business because It tells the firm what the profit per unit produced is. It always declines as more output is produced. It tells the firm what its fixed costs are. It is an indicator of the production function. The initial dominance of falling AFC, combined with the later resurgence of rising AVC (due to increasing MC), is what gives the ATC curve its characteristic U shape. Learning Objective: How the various measures of cost relate to each other.

18 18 of 25 5/1/2014 4:28 PM Refer to Figure The vertical difference between the total cost curve and the total fixed cost curve represents Total variable costs. Total marginal costs. Average fixed costs. Average variable costs. Total cost minus total fixed cost is total variable cost. Learning Objective: How the various measures of cost relate to each other.

19 19 of 25 5/1/2014 4:28 PM Normal profit implies that Economic profit must be positive. Economic profit must be negative. The factors employed are earning as much as they could in the best alternative employment. Firms will expand their scale of production. Normal profit is the profit made that covers all explicit costs and implicit costs but does not include any profit above and beyond what could have made with those resources used elsewhere. Learning Objective: How profits are computed. If a perfectly competitive firm wanted to maximize its total revenues, it would produce The output where MC equals price. As much as it is capable of producing. The output where the ATC curve is at a minimum. The output where the marginal cost curve is at a minimum. If a competitive firm wanted to maximize its total revenue, it would always produce at capacity because the individual firm is so small relative to the market that it will not impact market price. Learning Objective: How profits are computed. A perfectly competitive firm will maximize profits by choosing an output level where Price is greater than marginal cost. Price equals marginal cost. Price equals total cost. Price is greater than total cost. A competitive firm maximizes total profit at the output rate where MC is equal to price (which is the same as MR in perfect competition). If MC is less than price, the firm can increase profits by producing more. If MC exceeds price, the firm should reduce output. Learning Objective: The characteristics of perfectly competitive firms.

20 20 of 25 5/1/2014 4:28 PM Which of the following is the best explanation for why individuals own small businesses? Because they cannot earn a living working for corporate America. To provide a product consumers want. The expectation of profit. To gain experience for their next job. The basic incentive for producing goods and services is the expectation of profit. Learning Objective: How profits are computed. For the perfectly competitive firm, the marginal revenue is always Increasing. Constant. Equal to average total cost. Decreasing. Because a competitive firm can sell all its output at the prevailing price, the marginal revenue will always be equal to price and the MR curve will be equal to the demand curve. Learning Objective: The characteristics of perfectly competitive firms. Which of the following affects the ATC curve for a firm but not the MC curve? A change in property taxes. A change in payroll taxes. A change in profit taxes. A change in the price of the good. Fixed costs such as the cost of the basic plants and equipment and property taxes do not vary with the rate of output and therefore do not affect marginal costs but do affect the ATC. Learning Objective: What shapes or shifts a firm s supply curve.

21 21 of 25 5/1/2014 4:28 PM An investment decision involves choosing A rate of output and is a short-run decision. A rate of output and is a long-run decision. The amount of plants and equipment and is a short-run decision. The amount of plants and equipment and is a long-run decision. An investment decision is the long-run decision to build, buy, or lease plants and equipment, or to enter or exit an industry. Learning Objective: The difference between production and investment decisions. If price is greater than marginal cost, a perfectly competitive firm should increase output because Marginal costs are increasing. Additional units of output will add to the firm's profits (or reduce losses). The price it receives for its product is increasing. Total revenues would increase. If an extra unit brings in more revenue than it costs to produce, it would add to total profit. Hence a competitive firm should expand the rate of production whenever price exceeds MC. Learning Objective: The characteristics of perfectly competitive firms. Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials, $30,000 in new equipment, $20,000 in rented property, and $35,000 in interest costs on capital. The owner/manager does not choose to pay himself, but he could receive income of $90,000 by working elsewhere. The firm earns revenues of $360,000 per year. What are the annual economic costs for the firm described above? $450,000. $120,000. $90,000. $360,000. Economic costs include both explicit and implicit costs, totaling $450,000. Learning Objective: How profits are computed.

