MICROECONOMICS BU224 Seminar Seven
Agenda Course Issues and Questions Review of Chapter 13 Concepts Perfect Competition Review of Chapter 14 Concepts Monopoly Questions
Market Supply and Demand $80 $60 $40 $20 $100 $120 $130 $140 S D Q 5 10 15 20 25 30 35 40 45
Individual firm demand $140 $130 Individual firm demand $120 D $100 $80 $60 $40 $20 5 10 15 20 25 30 35 40 45
Chapter 13 Questions 1. If a profit-maximizing firm is producing an output level in which marginal revenue exceeds marginal cost, should it produce more, less or the same? 2. If a profit-maximizing firm is producing an output level in which marginal revenue equals marginal cost, then is this firm earning a profit?
Chapter 13 Questions 3. If a competitive industry is currently losing money, what can be expected to happen to the number of sellers, the price of the product, the volume of output and losses in this industry over time? 4. If a competitive industry expands and higher wages must be paid to attract more workers then what will the long-run supply curve for this industry look like?
Chapter 13 Questions 1. For each of the following, is the business a price-taking producer? Explain your answers. a. A cappuccino café in a university town where there are dozens of very similar cappuccino cafés b. The makers of Pepsi-Cola c. One of many sellers of zucchini at a local farmers’ market
Chapter 13 Questions 2. For each of the following, is the industry perfectly competitive? Referring to market share, standardization of the product, and/or free entry and exit, explain your answers. a. Aspirin b. Shania Twain concerts c. SUVs
Chapter 14 Questions Can a monopoly lose money? What are some relevant public policy questions when government considers breaking up a monopoly? Can a monopoly lose money? How long can a monopoly earn economic profits? Why does a monopolist produce less and charge a higher price compared to a competitive market?
Chapter 14 Questions 5. What evidence suggests that some government regulation may reduce competition in practice? 6. How can a monopoly maintain its single-seller status?
Chapter 14 Questions 1. Each of the following firms possesses market power. Explain its source. a. Merck, the producer of the patented cholesterol-lowering drug Zetia b. Verizon, a provider of local telephone service c. Chiquita, a supplier of bananas and owner of most banana plantations
Chapter 14 Questions 2. Skyscraper City has a subway system, for which a one-way fare is $1.50. There is pressure on the mayor to reduce the fare by one-third, to $1.00. The mayor is dismayed, thinking that this will mean Skyscraper City is losing one-third of its revenue from sales of subway tickets. The mayor’s economic adviser reminds her that she is focusing only on the price effect and ignoring the quantity effect. Explain why the mayor’s estimate of a one-third loss of revenue is likely to be an Overestimate. Illustrate with a diagram.
Microeconomics Questions?