ECO 211 Chapter 37: Case 37 Lindy's Bridal

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No, because she thrives on the fact that her store is a one-stop-shop for everything bridal and the amount of service she provides. Her shop attracts people because they are able to purchase a dress as well as shoes, veils, headpieces, jewelry and foundations making it attractive and convenient to the customer. The alterations should have less emphasis, because while they make money from it it is a very nominal amount. She cannot afford to pay her employees premium salaries so she must make decisions on what employees are essential to her store. Lindy only has one full-time employee and the rest part-time, leaving her with a majority of the workload in all aspects of her store.

Related Questions

A consultant has advised Consolidated Fish, Inc., a perfectly competitive firm, that it should cut back its production in order to increase its profits. We can conclude from this that

CF's total costs must be greater than its total revenues.

CF's marginal cost must be greater than the price of its product.

CF's costs are increasing at a rate less than its revenues.

fixed costs are not being covered and CF should shut down.

If marginal cost is equal to marginal revenue

the firm should hold output constant.

the firm should expand output.

there is no way to determine if the firm should expand output, contract output, or hold output constant.

the firm should contract output.

Which statement is true?

The minimum point on the firm's marginal cost curve is the shutdown point.

The minimum point on the firm's average variable cost curve is the shutdown point.

The minimum point on the firm's average total cost curve is the shutdown point.

The minimum point on the firm's marginal cost curve is the break-even point.

As output expands beyond the break-even point, the vertical distance between the AVC and ATC will

remain constant.

get smaller.

get larger.

Total revenue divided by output equals

average variable cost.

marginal cost.

price.

average total cost.

A monopoly firm selling mustache wax to vain men in a small town is currently maximizing profits by charging a price of $5. It follows that the marginal cost of mustache wax

is equal to $5.

is greater than $5.

is less than $5.

None of these choices are true.

A firm can sell 14 units at $18, but to sell 15 units, the firm must cut the price to $17. The marginal revenue derived from selling the 15th unit is

-$18

$17

If total revenue is increasing as output is rising, then

marginal revenue must be greater than zero.

marginal revenue must be less than zero.

marginal revenue must be equal to zero.

price must be increasing.

Firms that had virtual monopolies, that is control over at least 80 percent of industry production, because of control over an essential resource include all of the following except

the DeBeers Diamond Company.

the Standard Oil Company.

the Ford Motor Company.

the International Nickel Company.

10.

Which statement is true?

None of these statements are true.

Most natural monopolies are government regulated or government owned.

All monopolies are bad.

All monopolies are good.

11.

Which is the most accurate statement?

There are virtually no oligopolies in the U.S.

The most important aspect of oligopoly is product differentiation.

There are a whole range of oligopolistic models, from a cartel to cutthroat competition.

An oligopolistic industry cannot have more than five firms

12.

Oligopolists have more control over prices than monopolistic competitors because

their prices are always set by the government.

since an oligopolist is the only competitor in the market, setting prices is no problem.

they can legally collude whereas monopolistic competitors may not.

with fewer competitors, they are able to monitor and determine their own prices much easier.

13.

The definition of monopolistic competition differs from that of perfect competition

in neither the number of firms nor the type of product.

in both the number of firms and the type of product.

with respect to the type of product.

with respect to the number of firms in the industry.

14.

The typical monopolistic competitor

may compete on the basis of physical differences, convenience, service, and ambience.

always competes on the basis of producing a product that is physically different from those of its competitors.

never uses price discrimination.

is a large firm.

15.

Which statement is true?

The monopolistic competitor may make a profit in the long run.

The monopolistic competitor has a perfectly elastic demand curve.

None of these statements are true.

The monopolistic competitor operates at the minimum point of her ATC curve.

16.

Which statement is true about the monopolistic competitor in the long run?

It will be breaking even.

It will be making a profit.

It may be making a profit or taking a loss.

It will be taking a loss.

17.

Which statement is true?

Most monopolistic competitors are large firms.

Monopolistic competitors produce goods or services for which there are no close substitutes.

None of these statements are true.

Monopolistic competitors usually operate at the minimum point of their average total cost curves.

18.

Which statement is false?

As the price of a good rises the consumer surplus decreases.

A person would maximize her total utility when she had no consumer surplus.

We will consume a service when its marginal utility is equal to its price.

A product's utility to a buyer is measured by how much the buyer is willing to pay for it.