22 22 of 25 5/1/2014 4:28 PM Refer to Figure 22.3 At quantity level B The company is maximizing profit. Marginal cost is greater than marginal revenue, so it should cut production. The company is minimizing loss. Marginal revenue is greater than marginal cost, so the firm should expand production. Profit maximization occurs where marginal revenue equals marginal cost. At quantity B, marginal revenue is greater than marginal cost, which tells the firm that it should expand production. Learning Objective: How a competitive firm maximizes profit.

23 23 of 25 5/1/2014 4:28 PM In order to sell additional units of their products, competitive firms must Increase their advertising. Lower their price. Cut their expenses. Increase output. An individual firm in a perfectly competitive market is so small relative to the entire market that it confronts a horizontal demand curve (perfectly elastic demand) for its output. It does not need to lower its price to sell more; it can sell as much as it can produce at the market price. Learning Objective: How profits are computed.

24 24 of 25 5/1/2014 4:28 PM Refer to Figure 22.3 for a perfectly competitive firm. At a market price of $23, total profits are maximized at an output of Total profit is maximized at the output level where price is equal to MC, 39. Learning Objective: How a competitive firm maximizes profit.

25 25 of 25 5/1/2014 4:28 PM Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials, $30,000 in new equipment, $20,000 in rented property, and $35,000 in interest costs on capital. The owner/manager does not choose to pay himself, but he could receive income of $90,000 by working elsewhere. The firm earns revenues of $360,000 per year. What are the annual explicit costs for the firm described above? $450,000. $160,000. $90,000. $360,000. The explicit costs include wages and salaries, raw materials, equipment, rent, and interests for a total of $360,000. Learning Objective: How profits are computed.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE 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 information

http://ezto.mhecloud.mcgraw-hill.com/hm.tpx

http://ezto.mhecloud.mcgraw-hill.com/hm.tpx Page 1 of 17 1. Assume the price elasticity of demand for U.S. Frisbee Co. Frisbees is 0.5. If the company increases the price of each Frisbee from $12 to $16, the number of Frisbees demanded will Decrease

More information

Chapter 22 The Cost of Production Extra Multiple Choice Questions for Review

Chapter 22 The Cost of Production Extra Multiple Choice Questions for Review Chapter 22 The Cost of Production Extra Multiple Choice Questions for Review 1. Implicit costs are: A) equal to total fixed costs. B) comprised entirely of variable costs. C) "payments" for self-employed

More information

Practice Questions Week 8 Day 1

Practice 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 information

Economics 100 Exam 2

Economics 100 Exam 2 Name: 1. During the long run: Economics 100 Exam 2 A. Output is limited because of the law of diminishing returns B. The scale of operations cannot be changed C. The firm must decide how to use the current

More information

11 PERFECT COMPETITION. Chapter. Competition

11 PERFECT COMPETITION. Chapter. Competition Chapter 11 PERFECT COMPETITION Competition Topic: Perfect Competition 1) Perfect competition is an industry with A) a few firms producing identical goods B) a few firms producing goods that differ somewhat

More information

Chapter 13 Perfect Competition

Chapter 13 Perfect Competition Chapter 13 Perfect Competition 13.1 A Firm's Profit-Maximizing Choices 1) What is the difference between perfect competition and monopolistic competition? A) Perfect competition has a large number of small

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE 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 information

Chapter. Perfect Competition CHAPTER IN PERSPECTIVE

Chapter. Perfect Competition CHAPTER IN PERSPECTIVE Perfect Competition Chapter 10 CHAPTER IN PERSPECTIVE In Chapter 10 we study perfect competition, the market that arises when the demand for a product is large relative to the output of a single producer.

More information

An increase in the number of students attending college. shifts to the left. An increase in the wage rate of refinery workers.

