Question 11: A Firm's Marginal Revenue From Its 100th Unit

Question 11 If A Firms Marginal Revenue From Its 100th Unit Of Outpu

Question . If a firm's marginal revenue from its 100th unit of output is $50 and the marginal cost from its 100th unit of output is $45, then in the short run this firm should: a. shut down. b. produce more than 99 units of output. c. change its technology. d. produce less than 100 units of output. e. increase its plant size.

Question . Which of the following is a key characteristic of the long-run competitive equilibrium that distinguishes it from the short-run competitive equilibrium? a. Free entry to reduce short-run profits, or free exit to reduce short-run losses. b. Average revenue is less than average cost. c. Marginal revenue is greater than marginal cost. d. Economic profits are positive, but cannot be negative.

Question . The marginal approach to profit maximization means that a firm should produce until: a. marginal revenue equals price. b. price equals average total cost. c. marginal cost becomes negatively sloped. d. marginal revenue equals marginal cost. e. marginal revenue equals zero.

Question . If the demand for a product increases in an increasing cost industry, as the market adjusts in the long run: a. the firm's per-unit cost will fall. b. the market price will return to its initial position. c. price will rise. d. the firm's per-unit cost will increase.

Question . In the perfectly competitive market, individual firms exert no effect on the market price. Therefore, the firm's marginal revenue curve is: a. indeterminate. b. an upward-sloping curve. c. a downward-sloping curve. d. the same as the firm's demand curve.

Question . Exhibit 8-12 Marginal revenue and cost per unit curves As shown in Exhibit 8-12, the firm will shut down in the short-run at a price below: a. OB. b. OA. c. OD. d. OC.

Question . Exhibit 8-3 Cost per unit curves As shown in Exhibit 8-3, the price at which the firm earns zero economic profit in the short-run is: a. more than $2.00 per unit. b. $1.00 per unit. c. $2.00 per unit. d. $1.50 per unit. e. $4.00 per unit.

Question . In the short run, if a perfectly competitive firm is producing at a price above average total cost, its economic profit must be: a. normal. b. negative. c. zero. d. positive.

Question . Which of the following correctly explains why sellers in a perfectly competitive market are price takers? a. There are many sellers, and so the market process generates an equilibrium price that cannot be influenced by any one seller. Thus they have no choice but to take the price generated by the market process. b. Individual buyers in a competitive market have the power to influence price, and thus can impose prices and other conditions on powerless sellers. c. There are few sellers, and so they have the power to take whatever price they want. d. Sellers in a competitive market have the power to influence price by colluding with one another and using quotas to limit overall market output and thus raise price.

Question . Exhibit 8-3 Cost per unit curves As shown in Exhibit 8-3, the firm will produce in the short run if the price is at least equal to: a. $1.00 per unit (point A). b. $1.50 per unit (point B). c. $2.00 per unit (point C). d. $4.00 per unit (point D).

Question . Under both perfect competition and monopoly, a firm: a. always earns a pure economic profit. b. is a price maker. c. sets marginal cost equal to marginal revenue. d. will shut down in the short-run if price falls short of average total cost. e. is a price taker.

Question . Compared to a perfectly competitive industry, a monopolist with the same marginal cost and demand curve will charge: a. a higher price and produce a higher volume of output. b. a higher price and produce a lower volume of output. c. the same price and produce the same volume of output. d. a lower price and produce a lower volume of output. e. a lower price and produce a higher volume of output.

Question . Exhibit 9-8 Profit maximizing for a monopolist ​ As shown in Exhibit 9-8, the monopolist's total cost is which of the following areas? a. P1AEP5. b. P2BDP4. c. P3CDP5. d. P4DEP5. e. None of these.

Question . A monopoly sets a market price that is higher than the marginal cost of production. This fact implies that a monopoly's allocation of resources is: a. unfair. b. inefficient. c. excessive. d. discriminatory.

Question . The goal of any monopolist is to maximize: a. normal profits. b. output. c. price. d. economic profits. e. consumer welfare.

Question . Under monopoly, a firm: a. is a price taker. b. will shut down in the short-run if price falls short of average total cost. c. maximizes profit by setting marginal cost equal to marginal revenue. d. always earns a pure economic profit.

Question . Which of the following is true for the monopolist? a. Marginal revenue is less than the price charged. b. Economic profit is possible in the long-run. c. Profit maximizing or loss minimizing occurs when marginal revenue equals marginal cost. d. All of the above. e. None of the above.

Exhibit 9-2 Demand and cost information for a monopoly Q P TC . 3. Refer to Exhibit 9-2. Using the rule that focuses on the marginal approach to maximizing profits, the monopolist maximizes profit by choosing price equal to: a. $10. b. $30. c. $40. d. $20. e. $0.

