469-SG2 - d. Stricter environmental regulation requiring...

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Study Guide 2 for ABA Managerial Economics 1. Discuss why agricultural industries in the U.S. are primary examples of perfect competition. 2. Explain the similarities and differences in long run equilibrium between a) perfectly competitive price-taking markets, b) price-searcher monopolistic competition markets, and c) pure monopoly markets. You could mention some of the following variables in your explanation: Price, ATC, MR, MC, profits, min ATC , P v MC, P v ATC, etc. 3. Explain why perfectly competitive firms cannot earn positive economic profits in the LR. 4. Explain how each of the following events will affect the average and marginal costs of a firm in the short run (Hint: MC is only affected by a change in variable costs, ATC is affected by changes in any cost (Fixed or Variable): a. An increase in labor costs. b. An increase in the annual lease payments for a facility. c. A decrease in the cost of utilities (electricity, gas, water).
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Unformatted text preview: d. Stricter environmental regulation requiring installation of scrubbers on smokestacks. e. An increase in property taxes. f. An increase in learning on the part of labor that raises productivity. 5. Carefully explain why the Marginal Product of labor first rises and then falls as the use of labor increases. In which portion of the MP of labor curve will the firm typically produce? 6. Explain the rule for the firm to follow in the LR if its goal is to produce at the least cost. 7. Why are cartels inherently unstable? 8. How can occupational licensure be used to erect barriers to entry in an industry and generate possible monopoly profits (positive economic profits) for the industry? 9. Many natural monopolies are regulated. Explain the rationale for regulation. 10. Explain the concept of DWL (dead weight loss) as it applies to trade protection (complete ban on imports or tariffs) and monopoly....
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