An increase in the number of students attending college. shifts to the left. An increase in the wage rate of refinery workers. 1. Which of the following would shift the demand curve for new textbooks to the right? a. A fall in the price of paper used in publishing texts. b. A fall in the price of equivalent used text books. c.

More information

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS ECON 103, 2008-2 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 information

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:

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: 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 information

Chapter 6 Competitive Markets

Chapter 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 information

Technology, Production, and Costs

Technology, Production, and Costs Chapter 10 Technology, Production, and Costs 10.1 Technology: An Economic Definition 10.1 LEARNING OBJECTIVE Learning Objective 1 Define technology and give examples of technological change. A firm s technology

More information

N. Gregory Mankiw Principles of Economics. Chapter 13. THE COSTS OF PRODUCTION

N. Gregory Mankiw Principles of Economics. Chapter 13. THE COSTS OF PRODUCTION N. Gregory Mankiw Principles of Economics Chapter 13. THE COSTS OF PRODUCTION Solutions to Problems and Applications 1. a. opportunity cost; b. average total cost; c. fixed cost; d. variable cost; e. total

More information

PROBLEM SET#3 PART I: MULTIPLE CHOICE

PROBLEM SET#3 PART I: MULTIPLE CHOICE 1 PROBLEM SET#3 PART I: MULTIPLE CHOICE 1. In general, elasticity is a measure of a. the extent to which advances in technology are adopted by producers. b. the extent to which a market is competitive.

More information

Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9

Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9 Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9 print name on the line above as your signature INSTRUCTIONS: 1. This Exam #2 must be completed within the allocated time (i.e., between

More information

Short-Run Production and Costs

Short-Run Production and Costs Short-Run Production and Costs The purpose of this section is to discuss the underlying work of firms in the short-run the production of goods and services. Why is understanding production important to

More information

Module 2 Lecture 5 Topics

Module 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 information

Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!!

Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!! Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!! For more, please visit: http://courses.missouristate.edu/reedolsen/courses/eco165/qeq.htm Market Equilibrium and Applications

More information

Pre-Test Chapter 20 ed17

Pre-Test Chapter 20 ed17 Pre-Test Chapter 20 ed17 Multiple Choice Questions 1. In the above diagram it is assumed that: A. some costs are fixed and other costs are variable. B. all costs are variable. C. the law of diminishing

More information

Number of Workers Number of Chairs 1 10 2 18 3 24 4 28 5 30 6 28 7 25

Number of Workers Number of Chairs 1 10 2 18 3 24 4 28 5 30 6 28 7 25 Intermediate Microeconomics Economics 435/735 Fall 0 Answers for Practice Problem Set, Chapters 6-8 Chapter 6. Suppose a chair manufacturer is producing in the short run (with its existing plant and euipment).

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. Principles of Microeconomics, Quiz #5 Fall 2007 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) Perfect competition

More information

Microeconomics Instructor Miller Practice Problems Monopolistic Competition

Microeconomics 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 information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

MULTIPLE 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 information

Chapter 8. Competitive Firms and Markets

Chapter 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

D) Marginal revenue is the rate at which total revenue changes with respect to changes in output.

D) Marginal revenue is the rate at which total revenue changes with respect to changes in output. Ch. 9 1. Which of the following is not an assumption of a perfectly competitive market? A) Fragmented industry B) Differentiated product C) Perfect information D) Equal access to resources 2. Which of

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE 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 information

Market Structure: Perfect Competition and Monopoly

Market 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 information

Miami Dade College ECO 2023 Principles of Microeconomics Spring 2015 Practice Test #2

Miami Dade College ECO 2023 Principles of Microeconomics Spring 2015 Practice Test #2 Miami Dade College ECO 2023 Principles of Microeconomics Spring 2015 Practice Test #2 1. If a product's price rises by 6%, and its quantity demanded falls by 8%, then we can say that demand for this product

