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What does it imply when we say that the marginal utility per dollar spent is equal for two goods?
If a one-day pass costs $40 but the two-day pass costs $50, what is the average cost for the two-day pass? What is the marginal cost of the two day pass?
Describe the two-step process used to identify the profit-maximizing level of output.
Under what circumstances will a firm have to decide whether to operate or to shut down?
How do profits and losses act as signals that guide producers to use resources to make what society wants most?
A firm is experiencing a loss of $5,000 per year. The firm has fixed costs of $8,000 per year. Should the firm operate in the short run or shut down?
If Barney clears 20 driveways a day, should he continue to operate or shut down? If this situation persists, will Barney stay in the industry or exit?
Describe the difference between a monopoly and a natural monopoly. Give an example of a barrier that can lead to monopoly.
Why is a monopolist's marginal revenue curve less than the price of the good it sells?
What is the monopolist's rule for determining the profit-maximizing output? What two steps does the monopolist follow to maximize profits?
Why does a monopolist operate inefficiently? Draw a demand curve, marginal revenue curve and a marginal cost curve to illustrate deadweight loss from monopoly.
Why are the necessary conditions met to establish a monopoly? If the crystals are government-owned or -regulated, what price should the government set for them?
Recalling what you have learned about elasticity. What can you say about the connection between the price a monopolist chooses to charge?
Create a new graph that illustrates the consumer surplus, producer surplus, and deadweight loss after the monopoly enters the market.
Explain why the city council's estimate of the revenue increase is likely to be overstated. Use a graph to illustrate your answer.
Suppose that a monopolist's marginal cost curve shifts upward. What is likely to happen to the price the monopolist charges?
What two challenges must a firm overcome to effectively price-discriminate? Why does price discrimination improve the efficiency of the market?
Why is preventing resale a key to successful price discrimination? How can this lead to the most socially desirable level of output?
At many amusement parks, customers who enter after 4 p.m. receive a steep discount on price of admission. How this practice is a form of price discrimination.
Given that the pharmaceutical industry cannot prevent the resale of these drugs, are the industry's efforts to price dis criminate useless? Explain your answer.
The student rush tickets are available first-come first-served. Why does the opera company offer these low-cost tickets? How does it benefit from this practice?
Why is product differentiation necessary for monopolistic competition? What are three types of product differentiation?
How is monopolistic competition like competitive markets? How is monopolistic competition like monopoly?
Why do monopolistically competitive firms produce less than those operating at the most efficient scale of production?
Draw a graph that shows a monopolistic competitor making economic profit in short run and a graph that shows monopolistic competitor making no economic profit.