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1. The following table gives quantity supplied and quantity demanded at various prices in the perfectly competitive meat-packing market:
Price (per lb.) QS
(in millions of lbs.) QD
$1.00 10 100
$1.25 15 90
$1.50 25 75
$1.75 40 63
$2.00 55 55
$2.25 65 40
Assume that each firm in the meat-packing industry faces the following cost structure:
a. What is the profit-maximizing output level for the typical firm? (Hint: Calculate MC for each change in output, then find the equilibrium price, and calculate MR for each change in output.) (10 points)
b. Is this market in long-run equilibrium? Why or why not? (Hint: Calculate ATC.) (10 points)
What do you expect to happen to the number of meat-packing firms over the long run? Why? (10 points)
1. Assume that the firm shown in the following table produces output using one fixed input and one variable input.
P Total Revenue
TR Marginal Revenue
MR Total Cost
TC Marginal Cost
0 $50 $0 $5
1 $50 $35
2 $50 $15
3 $50 $35
4 $50 $55
a. Complete this table and use it to find this firm’s short-run profit-maximizing quantity of output. (10 points)
b. How much profit will this firm earn? (10 points)
Chapter 13Monopolistic Competition: The Competitive Model in a More Realistic Setting
1. Why is a monopolistically competitive firm not productively efficient? In what sense does a monopolistically competitive firm have excess capacity? (10 points)
2. Use the following graph for Elijah’s Burgers to answer the questions:
a) If Elijah produces at the profit- maximizing level of output, how much is his total revenue? How much is his total cost? Briefly explain your calculations. (10 points)
b) How much economic profit is Elijah earning? (10 points)
3. What is the difference between zero accounting profit and zero economic profit? (10 points)
Is it possible for a monopolistically competitive firm to continue to earn an economic profit as new firms enter the market? (10 points)
Chapter 14Oligopoly: Firms in LessCompetitive Markets
1. What is an oligopoly? Give three examples of oligopolisticindustries in the United States. (10 points)
2. Airlines often find themselves in price wars. Consider the following game: Delta and United are the only two airlines flying the route from Houston to Omaha. Each firm has two strategies: charge a high price or charge a low price.
a) What (if any) is the dominant strategy for each firm? (10 points)
b) Is this game a prisoner’s dilemma? (10 points)
3. The following table shows the market shares during the first three months of 2013 for companies in the U.S. personal computer (PC) market, which includes desk-based PCs and mobile PCs, such as mini-notebooks, but not tablet computers, such as the iPad:
Company Market Share
Read the following passage from pages 496 – 498, and predict whether the Department of Justice and the Federal Trade Commission would be likely to oppose a merger between any of the five firms listed in the table. Assume that “Others” in the table consists of five firms, each of which has a 5% share of the market. (20 points)
Chapter 15 Monopoly and Antitrust Policy
1. The German company Koenig & Bauer has 90 percent of the world market for presses that print currency. Discuss the factors that would make it difficult for new companies to enter this market. (10 points)
2. Suppose that the quantity demanded per day for a product is 90 when the price is $35. The following table shows costs for a firm with a monopoly in this market:
Briefly explain whether this firm has a natural monopoly. (10 points)
3. Ed Scahill has acquired a monopoly on the production of baseballs(don’t ask how) and faces the demand and cost situation shown in the following table:
a) Fill in the remaining values in the table. (10 points)
b) If Scahill wants to maximize profit, what price should he charge, and how many baseballs should he sell? How much profit (or loss) will he make? (10 points)
c) Draw a graph to illustrate your answer. Your graph should be clearly labeled and should include Scahill’s demand, ATC, AVC, AFC, MC, and MR curves, the price he is charging, the quantity he is producing, and the area representing his profit (or loss). (20 points)
d) Suppose that the government raises the tax in part (c) to $ 70,000. Now what price should Scahill charge, how many baseballs should he sell, and what will his profit (or loss) be? (10 points)
e) Will his decision on what price to charge and how much to produce be different in the short run than in the long run after the government tax increase? Briefly explain. (10 points)
4. Suppose that the city has given Jorge a monopoly selling baseball caps at the local minor league stadium. Use the following graph to answer the questions:
a) What quantity will Jorge produce, and what price will he charge? (10 points)
b) How much profit will he earn? (10 points)
1. (30 points) Making Decisions at the Margin. In 2013, the president and chief executive office of McDonald’s, Don Thompson, said that McDonald’s was considering serving breakfast all day, instead of stopping at 10:30 am on weekdays and 11 am on weekends. Several owners of McDonald’s restaurants, however, point out that offering breakfast 24 hours a day presents two logistical problems:
a. Burgers and other meats need to be cooked at a higher temperature than eggs, so it would be difficult for employees to set the grill at the right temperature for both foods, and
b. Scrambled eggs require employees to continually stir, while hamburgers don’t require this attention.
In addition, some customers might buy the cheaper breakfast rather than the more expensive lunch or dinner meals.
If you were the present and chief executive officer of McDonald’s, discuss how you would go about deciding whether to serve breakfast all day.
Would your decision have to be all or nothing—either serve breakfast up to 10:30 am or serve breakfast all day?
Would you have to serve the entire breakfast menu all day?
Requirement: minimum 100 words.
1. [Related to the Making the Connection on page 86] More than half of homes in the United States are heated by burning natural gas. According to an article in the Wall Street Journal, demand for natural gas decreased during the winter of 2012 because of unusually warm weather. At the same time, “robust production [of natural gas] from U. S. shale fields has created record supplies.” Use demand and supply graphs to illustrate your answers to the following questions:
a. Can we use this information to be certain whether the equilibrium quantity of natural gas increased or decreased?(5 points)
b. Can we use this information to be certain whether the equilibrium price of natural gas increased or decreased? (5 points)
Statement whether each of the following events will result in a movement along the same demand curve (change in own price) for McDonald’s Big Mac hamburgers or whether it will cause the curve to shift.
If the demand curve shifts, indicate whether it will shift to the left or to the right, and draw a graph to illustrate the shift.
a. The price of Burger King’s Whopper hamburger declines. (4 points)
b. McDonald’s distributes coupons for 41.00 off the purchase of a Big Mac. (4 points)
c. Because of a shortage of potatoes, the price of French fries increases. (4 points)
Fast-food restaurants post nutrition warning labels. (4 points)
1. For each of the following pairs of products, state which are complements, substitutes, or unrelated.
a. New cars and used cars (4 points)
b. Houses and washing machines (4 points)
c. UGG boots and Kindle e-readers (4 points)
iPads and Kindle e-readers (4 points)
1. (10 points) When the price of Microsoft stock increased more than 27 percent in the first part of 2013, Bill Gates, who owns 436 million shares of Microsoft stock, once again became the world’s richest person. Does Bill Gates face scarcity? Does everyone? Are there any exceptions
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