More information

Pricing and Output Decisions: i Perfect. Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young

Pricing 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 information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If a producing firm does not have enough time to expand its plant capacity, it is: A)

More information

MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 3 rd Edition

MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 3 rd Edition Chapter 16 MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 3 rd Edition Chapter Summary This chapter presents the traditional, idealized model of perfect competition. In it, you will

More information

Chapter 8 Production Technology and Costs 8.1 Economic Costs and Economic Profit

Chapter 8 Production Technology and Costs 8.1 Economic Costs and Economic Profit Chapter 8 Production Technology and Costs 8.1 Economic Costs and Economic Profit 1) Accountants include costs as part of a firm's costs, while economists include costs. A) explicit; no explicit B) implicit;

More information

CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION

CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION Chapter in a Nutshell Now that we understand the characteristics of different market structures, we ask the question

More information

Cosumnes River College Principles of Microeconomics Problem Set 6 Due Tuesday, March 24, 2015

Cosumnes River College Principles of Microeconomics Problem Set 6 Due Tuesday, March 24, 2015 Name: Solutions Cosumnes River College Principles of Microeconomics Problem Set 6 Due Tuesday, March 24, 2015 Spring 2015 Prof. Dowell Instructions: Write the answers clearly and concisely on these sheets

More information

Chapter 12. The Costs of Produc4on

Chapter 12. The Costs of Produc4on Chapter 12 The Costs of Produc4on Copyright 214 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. What will you learn

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Practice for Perfect Competition Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following is a defining characteristic of a

More information

Chapter 6. Elasticity: The Responsiveness of Demand and Supply

Chapter 6. Elasticity: The Responsiveness of Demand and Supply Chapter 6. Elasticity: The Responsiveness of Demand and Supply Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 202 504 Principles of Microeconomics Elasticity Demand curve:

More information

Recitation #5 Week 02/08/2009 to 02/14/2009. Chapter 6 - Elasticity

Recitation #5 Week 02/08/2009 to 02/14/2009. Chapter 6 - Elasticity Recitation #5 Week 02/08/2009 to 02/14/2009 Chapter 6 - Elasticity 1. This problem explores the midpoint method of calculating percentages and why this method is the preferred method when calculating price

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Firms that survive in the long run are usually those that A) remain small. B) strive for the largest

More information

Problems on Perfect Competition & Monopoly

Problems 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 long-run equilibrium, every firm in a perfectly

More information

Ch. 6 Lecture Notes I. Price Elasticity of Demand 4. CONSIDER THIS A Bit of a Stretch

Ch. 6 Lecture Notes I. Price Elasticity of Demand 4. CONSIDER THIS A Bit of a Stretch Ch. 6 Lecture Notes I. Price Elasticity of Demand A. Law of demand tells us that consumers will respond to a price decrease by buying more of a product (other things remaining constant), but it does not

More information

Economics 10: Problem Set 3 (With Answers)

Economics 10: Problem Set 3 (With Answers) Economics 1: Problem Set 3 (With Answers) 1. Assume you own a bookstore that has the following cost and revenue information for last year: - gross revenue from sales $1, - cost of inventory 4, - wages

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chapter 12 Monopoly - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Unregulated monopolies A) cannot change the market quantity.

More information

UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES. Monopolistic Competition

UNIT 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 information

PART A: For each worker, determine that worker's marginal product of labor.