If pizza used to be produced in a perfectly competitive market, and now the pizza market has become a monopoly, we can expect: a. less pizza to be sold at a lower price. b. the same amount of pizza to be sold at the same price. c. more pizza to be sold at a higher price. d. less pizza to be sold at a higher price. e. more pizza to be sold at a lower price.

When marginal revenue is zero for a monopolist facing a downward-sloping straight-line demand curve, the price elasticity of demand is: a. equal to 0. b. less than 2. c. greater than 1. d. equal to 1.

Game theory is an especially useful model for analysis in the following types of markets: a. monopolistic competition. b. perfect competition. c. oligopoly. d. monopoly.

Suppose an oligopoly has a dominant firm that sets the price for the entire industry. In this situation, the oligopoly has: a. a cartel. b. a kinked demand curve. c. nonprice competition. d. price leadership.

Exhibit 10-5 Two-Firm Payoff Matrix Suppose costs are identical for the two firms in Exhibit 10-5. Each firm assumes without formal agreement that if it sets the high price its rival will not charge a lower price. Under these "tit-for-tat" conditions, equilibrium will be established by: a. Beta Co. charging $1,000 and Alpha Co. charging $500. b. Beta Co. charging $500 and Alpha Co. charging $1,000. c. Beta Co. charging $1,000 and Alpha Co. charging $1,000. d. Beta Co. charging $500 and Alpha Co. charging $500.

Question . Which of the following is a game theory strategy for oligopolists to avoid a low-price outcome? a. Win-win b. Second best c. Last in-first out d. Tit-for-tat

Question . Product differentiation makes the demand for a monopolistically competitive firm's product: a. more elastic than for a monopoly. b. perfectly inelastic. c. perfectly elastic. d. more inelastic than for a monopoly.

Question . Which of the following is evidence of an ineffective cartel? a. Output changes are dictated by changes in demand. b. Price changes are dictated by changes in demand. c. Members do not agree on output quotas. d. All of these.

Exhibit 10-6 Two-Firm Payoff Matrix Assume costs are identical for the two firms in Exhibit 10-6. If both firms were allowed to form a cartel and agree on their prices, equilibrium would be established by: a. Widget Co. charging the low price and Ajax Co. charging the low price. b. Widget Co. charging the low price and Ajax Co. charging the high price. c. Widget Co. charging the high price and Ajax Co. charging the high price. d. Widget Co. charging the high price and Ajax Co. charging the low price.

Suppose that R. J. Reynolds raises the price of cigarettes by 10 percent. Although they have no requirement or agreement to do so, the other cigarette firms decide to raise their prices accordingly. This situation is best described as: a. monopolistic competition. b. a cartel. c. a market with kinked demand. d. price leadership.

Excluding foreign competition, which of the following is an oligopoly in the United States? a. The computer industry. b. The automobile industry. c. The steel industry. d. All of these are oligopolies.

Which of the following is true about advertising? a. If monopolistically competitive firms compete through advertising, that creates brand loyalty, then advertising can be an effective entry cost. b. Both a. and b. above are correct. c. Advertising has no impact on entry costs or market structure. d. Advertising may be the only way that a new entrant can penetrate a market dominated by long-established firms.

Which of the following most closely approximates the conditions of a monopolistically competitive market? a. The market for jumbo aircraft, where one major domestic firm competes with one major foreign firm. b. The restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers. c. The market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product. d. Local cable television service, where a licensed supplier competes with firms offering satellite service.

The purpose of a cartel is to: a. act like a monopoly. b. promote product innovation. c. increase market competition. d. decrease market concentration. e. diversify operations.

Which of the following statements concerning the supply of labor is true ? a. The supply of labor is determined by the prevailing wage rate. b. The labor supply curve is downward sloping. c. The wage rate has no effect on the supply of labor. d. None of these.

The demand for a factor of production depends on the: a. supply of other factors of production. b. demand for the products that it helps to produce. c. supply of the factor. d. demand for other factors of production.

Exhibit 11-12 A monopsonist In Exhibit 11-12, suppose this labor market is unionized by a powerful union which forces a wage of $35 upon the industry. The firm would respond by hiring ____ workers and paying a wage of ____. a. 70; $27 b. 60; $35 c. 40; $35 d. 60; $30 e. 40; $ points Question . Firms should hire additional units of a resource as long as the: a. marginal revenue product of the resource exceeds the cost of an additional unit of the resource. b. marginal product of the resource exceeds the price of the resource multiplied by the quantity of output produced. c. price of the output produced is positive. d. marginal product of the resource is less than the price of the resource. 4 points Question . If the wage rate is fixed at a certain level, the: a. total wage cost curve will increase at a decreasing rate. b. total wage cost curve is horizontal. c. total wage cost curve will increase at an increasing rate. d. MP must be constant. e. total wage cost curve is a straight upward sloping line. 4 points Question . The profit-maximizing employment level for a monopsonist occurs where: a. price = wage. b. wage = TWC. c. MRP = MFC d. wage = MFC e. wage = MRP. 4 points Question . Exhibit 11-11 Labor wage and cost data Labor Wage TWC MFC 10 $ $ 50.00 $ ...... 3. In Exhibit 11-11, the wage required to hire 14 employees is equal to: a. $8.80. b. $8.10. c. $9.00. d. $5.50. e. $9.50. 4 points Question . Which of the following would cause the demand for labor to change? a. A change in the cost of living. b. Movements along the labor demand curve. c. c and e. d. A change in the price of the good produced. e. Changes in the wage rate.

