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SCC Econ&201 Exam 2 Essays Ch. 8-11

SCC Econ&201 Exam 2 Essays Ch. 8-11 - output when...

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MICROECONOMICS EXAM 2 ESSAYS CHAPTER 8-11 TOTAL 20 POINTS 1. Why does the short-run marginal cost curve eventually increase for the typical firm? Ans: Assume that the total cost is fixed, if we add too many labor in factories, the efficiency will decrease amd the marginal cost will rise up. 2. Explain what allocative efficiency is and how it is achieved in pure competition? Ans: In both the short and long run in perfect competition, if the price is equal to marginal cost (P=MC) , than allocative efficiency is achieved. 3. How does price elasticity affect the price-quantity combination and segment of the demand curve that the monopolist would prefer for price and output? Ans: Marginal revenue is positive for the monopolist on the elastic portion of the demand curve, and negative for the inelastic part. The monopolist will put out his
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Unformatted text preview: output when marginal revenue= marginal cost. 4. Why is the monopolistic competitor’s demand curve more elastic than a pure monopolist’s, but less elastic than a pure competitor’s? What factors determine the price elasticity of demand for a monopolistic competitor? Ans: The product of a monopolist has no substitutes for consumers to choose. This makes the demand curve of monopolist less elastic than that of a monopolistic competitor. For pure competition, customers will choose a product with a lower price because it’s esay for them to find a substitute, so this makes the price elasticity of demand of a monopolistic competitor lower than that of a pure competitor. Jason Wang Eco201 06:00-08:45 Hu...
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