PART 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 information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Multiple choice review questions for Midterm 2 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A consumption point inside the budget line A) is

More information

C H A P T E R 4: The Price System, Demand and Supply, and Elas ticity. The Price System: Rationing and Allocating Resources

C H A P T E R 4: The Price System, Demand and Supply, and Elas ticity. The Price System: Rationing and Allocating Resources C H A P T E R 4 The Price System, Demand and Supply, and Elasticity Prepared by: Fernando Quijano and Yvonn Quijano Karl Case, Ray Fair The Price System: Rationing and Allocating Resources The market system,

More information

Practice Questions Week 3 Day 1

Practice Questions Week 3 Day 1 Practice Questions Week 3 Day 1 Figure 4-1 Quantity Demanded $ 2 18 3 $ 4 14 4 $ 6 10 5 $ 8 6 6 $10 2 8 Price Per Pair Quantity Supplied 1. Figure 4-1 shows the supply and demand for socks. If a price

More information

CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY

CHAPTER 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 information

Managerial Economics Prof. Trupti Mishra S.J.M School of Management Indian Institute of Technology, Bombay. Lecture - 10 Theory of Demand (Contd )

Managerial Economics Prof. Trupti Mishra S.J.M School of Management Indian Institute of Technology, Bombay. Lecture - 10 Theory of Demand (Contd ) Managerial Economics Prof. Trupti Mishra S.J.M School of Management Indian Institute of Technology, Bombay Lecture - 10 Theory of Demand (Contd ) In continuation to our last session on theory of demand

More information

ELASTICITY AND ITS APPLICATION

ELASTICITY AND ITS APPLICATION 5 ELASTICITY AND ITS APPLICATION CHAPTER OUTLINE: I. The Elasticity of Demand A. Definition of elasticity: a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants.

More information

Monopoly. Chapter 13. Monopoly and How It Arises. Single-price Monopoly. Monopoly and Competition Compared. Price Discrimination

Monopoly. Chapter 13. Monopoly and How It Arises. Single-price Monopoly. Monopoly and Competition Compared. Price Discrimination CHAPTER CHECKLIST Monopoly Chapter 13 1. Explain how monopoly arises and distinguish between single-price monopoly and price-discriminating monopoly. 2. Explain how a single-price monopoly determines its

More information

Managerial Economics Prof. Trupti Mishra S.J.M. School of Management Indian Institute of Technology, Bombay. Lecture - 13 Consumer Behaviour (Contd )

Managerial Economics Prof. Trupti Mishra S.J.M. School of Management Indian Institute of Technology, Bombay. Lecture - 13 Consumer Behaviour (Contd ) (Refer Slide Time: 00:28) Managerial Economics Prof. Trupti Mishra S.J.M. School of Management Indian Institute of Technology, Bombay Lecture - 13 Consumer Behaviour (Contd ) We will continue our discussion

More information

Learning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly

Learning 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 information

Exam: Principles Micro ECO 2023.U07 Fall 2009 Name

Exam: Principles Micro ECO 2023.U07 Fall 2009 Name Exam: Principles Micro ECO 2023.U07 Fall 2009 Name Panther ID Instructions: 1. Please write in your name and Panther ID on the question paper. 2. Please Bubble in your name and Panther ID on the Scantron

More information

Econ 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam.

Econ 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam. , Fall 2007 Version A Special Codes 00000 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 201 Final Exam 1. For a profit-maximizing monopolist, a. MR

More information

Managerial 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 Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets I. Perfect Competition Overview Characteristics and profit outlook. Effect

More information

Unit 2.3 - Theory of the Firm Unit Overview

Unit 2.3 - Theory of the Firm Unit Overview Unit 2.3.1 - Introduction to Market Structures and Cost Theory Intro to Market Structures Pure competition Monopolistic competition Oligopoly Monopoly Cost theory Types of costs: fixed costs, variable

More information

Monopolistic Competition

Monopolistic Competition In this chapter, look for the answers to these questions: How is similar to perfect? How is it similar to monopoly? How do ally competitive firms choose price and? Do they earn economic profit? In what

More information

ELASTICITY Microeconomics in Context (Goodwin, et al.), 3 rd Edition

ELASTICITY Microeconomics in Context (Goodwin, et al.), 3 rd Edition Chapter 4 ELASTICITY Microeconomics in Context (Goodwin, et al.), 3 rd Edition Chapter Overview This chapter continues dealing with the demand and supply curves we learned about in Chapter 3. You will

