Elasticity and Total Revenue) Explain the relationship between theprice elasticity of demand and total revenue.
(Determinants of Price Elasticity) Would the price elasticity ofdemand for electricity be more elastic over a shorter or a longerperiod of time?
(Explicit and Implicit Costs) Determine whether each of thefollowing is an explicit cost or an implicit cost:
a. Payments for labor purchased in the labor market
b. A firmâs use of a warehouse that it owns and could rent toanother firm
(Long-Run Average Cost Curve) Explain the shape of the long-runaverage cost curve. What does âminimum efficient scaleâ mean?
When a government wants to increase tax revenue, they will oftenincrease the sales tax on gasoline. Using price elasticity ofdemand, explain why the tax would be placed on gasoline ratherthan, say, yachts. What might be the long run effect of raising theprice of gas?
The shape of the long-run cost curve is determined by economies anddiseconomies of scale. Contrast this curve with the short-run costcurve as it relates to increasing and diminishing marginal returnsto labor.
(Determinants of Price Elasticity) Would the price elasticity ofdemand for electricity be more elastic over a shorter or a longerperiod of time?
(Explicit and Implicit Costs) Determine whether each of thefollowing is an explicit cost or an implicit cost:
a. Payments for labor purchased in the labor market
b. A firmâs use of a warehouse that it owns and could rent toanother firm
(Long-Run Average Cost Curve) Explain the shape of the long-runaverage cost curve. What does âminimum efficient scaleâ mean?
When a government wants to increase tax revenue, they will oftenincrease the sales tax on gasoline. Using price elasticity ofdemand, explain why the tax would be placed on gasoline ratherthan, say, yachts. What might be the long run effect of raising theprice of gas?
The shape of the long-run cost curve is determined by economies anddiseconomies of scale. Contrast this curve with the short-run costcurve as it relates to increasing and diminishing marginal returnsto labor.
Related textbook solutions
Related questions
#7
If a monopolist or a perfectly competitive firm is producing at a break-even point, then:
i. average revenue is equal to average variable cost
ii. average revenue is equal to average total cost
iii. total revenue is equal to total variable cost
iv. total revenue is equal to total cost
| i |
| ii |
| iii |
| i and iii |
| ii and iv |
#8
A natural monopoly, such as a local electricity provider, is the result of:
i. a firm owning or controlling a key input used in the production process
ii. economies of scale existing over a wide range of output
iii. long-run average total costs declining continuously as output increases
iv. long-run total costs declining continuously as output increases
| i |
| ii |
| iii |
| iv |
| ii and iii |
| ii and iv |
| ii, iii, and iv |
#9
What do economies of scale, the exclusive ownership of essential raw materials used in the production process, and patents have in common?
| they are all barriers to entry |
| they all help explain why a monopolists demand and marginal revenue curves are identical |
| they must all be present before a monopolist may practice price discrimination |
| they all help explain why a firms short run average total cost curve is U-shaped |
#10
The principle that a firm should produce up to the point where the marginal revenue (MR) from the sale of an extra unit of output is equal to the marginal cost (MC) of producing the extra unit applies:
| to both perfectly competitive firms and monopolies |
| only to monopolies |
| only to perfectly competitive firms |
| only to firms that can employ discriminatory pricing strategies |
#11
A monopoly is producing a level of output such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $8 per unit and is incurring average variable costs of $5 per unit and average total costs of $10 per unit. Given this information, it may be concluded that the firm:
| is operating at maximum total profit |
| is operating at a loss that could be reduced by shutting down |
| is operating at a profit that could be increased by producing more output |
| is operating at a loss that is less than the loss incurred by shutting down |
#12
Suppose the demand function for a profit maximizing monopolists good is P = 120 - 0.2Q, its total cost function is TC = 40 + 4Q + Q2, and its marginal cost function is MC = 4 + 2Q. If the firm uses a uniform pricing strategy, then rounded to the nearest unit of output and to the nearest dollar the firm will:
| produce 48 units of output, charge a price of $110, and earn a total profit of $5280 |
| produce 48 units of output, charge a price of $110, and earn a total profit of $2744 |
| produce 52 units of output, charge a price of $134, and earn a total profit of $5322 |
| produce 52 units of output, charge a price of $134, and earn a total profit of $4016 |
