Pg. 263 Ch. 12 Question 2 (Do Part a. only) Complete the labor demand table for a firm that is hiring labor competitively and selling its product in a competitive market.
a. How many workers will the firm hire if the market wage rate is $27.95? $19.95? Explain why the firm will not hire a larger or smaller number of units of labor at each of these wage rates.
Pg. 285 Ch. 13 Problem 4 (Do Part a. and b. only) Suppose that low?skilled workers employed in clearing woodland can each clear one acre per month if they are each equipped with a shovel, a machete, and a chainsaw. Clearing one acre brings in $1000 in revenue. Each worker’s equipment costs the worker’s employer $150 per month to rent and each worker toils 40 hours per week for four weeks each month.
a. What is the marginal revenue product of hiring one low?skilled worker to clear woodland for one month?
b. How much revenue per hour does each worker bring in?
Pg. 179 Ch. 8 Problem 1 A purely competitive firm finds that the market price for its product is $20. It has a fixed cost of $100 and a variable cost of $10 per unit for the first 50 units and then $25 per unit for all successive units. Does price exceed average variable cost for the first 50 units? What about for the first 100 units? What is the marginal cost per unit for the first 50 units? What about for units 51 and higher? For each of the first 50 units, does MR exceed MC? What about for units 51 and higher? What output level will yield the largest possible profit for this purely competitive firm? (Hint: Draw a graph similar to Figure 8.2 using data for this firm.)
Pg. 193 Ch. 9 Question 7 The basic model of pure competition reviewed in this chapter finds that in the long run all firms in a purely competitive industry will earn normal profits. If all firms will only earn a normal profit in the long run, why would any firms bother to develop new products or lower?cost production methods? Explain.
Pg. 214 Ch. 10 Question 5 Assume that a pure monopolist and a purely competitive firm have the same unit costs. Contrast the two with respect to (a) price, (b) output, (c) profits, (d) allocation of resources, and (e) impact upon the distribution of income. Since both monopolists and competitive firms follow the
MC = MR rule in maximizing profits, how do you account for the different results? Why might the costs of a purely competitive firm and a monopolist be different? What are the implications of such a cost difference?
Pg. 193 Ch. 9 Question 9 (Read Last Word on page 191). How does a generic drug differ from its brand?name, previously patented equivalent? Explain why the price of a brand?name drug typically declines when an equivalent generic drug becomes available? Explain how that drop in price affects allocative efficiency.
Pg. 239 Ch. 11 Question 6 Why do oligopolies exist? List five or six oligopolists whose products you own or regularly purchase. What distinguishes oligopoly from monopolistic competition?
Pg. 239 Ch. 11 Question 7 Answer the following questions, which relate to measures of concentration:
a. What is the meaning of a four-firm concentration ratio of 60 percent? 90 percent? What are the shortcomings of concentration ratios as measures of monopoly power?
b. Suppose that the five firms in industry A have annual sales of 30, 30, 20, 10, and 10 percent of total industry sales. For the five firms in industry B the figures are 60, 25, 5, 5, and 5 percent. Calculate the Herfindahl index for each industry and compare their likely competitiveness.
Last Question (not in textbook) The demand schedule for the product produced by a monopolist is given in the following table.
Quantity demanded Price Total revenue Marginal revenue Price elasticity
(a) Complete the table by computing total revenue, marginal revenue, and the price elasticity of demand. USE THE MIDPOINTS FORMULA.