More information

Multiple Choice Questions for Self Study. (GZ der VWL / Introduction to Economics)

Multiple Choice Questions for Self Study. (GZ der VWL / Introduction to Economics) Multiple Choice Questions for Self Study (GZ der VWL / Introduction to Economics) ao. Prof. Dr. B. Yurtoglu) Economic Models 1) The purpose of making assumptions in economic model building is to (a) force

More information

Econ 101: Principles of Microeconomics

Econ 101: Principles of Microeconomics Econ 101: Principles of Microeconomics Chapter 12 - Behind the Supply Curve - Inputs and Costs Fall 2010 Herriges (ISU) Ch. 12 Behind the Supply Curve Fall 2010 1 / 30 Outline 1 The Production Function

More information

BPE_MIC1 Microeconomics 1 Fall Semester 2011

BPE_MIC1 Microeconomics 1 Fall Semester 2011 Masaryk University - Brno Department of Economics Faculty of Economics and Administration BPE_MIC1 Microeconomics 1 Fall Semester 2011 Final Exam - 05.12.2011, 9:00-10:30 a.m. Test A Guidelines and Rules:

More information

Equilibrium of a firm under perfect competition in the short-run. A firm is under equilibrium at that point where it maximizes its profits.

Equilibrium of a firm under perfect competition in the short-run. A firm is under equilibrium at that point where it maximizes its profits. Equilibrium of a firm under perfect competition in the short-run. A firm is under equilibrium at that point where it maximizes its profits. Profit depends upon two factors Revenue Structure Cost Structure

More information

Econ 202 Exam 3 Practice Problems

Econ 202 Exam 3 Practice Problems Econ 202 Exam 3 Practice Problems Principles of Microeconomics Dr. Phillip Miller Multiple Choice Identify the choice that best completes the statement or answers the question. Chapter 13 Production and

More information

Figure 4-1 Price Quantity Quantity Per Pair Demanded Supplied $ 2 18 3 $ 4 14 4 $ 6 10 5 $ 8 6 6 $10 2 8

Figure 4-1 Price Quantity Quantity Per Pair Demanded Supplied $ 2 18 3 $ 4 14 4 $ 6 10 5 $ 8 6 6 $10 2 8 Econ 101 Summer 2005 In-class Assignment 2 & HW3 MULTIPLE CHOICE 1. A government-imposed price ceiling set below the market's equilibrium price for a good will produce an excess supply of the good. a.

More information

Demand, Supply, and Market Equilibrium

Demand, Supply, and Market Equilibrium 3 Demand, Supply, and Market Equilibrium The price of vanilla is bouncing. A kilogram (2.2 pounds) of vanilla beans sold for $50 in 2000, but by 2003 the price had risen to $500 per kilogram. The price

More information

Unit 7. Firm behaviour and market structure: monopoly

Unit 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 information

Consumers face constraints on their choices because they have limited incomes.

Consumers face constraints on their choices because they have limited incomes. Consumer Choice: the Demand Side of the Market Consumers face constraints on their choices because they have limited incomes. Wealthy and poor individuals have limited budgets relative to their desires.

More information

AP Microeconomics Chapter 4 Outline

AP Microeconomics Chapter 4 Outline I. Introduction A. Learning Objectives In this chapter students should learn: 1. What price elasticity of demand is and how it can be applied. 2. The usefulness of the total revenue test for price elasticity

More information

CHAPTER 9: PURE COMPETITION

CHAPTER 9: PURE COMPETITION CHAPTER 9: PURE COMPETITION Introduction In Chapters 9-11, we reach the heart of microeconomics, the concepts which comprise more than a quarter of the AP microeconomics exam. With a fuller understanding

More information

Elasticity: The Responsiveness of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply Chapter 6 Elasticity: The Responsiveness of Demand and Supply Chapter Outline 61 LEARNING OBJECTIVE 61 The Price Elasticity of Demand and Its Measurement Learning Objective 1 Define the price elasticity