1) Assume that two firms (Firm A and Firm B) operate in the U.S. steel industry. The owner of Firm A writes the following letter to the owner of Firm B:

Dear Owner of Firm B,

I have concluded that if we both restrict output such that we each produce only 3 million tons of steel per year, we can both charge a price that will allow us to effectively monopolize the steel market and to maximize our joint profits. If you would like to enter into this agreement with me, please draft a contract that specifies this agreement and I will be more than willing to meet with you and sign it.

Sincerely,

Owner of Firm A

If this letter were sent in the year 1944, the:

a) Owners of both Firm A and Firm B would not be guilty of violating antitrust laws because antitrust laws in 1944 contained exceptions for certain nationally important industries like the steel industry.

b) Owners of both Firm A and Firm B would not be guilty of anything because there were no antitrust laws in existence in 1944.

c) Owner of Firm A would be guilty of violating antitrust laws only if she met with the owner of Firm B and signed the contract, but she would not be guilty if the attempt to monopolize the market failed because the owner of Firm B never responded to the letter.

d) Owner of Firm A would be guilty of violating antitrust laws because she merely attempted to monopolize the steel industry.

e) Owners of both Firm A and Firm B would not be guilty of violating antitrust laws because antitrust laws in 1944 applied only to industries made up of three or more firms.

2) Entry of new firms will continue in a monopolistically competitive industry until:

a) Marginal cost = 0 (zero).

b) Economic profit is negative.

c) Marginal revenue = marginal cost.

d) Economic profit equals zero.

e) Marginal Revenue = 0 (zero).

3) A monopolistically competitive firm usually charges less than a monopoly firm because:

a) It is part of a group of firms that have formally agreed to control the price and the output of a product.

b) Its primary goal is to reap monopoly profits by replacing competition with cooperation.

c) It has a monopoly, but potential entrants exist in the form of contestable markets.

d) It faces some degree of competition due to low barriers to entry.

e) Producing homogenous output is more expensive than producing differentiated output.

4) An example of price discrimination is when:

a) A single box of Froot Loops costs $3.50, but when purchased in a case of six, it costs only $3.00 per box.

b) You can purchase a new PC for half the price of a new Mac, even though they are both computers.

c) Procter & Gamble charges $9 for a bottle of Tide laundry detergent, while the store brand costs the consumer significantly less, despite being somewhat similar products.

d) Out-of-state students pay more for the same education as in-state students.

e)Movie theaters do not allow children into R-rated movies without a parent or guardian.

5) The Varsity, located in downtown Atlanta, is the world's largest drive-in restaurant. Located near the Georgia Tech campus, the drive-in attracts two distinct types of customers: college students and visitors to Atlanta. The owners are considering offering a student discount of $1 off their combo meal, which is regularly priced at $9. There are 5,000 students interested in purchasing a combo meal, with a maximum willingness to pay of $8. There are 5,000 visiting customers interested in purchasing the combo meal, with a maximum willingness to pay of $9. Assume that each customer, at most, will purchase a single meal and the marginal cost is $5. What will be the amount of total revenue for the Varsity if the owners offer a single price of $8 per combo meal?

a) $65,000

b) $85,000

c) $40,000

d) $80,000

e) $90,000

6) A competitive firm would have:

a) More elastic demand than a monopolistically competitive firm.

b) More inelastic demand than a monopolistically competitive firm.

c) A horizontal demand curve.

d) Bowed-in or bowed-out demand.

e) An upward-sloping demand curve.

7) It is unrealistic to regulate a natural monopoly at marginal cost pricing because:

a) The government is not allowed to regulate markets.

b) With this type of regulation, the firm will want to shut down, and that outcome is not desirable for society.

c) Firms do not need to follow regulations from the government.

d) Regulating a market causes more deadweight loss.

e) Marginal cost pricing ends up having the natural monopoly firm earn zero economic profits.

8) Price discrimination allows businesses to make additional profits and allows markets to work more:

a) Efficiently

b) Unfairly

c) Realistically

d) Equitably

e) Independently

9) Antitrust laws are designed to:

a) Increase prices.

b) Promote monopoly practices.

c) Promote awareness of government programs.

d) Promote competition.

e) Decrease output.

10) Barriers to entry:

a) Do not exist for monopolies.

b) Exist for perfectly competitive firms.

c) Restrict the entry of new firms into the market.

d) Always lead to profits.

e) Measure the ability of firms to set the price for a good.

ultramarinemule185

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.

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ECO 211 Chapter 37: Case 37 Lindy's Bridal

ECO 211 Full Course Notes

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