3.1: the presence of ________ explains the negatively sloped portion of a long-run average-curve, and the notion of___________ explains the horizontal portion of the curve.
3.6 : the typical short-run average-cost curve is shaped like the letter, while the typical long-run average-cost curve is shaped the letter L because_______ are not applicable in the __________ run
Action Items
• Write a one to two page paper, addressing the following:
• Describe in your own words the concept of market power.
• Provide an example of a firm exercising its market power.
• Referring to your example above, answer the following questions:
▪ What are the sources of the firm's market power?
▪ Can they be sustained over a short run / long run?
• Answer the question below in your conclusion:
Why is it hard for a firm to maintain market power over a Long Run
7-3
1.1:the firm-specific demand curve shows the relationship between the _______charged by the firm and the _____ by the firm
1.4: A perfectly competitive firm is a price _________ while a monopolist is a price ________.
2.1: economic profit equals _______ minus______
2.6: A firm produces 20 units of output a market price of $5, a marginal cost of $5, and an average cost of $3 the firm’s economic profit is $______, and the firm (is/is not) maximizing its economic profit
2.10: Changes in the break-even price. Consider a switch grass farmer whose initial break-even price is $76- $36 explicit cost + $40 opportunity cost for land for each of the following changes, explain the effects on the farmer’s production cost and break –even price related to application 2
8-3
3.7 A buffing framer ? Consider the following statement from a wheat farmer to his workers: ”the price of wheat is very low this yea and the most I can get for crop is $35,000.If I paid you the same amount as I paid you last year($30,000) I would lose money because I also have to worry about the $20,000 I paid three months ago for seed and fertilizer. I’d be crazy to pay$35,000 . If you are willing to work or half as much as last year ($15,000), my total cost will be $35,000 so I’ll break even. If you don’t take a pay cut, I wont harvest the wheat” Is the farmer bluffing, or will the farm workers really lose their jobs if they reject the proposed pay cut?
5.4 in table 6.4 .suppose the relation ship between industry output and the total cost for the typical firm is linear, and each firm produces six shirts. If there are 400 firms in the industry the total cost for the typical firm is $_____, and the average cost per shirt is $______. another point on the supply curve is prices of $_______ and quantity of _______ shirts.
6.1 : the short-run supply curve is steeper than the long-run supply curve because of the principle of____________.
7.1 As the total output of a constant-cost industry increases, the_______ cost does not change, so the long run supply curve is ________(horizontal/ positively sloped/negatively sloped).
9-1
Action Items
• Read the article "Trading in a Pit Market".
• Based on the information provided in the paper, considering having 18 participants (buyers and sellers), answer the following questions:
• What do you expect the average profit for a buyer to be in each round?
• What do you expect the average profit for a seller to be in each round?
What is the highest cumulative (total) profit a seller can make if the game is played 10 times?
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Action Items
• Go to an online auction website eBay.com
• Search for top 10 listing for a specific item (e.g. chess sets), sort by "Best Match"
• List the item numbers of the top ten items. (After you click each individual item, the item number is located at the top right corner of the screen.)
• Summarize the price range of the ten items (lowest price, highest price).
Describe how the market supply curve could be constructed based on the information you collected.
1.1:for a monopolist, marginal revenue is_______(greater /less) than the price.
1.2: A monopoly that cuts its price gains revenue from its _______ customers but loses revenue from its ________ customers.
1.8 the marginal cost of an additional baseball fan is zero, so the profit-maximizing condition simplifies to ________( related to application 1)
2.3:the average cost for providing off-street parking is $30 per space per day, and as a monopolist you could charge $35 per space per day for 200 spaces the maximum amount that you are willing to pay for monopoly is $_______.
3.1: A patent increases the incentive to develop new products because it ________ the price of the product and thus generates the profit to cover a firm’s costs of_________.
4.1: A price discriminating will charge a higher price to consumers with a relatively ______ (elastic/inelastic) demand and a lower price to consumers with a relatively _______( elastic/inelastic) demand.
4.6senior discount for movies. Your movie theater charges a single price of $6. The marginal cost of each patron is $1. A recent marketing survey revealed the following information about senior citizens and non seniors.
Price
Number of patrons
Slope of demand curve
Seniors
6
100
-$0.01 per patron
Nonseniors
6
80
-0.10 per patron
a) the marginal revenue for senior citizens is $______, while the marginal revenue for nonseniors is $______.
b) if your objective is to maximize profit, the marginal principle tells you to______ the price for seniors and______ the price for nonseniors.
4.10: airline pricing. Consider an airline that initially has a single price of $300 for all consumers. At this price, it has 120 business travelers and 80 tourists. The airlines marginal cost is $100. The slope of the business demand curve is -$2 per traveler and the slope of the tourist demand curve is -$1 per traveler. Does the single-price policy maximize the airline’s profit? If not, how should it change its prices?
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