More information

Price Theory Lecture 6: Market Structure Perfect Competition

Price Theory Lecture 6: Market Structure Perfect Competition Price Theory Lecture 6: Market tructure Perfect Competition I. Concepts of Competition Whether a firm can be regarded as competitive depends on several factors, the most important of which are: The number

More information

Elasticity of Demand and Supply

Elasticity of Demand and Supply Elasticity of Demand and Supply Price Elasticity of Demand (Ep) Calculating Percentage Change Significance of Price Elasticity of Demand (Ep) Determinants of Price Elasticity of Demand (Ep) For Next Time

More information

Economics 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 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 information

國 立 高 雄 第 一 科 技 大 學 管 理 學 院 暨 財 金 學 院 1 0 3 學 年 度 第 1 學 期 經 濟 學 期 末 會 考 題 目 卷 ( A ) I. Production and Cost

國 立 高 雄 第 一 科 技 大 學 管 理 學 院 暨 財 金 學 院 1 0 3 學 年 度 第 1 學 期 經 濟 學 期 末 會 考 題 目 卷 ( A ) I. Production and Cost 國 立 高 雄 第 一 科 技 大 學 管 理 學 院 暨 財 金 學 院 1 0 3 學 年 度 第 1 學 期 經 濟 學 期 末 會 考 題 目 卷 ( A ) I. Production and Cost 1. The short run is the time frame A. during which the quantities of all resources are fixed.

More information

Microeconomics Instructor Miller Practice Problems Labor Market

Microeconomics 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 information

c. Given your answer in part (b), what do you anticipate will happen in this market in the long-run?

c. Given your answer in part (b), what do you anticipate will happen in this market in the long-run? Perfect Competition Questions Question 1 Suppose there is a perfectly competitive industry where all the firms are identical with identical cost curves. Furthermore, suppose that a representative firm

More information

Pure Competition urely competitive markets are used as the benchmark to evaluate market

Pure Competition urely competitive markets are used as the benchmark to evaluate market R. Larry Reynolds Pure Competition urely competitive markets are used as the benchmark to evaluate market P performance. It is generally believed that market structure influences the behavior and performance

More information

4 THE MARKET FORCES OF SUPPLY AND DEMAND

4 THE MARKET FORCES OF SUPPLY AND DEMAND 4 THE MARKET FORCES OF SUPPLY AND DEMAND IN THIS CHAPTER YOU WILL Learn what a competitive market is Examine what determines the demand for a good in a competitive market Chapter Overview Examine what

More information

Chapter 9: Perfect Competition

Chapter 9: Perfect Competition Chapter 9: Perfect Competition Perfect Competition Law of One Price Short-Run Equilibrium Long-Run Equilibrium Maximize Profit Market Equilibrium Constant- Cost Industry Increasing- Cost Industry Decreasing-

More information

Integrating the Input Market and the Output Market when Teaching Introductory Economics

Integrating 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 28035-7022

More information

Where are we? To do today: finish the derivation of the demand curve using indifference curves. Go on then to chapter Production and Cost

Where are we? To do today: finish the derivation of the demand curve using indifference curves. Go on then to chapter Production and Cost Where are we? To do today: finish the derivation of the demand curve using indifference curves Go on then to chapter Production and Cost Utility and indifference curves The point is to find where on the

More information

Profit Maximization. 2. product homogeneity

Profit 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 information

Competitive Market Equilibrium

Competitive Market Equilibrium Chapter 14 Competitive Market Equilibrium We have spent the bulk of our time up to now developing relationships between economic variables and the behavior of agents such as consumers, workers and producers.

