ECO105Y1 Lecture Notes - Lecture 10: Takers, Fixed Cost, Marginal Revenue

56 views5 pages

greenraccoon19

30 Apr 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Additional revenues from selling one more unit or from extension of sales. The revenue you get from selling one more of your product/service. Costs that do not change with changes in the quantity of output a business produces. Fixed costs of not affect smart decisions; only marginal costs do. Businesses always compare marginal revenues and marginal costs in making smart decisions. These decisions are smart as long as marginal revenues are greater than marginal cost. Most products that can easily be resold tend to have a single price. For businesses in extreme competition: marginal revenue = price (price takers) marginal revenue > price (price makers) As price making businesses consider setting lower prices to increase sales, with the one-price rule, marginal revenue also falls, and marginal revenue falls faster than the falling price. Marginal revenue from each additional unit sold will be decreasing as sales increase.

Related Questions

In a monopolistically competitive market, the rule for maximizing profit is to set MR=MC, which means

Price is higher than marginal revenue

Price is equal to marginal cost

Price is equal to marginal revenue

Price is lower than marginal revenue

Perfect competition displays________________________ because the social benefits of additional production, as measured by the price that people are willing to pay, are in balance with the _____________________to society of that production

Economic efficiency; marginal revenues

Allocative efficiency; marginal costs

Economic efficiency; total revenues

Allocative efficiency; total costs

How can parties who find themselves in a prisoners dilemma situation avoid the undesired outcome and cooperate with each other

Find effective ways to penalize firms who do not cooperate

Sign legally enforceable contracts setting out their mutual agreement to act like a monopoly

One oligopoly can physically beat up another oligopoly

By seeking alternatives to create pressure for members to keep output up and prices up

In the framework of an oligopoly, what strategy can work like a silent form of cooperation

Always match other cartel firmsï¿½ price cuts, but donï¿½t match price increases

Immediately match price increase

Legally enforcement agreements

fuchsialocust206

Multiple choice qs on Perfect Competition - Qs College level 1 MIcreconomics

1. What is the correct interpretation of the perfectly competitive firm's supply curve?

It is the same as its average variable cost curve.

It is the same as its total variable cost curve.

It is the same as the portion of its marginal cost curve that lies above the average variable cost curve.

It is the same as the portion of its average variable cost curve that lies above the marginal cost curve.

2. What is the name of the type of market that is dominated by a few firms?

Oligopoly.

Monopolistic competition.

Monopoly.

Perfect competition.

---------------------------------------------------

3. What is break-even output?

The output at which the total revenue just covers a firm's total fixed cost.

The output at which the total revenue just covers a firm's total variable cost.

The output at which the total revenue just covers a firm's fixed and variable costs including normal profits.

The output at which the firm is making zero normal profits.

==================================================================

4. All of the following except one are considered to be the prerequisite elements for a market system to work effectively. Which is the exception?

Extensive specialization and trade.

Perfect competition.

Private ownership of productive resources.

A legal and social foundation

A balanced government budget

==========================================================

5. What is the term for the price at which the firm makes only normal profits?

Shutdown price.

Break-even price.

Average price.

Economic price.

================================================

6. Which of the following statements is true regarding the price in a perfectly competitive market?

Price equals average revenue but not marginal revenue.

Price equals marginal revenue but not average revenue.

Price is equal to neither the average nor the marginal revenue.

Price is equal to both the average and marginal revenue.

=================================================

7. What is the term for the extra revenue derived from the sale of one more unit?

Average revenue.

Marginal revenue.

Net revenue.

Total revenue.

=========================

8. What is the term for the amount of revenue that will always equal the price of the product in a perfectly-competitive market?

Marginal price.

Net revenue.

Average revenue.

Total revenue.

1. In a market economy, the high salaries of some star baseball players such as Adrian Gonzalez, are determined by

		Team owners, based on the total number of star athletes they plan to hire.
	B	advertising companies, based on what they are willing to pay to advertise their products at baseball games.
	C	the interaction of the demand for star athletes and the supply of star athletes.
	D	consumers, based on their willingness to watch baseball games.

2. Demand in factor markets differs from demand in product markets in that

	A	the demand for a factor of production is difficult to determine.
B		the demand for a factor of production is influenced by workers' productivity and by the producers' expected sales revenues, not by tastes and preferences of consumers.
C		demand for a factor of production is based on the tastes and preferences of firms.
D		demand for a factor of production is based on the tastes and preferences of resource owners.

3. The demand for labor is described as a derived demand because

A		it is derived by workers seeking to earn income to fund the consumption of goods and services.
B		it is derived by producers seeking to make profits by starting new businesses.
C		it is derived from the demand for products that use labor in the production process.
D		it is derived from government institutions that rely on labor markets for the purpose of raising tax revenue.

4. Which of the following is not an example of a derived demand?

A		Several of the animated films released between 1999 and 2001 failed to earn a profit, which caused some companies to stop making these films, thereby decreasing the demand for animators.
B		Seth Bullock, a personal injury attorney, complains that he is earning far less now than a few years ago largely because personal injury cases have been undercut by state laws limiting class-action suits and payouts on damages.
C		Millicent Manning, the owner of a furniture store, is concerned that her sales have fallen for the past six months. She attributes this to the downturn in the real estate market.
D		As advancements in medical technology increase the safety and success of laser eye surgery, the demand for opticians has decreased.

5. Marginal revenue product for a perfectly competitive seller is equal to

A		the output price multiplied by the total product of labor.
B		the output price multiplied by the number of workers hired.
C		the change in total revenue that results from hiring another worker.
D		the marginal cost of production.

6. What is the difference between labor's marginal product and marginal revenue product?

A		The marginal product of labor is the increase in output as a result of hiring an additional worker while the marginal revenue product of labor is the increase in profit as a result of hiring an additional worker.
B		The marginal revenue product of labor is the dollar value of hiring an additional worker while the marginal product of labor is the increase in the firm's physical output as a result of hiring an additional worker.
C		The marginal product of labor is the additional labor's contribution to the firm's total output while the marginal revenue product is the additional labor's contribution to the firm's total sales revenue.
D		Labor's marginal product is a measure of labor's productivity while labor's marginal revenue product is a measure of labor's ability to sell the firm's products.

7. What is the difference between a firm's marginal revenue and its marginal revenue product?

A		Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the profit earned from hiring one more worker.
B		Marginal revenue is the change in sales revenue from selling one more unit of output while marginal revenue product is the change in total revenue from hiring one more worker.
C		Marginal revenue is the increase in revenue when a firm raises its output price while marginal revenue product is the increase in the marginal product when a firm hires an additional worker.
D		There is no difference between the two terms.

coffeecat509

ECO105Y1 Lecture Notes - Lecture 10: Takers, Fixed Cost, Marginal Revenue

Document Summary

Get access

Related textbook solutions

Principles of Economics

Principles of Macroeconomics

Principles of Microeconomics

Related Documents

ECO105Y1 Lecture Notes - Lecture 9: Deadweight Loss, Airbnb, Creative Destruction

ECO105Y1 Chapter Notes - Chapter 12: Marginal Revenue Productivity Theory Of Wages, Marginal Revenue, Marginal Cost

ECO105Y1 Chapter Notes - Chapter 9: Fixed Cost, Perfect Competition, Marginal Cost

Related Questions