Paper For Above instruction

In analyzing how firms determine optimal output levels, marginal revenue (MR) and marginal cost (MC) serve as crucial benchmarks. Specifically, firms aim to produce at the output level where MR equals MC, ensuring profit maximization. In the short run, if the marginal revenue from the 100th unit exceeds the marginal cost ($50 vs. $45), the firm should expand production beyond this point to maximize profits (Lerner, 1944). Conversely, if MR is less than MC, the firm should reduce output. Applying this principle, the firm in question should increase production beyond 100 units, aligning with the standard rule of profit maximization.

Long-run competitive equilibrium exhibits unique characteristics that distinguish it from the short run. Notably, free entry and exit facilitate adjustments in the industry, driving profits toward zero in the long run. This process ensures that economic profits are eliminated, and firms operate at their efficient scale (Mankiw, 2014). Unlike short-run conditions, where firms may experience positive or negative profits, the long-run equilibrium ensures that price equals the minimum point on the average total cost curve (Frank et al., 2014). This equilibrium results from the dynamics of entry and exit, which align marginal revenue with marginal cost, ensuring optimal resource allocation and competitive efficiency.

The marginal approach to profit maximization emphasizes that firms should produce until marginal revenue equals marginal cost. When MR = MC, any additional unit produced adds equally to revenue and cost, maximizing profit (Pindyck & Rubinfeld, 2018). Producing beyond this point would lead to diminishing returns or losses, while producing less would mean foregone profit opportunities. This principle is fundamental in microeconomics and applies across various market structures, from perfect competition to monopoly (Perloff, 2012).

In industry analyses, the response to increased demand depends on industry cost structures. In an increasing cost industry, where costs rise with output, market adjustments in the long run typically lead to higher prices. As demand increases, firms face higher input prices and per-unit costs, pushing the market price upward until new equilibrium conditions are established (Baumol & Blinder, 2015). This shift reflects the upward-sloping long-run supply curve, unlike the perfectly elastic supply in constant cost industries.

Within perfect competition, individual firms are price takers, implying they cannot influence market price. Their marginal revenue curve coincides with the demand curve they face, which is perfectly elastic at the market price. Since each firm's output is too small to affect the overall market, the marginal revenue curve is the same as the demand and price line (Stiglitz & Walsh, 2002). Consequently, firms maximize profit where MR equals MC, with the acceptance that MR is equal to the market price.

Exhibit analyses often depict the shutdown point in the short run, which occurs when the price drops below the minimum average variable cost (AVC). At this point, the firm cannot cover its variable costs, and continuing production would lead to greater losses than shutting down (Varian, 2014). For instance, if the price falls below a critical level represented by point OA, the firm should cease operations temporarily to minimize losses.

The zero-profit condition in the short run occurs when price equals average total cost (ATC). As shown in Exhibit 8-3, the equilibrium price level where economic profits are zero aligns with the ATC curve. At this price, firms earn just enough to cover all costs, including normal profit, but no excess profit is realized (Mankiw, 2014). Under perfect competition, this point indicates efficient resource allocation with no incentive for entry or exit.

When a firm's price exceeds its average total cost in the short run, it earns positive economic profits. These profits attract new entrants into the industry in the long run, increasing supply and reducing the market price until profits return to zero (Frank et al., 2014). In such a scenario, the firm’s revenues surpass its costs, including normal profit, signifying a lucrative operation (Lerner, 1944).

Sellers in perfect competition are considered price takers because the presence of many sellers prevents any single firm from influencing market price. The supply and demand forces establish an equilibrium price, and individual firms must accept this price; hence, they do not set prices independently (Pindyck & Rubinfeld, 2018). This feature underscores the competitive nature of such markets, promoting efficiency and consumer welfare.

The firm’s production decision hinges on the relationship between price and per-unit costs. When the price is at least equal to the minimum of the average variable cost, the firm will produce in the short run. If the price falls below this level, the firm would incur losses greater than fixed costs, favoring shutdown (Stiglitz & Walsh, 2002). This decision point serves as a critical threshold for continuing operations in a competitive landscape.

Monopoly firms set prices above marginal costs, which results in allocative inefficiency. This market power allows monopolists to