More information

CHAPTER 3 CONSUMER BEHAVIOR

CHAPTER 3 CONSUMER BEHAVIOR CHAPTER 3 CONSUMER BEHAVIOR EXERCISES 2. Draw the indifference curves for the following individuals preferences for two goods: hamburgers and beer. a. Al likes beer but hates hamburgers. He always prefers

More information

SUPPLY AND DEMAND : HOW MARKETS WORK

SUPPLY AND DEMAND : HOW MARKETS WORK SUPPLY AND DEMAND : HOW MARKETS WORK Chapter 4 : The Market Forces of and and demand are the two words that economists use most often. and demand are the forces that make market economies work. Modern

More information

DEMAND FORECASTING. Demand. Law of Demand. Definition of Law of Demand

DEMAND FORECASTING. Demand. Law of Demand. Definition of Law of Demand DEMAND FORECASTING http://www.tutorialspoint.com/managerial_economics/demand_forecasting.htm Copyright tutorialspoint.com Demand Demand is a widely used term, and in common is considered synonymous with

More information

The Markets for the Factors of Production. Derived Demand. Our Example: Farmer Jack. Two Assumptions

The Markets for the Factors of Production. Derived Demand. Our Example: Farmer Jack. Two Assumptions 8 The Markets for the Factors of roduction R I N C I E S O F ECONOMICS F O U R T H E D I T I O N N. G R E G O R Y M A N K I In this chapter, look for the answers to these questions: hat determines a competitive

More information

INTRODUCTION THE LABOR MARKET LABOR SUPPLY INCOME VS. LEISURE THE SUPPLY OF LABOR

INTRODUCTION THE LABOR MARKET LABOR SUPPLY INCOME VS. LEISURE THE SUPPLY OF LABOR INTRODUCTION Chapter 15 THE LBOR MRKET This chapter covers why there are differences in wages: How do people decide how much time to spend working? What determines the wage rate an employer is willing

More information

Employment and Pricing of Inputs

Employment 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 information

Production and Cost Analysis

Production and Cost Analysis Production and Cost Analysis The entire production process begins with the supply of factors of production or inputs used towards the production of a final good we all consume in the final good market.

More information

Pre-Test Chapter 21 ed17

Pre-Test Chapter 21 ed17 Pre-Test Chapter 21 ed17 Multiple Choice Questions 1. Which of the following is not a basic characteristic of pure competition? A. considerable nonprice competition B. no barriers to the entry or exodus

More information

Managerial Economics Prof. Trupti Mishra S.J.M School of Management Indian Institute of Technology, Bombay. Lecture - 14 Elasticity of Supply

Managerial Economics Prof. Trupti Mishra S.J.M School of Management Indian Institute of Technology, Bombay. Lecture - 14 Elasticity of Supply Managerial Economics Prof. Trupti Mishra S.J.M School of Management Indian Institute of Technology, Bombay Lecture - 14 Elasticity of Supply We will continue our discussion today, on few more concept of

More information

Elasticity and Its Uses

Elasticity and Its Uses CHAPTER 4 Elasticity and Its Uses CHAPTER OVERVIEW One of the most practical uses of economic analysis is to predict the effects of changes in underlying conditions or policies on the prices and production

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. MBA 640, Survey of Microeconomics, Quiz #4 Fall 2006 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In the short run, A) there are no variable

More information

Chapter 14 Monopoly. 14.1 Monopoly and How It Arises

Chapter 14 Monopoly. 14.1 Monopoly and How It Arises Chapter 14 Monopoly 14.1 Monopoly and How It Arises 1) One of the requirements for a monopoly is that A) products are high priced. B) there are several close substitutes for the product. C) there is a

More information

Lecture 2. Marginal Functions, Average Functions, Elasticity, the Marginal Principle, and Constrained Optimization

Lecture 2. Marginal Functions, Average Functions, Elasticity, the Marginal Principle, and Constrained Optimization Lecture 2. Marginal Functions, Average Functions, Elasticity, the Marginal Principle, and Constrained Optimization 2.1. Introduction Suppose that an economic relationship can be described by a real-valued

More information