ECON101 Lecture Notes - Lecture 17: Marginal Product, Demand Curve, W. M. Keck Observatory

A firm selling output in a competitive market produces output using fixed factors and one variable factor. The short run production function is equation where x is the amount of variable factor used. The price of the output produced is $2 and the price of variable factor is $10. In the short run, what is this firm's maximum profit?

Can I get answers about these questions??

These questions are about Chapter 16-22 in Principles of Microecnomics sixth editon.

Monopolistic competition

· What makes a market monopolistically competitive?

· How do monopolistically competitive firms decide how much to produce and what price to set?

· How to monopolistically competitive firms make short-run and long-run choices?

· What is the role of advertising?

Oligopoly and Game Theory

· What is the prisoner’s dilemma and what are some applications?

· What is collusion and why is it difficult? What are some things that can make it harder or easier to collude?

· What is a dominant strategy?

· How can you find a Nash equilibrium in a game where a player has a dominant strategy?

Markets for Factors of Production

· How do profit maximizing firms decide how much of a factor of production (such as labor) to use? In other words what is the demand for factors of production?

· What changes the demand for factors of production?

· What determines the supply for labor? Supply for other factors of production?

· How are the rental prices and wages determined in a competitive market for factors of production?

Earnings and Discrimination

· What are some reasons why different people have different labor earnings?

· What are some difficulties in measuring discrimination?

· Why might firms that discriminate have difficulty competing?

· Why might a firm find it profitable to discriminate?

Income Inequality and Poverty

· What are some political philosophies regarding what the government should do to decrease poverty or income inequality?

· What are some policies that can reduce poverty? What are the strengths and weaknesses of these policies?

Consumer Choice

· What is the consumers budget constraint?

· How does a consumer choose how much of different goods to consume?

· What are the income and substitution effects?

· How does the demand curve relate to the consumer choice problem?

· How does the consumer choice problem relate to labor supply and borrowing/lending behavior?

Asymmetric Information and Healthcare

· What is moral hazard?

· What is adverse selection?

· How do these two concepts relate to the market for insurance and healthcare?

· How do insurance companies try to deal with adverse selection and moral hazard?

A. A competitive firm

1. can consider only its location in setting the price.
2. must base its competitive price on product differentiation.
3. has the ability to set its own price.
4. must accept the price determined by the intersection of the market supply and demand curves.
5. has no supply curve.

B. If a firm is making an economic profit, then

1. the factors of production are being paid their opportunity costs.
2. there will be no change in the number of firms if the industry is perfectly competitive.
3. the factors of production are being paid less than their opportunity costs.
4. the factors of production are being paid more than their opportunity costs.
5. the firm will exit the industry

C. Along a downward-sloping monopoly demand curve,

1. marginal revenue is greater than price.
2. the elasticity of demand is constant.
3. marginal revenue decreases when the price decreases.
4. marginal revenue is equal to zero when the price is equal to zero

D. If, in the short run, a perfectly competitive firm is producing at a point where the total cost is greater than total revenue, then the firm should

1. shut down because economic profits are negative.
2. continue to produce as long as P > AVC.
3. continue to produce because accounting profits are positive.
4. set a higher price for its output.
5. set a lower price for its output

E. For a perfectly competitive firm, the demand curve is

1. the marginal revenue curve.
2. perfectly inelastic.
3. always equal to marginal cost.
4. the same as the market demand curve

F. A firm in a(n) industry will have the most elastic demand curve

1. monopolistic
2. oligopolistic
3. monopolistically competitive
4. perfectly competitive

G. If the demand curve of a monopolist is in the inelastic range, then

1. total revenue will fall if the price increases.
2. total revenue will be unchanged if the price increases.
3. total revenue will rise if the price increases.
4. the total supply will increase by an equal amount if demand increases.
5. the price will be unchanged if total revenue increases

H. Monopolistic competition and oligopoly are examples of

1. monopoly.
2. perfect competition.
3. theories of consumer behavior.
4. imperfect competition.
5. the extreme cases on the market structure continuum

I. Under which market structure do firms face the flattest (most elastic) demand curve?

1. perfect competition
2. monopolistic competition
3. oligopoly
4. monopoly

J. At the point of long-run equilibrium for a perfectly competitive firm,

1. economic profits are zero.
2. TR > TC.
3. TR < TC.
4. P = AVC.
5. normal profits are zero.