hw 10 (extra credit)

hw 10 (extra credit) - leEKEI’ClSEll(J Exercise Score 1...

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Unformatted text preview: leEKEI’ClSEll (J) Exercise Score: 1. 0F 1. pt Assignment Score: 915% (1.9.5 0F 20 pts] 20 of 2|) complete Marginal DVDS Rented Total Revenue Avereage Revenue Revenue Complete the following table bv filling in the values for (i), (ii): and (“il- (i) Total revenue for 3 DVDs is $ 19.5 [enter your response in dollars and cents). (ii) Average revenue for 5 DVDs is $ 5.5 (enter your response in dollars and cents). (iii) Marginal revenue for the 8th D‘s-T] is $ _5 (enter your response in dollars and cents). laEx-arei5912 [J] Exercise Score: 1. OF 1. pt Assignment Score: 915% (1.9.5 of 20 pts] 20 0F 20 complete Which of the following are characteristics of monopolistic competition? Few firms compete High barriers to entrj: V Firms sell similar, but not identicaL products All of the above. "l "l "W. "l. "l. "l. "l. "l. "l. "l aaeeeeeeeenmu 1mm” Exercise Score: 1. 0F 1. pt Assignment Score: 915% (1.9.5 of 2D pts] 20 of 20 complete Whv does a monopolisticaflv competitive firm have a dounward—sloping demand curve? V Because the firm's product has man}; close substitutes. Because the firm is a price taker, like a wheat farmer Because the level of output produced depends on the cost structure ofthe firm Because the firm is considered to be a monopoly in its own market 19Exercise2E Exercise Score: 0.5 0F 1. pt Assignment Score: 979.5% (1.9.5 0F 20 pts) 20 of 20 complete a. [fAmazoncom's revenue increased after it cut the A PHCB price of books, what must be true about the price - elasticity of demand for ordering books onEle? I is unit-elastic. V [t is elastic. I is inelastic. 13. Suppose that before the price cut, Amazoncom was not seT 1g the profit-maximizing quantity of books, but after the price cut it was. 1) Use the line drawing tool to draw this firms' marginal revenue line. Label this line 'MR'. Noie.‘ you are noiprompredfor at 3:15:93, you have arsed (he wro rig drawing r003. I.............. D 10 20 30 :0 El] 60 ill 80 90100 9 _ . . . . __ . _) L se the pornt drawing tool to 1denttfy a pornt on the Quantity. [thousandsmafl demand curve reflecting the pric e-quanfity sold combination before the price cut. Label this point 'A'. 3) L'Se the point drawing tool to identify a point on the _ _ _ fl leExerci5931 Exercise Score: 1 OF 1 pt Assignment Score: 915% (19.5 0F 20 pts] 2|} of 2|} complete [Related to Don 'ILBI This Happen To Foul] A student remarks, "If Ems in a monopolistically compefitive industry are earning economic profits. new Ems will enter the mdusny. Eventually, the representative Em wfll E1d its demand curve has shifted to the left until it is just tangent to its average cost curve and it is earning zero profit at that point, some Ems will leave the indus 1y and the representative Em wfll E1d its demand curve will shift to the right. in long-run eqmlibrium, price will be above average total cost by just enough so that each Em is just brealdng even." Is the analysis correct or incorrect? She anaysis is incorrect. In the long-run eqmlibrimn, price wfll be below average total cost by just enough so that each Em is just breaking even. “he anaysis is incorrect. Firms in a monopolistically competitive indusz cannot enter and exit as easily as the analysis supposes. V The ana_ysis is incorrect. Firms will not leave the industry when earning zero economic profit. When the Em's demand curve is tangent to its average cost curve it is still earning zero economic profit. “he anaysis is correct. leExercis-332 {J} Exercise Score: 1. of 1. pt Assignment Score: 915% (1.9.5 of 20 pts] 20 of 2|) complete Writing in the Economic? magazine, Clive Crook argues: "A fashionable strand of skepticism agrues that governments have surrendered their power to capitalism—that the world's biggest companies are nowadays more powerde than many of the world's governments. Democracy is a sham. Profits rule, not people. These claims are patent nonsense. On the other hand, there is no question that companies would run the world for profit if they could. What stops them is not governments, powerful as they may be, but markets. " Source: Clive Crook, "Globalisation and Its Critics," Economist, September 23', 2001. How do markets stop companies from "running the world "or profit”? Competition in markets keeps most Ems from earning more than a normal rate ofreturn in the long run. Competition in markets keeps most Ems from earning more than a normal rate ofreturn in the short run. Competition in markets results in Ems being forced to produce the goods most desired by consumers. All of the above are true. V Only A and C are true. 19E:4erci5933 Exercise scere: 1 of 1 pt Assignment Score: 915% (19.5 or an ptsj 20 ef 2|:- complete [Related to Solved Problem 12-2] Michael Porter, an economist at the Harvard Business SchooL argues that Ems in the US. commercial-printing indusz have been “investing heavily in the same new equipment running their presses faster. and reducing crew sizes. But the resulting major productivity gains are being captured by customers and equipment suppliers, not retained in superior profitability. " Source: lflchlel E. Porter, “What Is Strategy?" Hm'rmi Business Resists, November-December 1996, p. 63. Why aren't Ems in the printing business earning higher profits. despite the productivity gains? V Competition causes the prices they charge to fall to the level ofthe average total costs. Firms in the industry are inefficient. Iheir costs are too high. Lower average total costs allow Ems to lower price. 1eEs‘erciseJE Exercise Score: l. of 1. pt Assignment Score: 979.5% (1.9.5 of 2D pts) 20 of 20 complete What trade-offs do consumers face when buying a product from a monopolistically competitive firm? Consumers pay a lower price but also have fewer choices. Consumers pay a higher price but are happy knowing that me industry is highly efficient. Consumers pay a price as low as the competitive price but have difficulty Etding and buying the product. V Consumers pay a price greater than marginal cost but also have choices more suited to their tastes. 1eExercise48 {J} Exercise Score: 1. oF 1 pt Assignment Score: 915% (1.9.5 oF 20 p13] 2|} 0F 2|} complete A monopolisticallv compefitive firm has excess capacity because its profit—ng level of output occurs at what point? Where price is greater than marginal cost and the firm is on the upward—sloping portion of its average total cost (ACT) curve. Where price is less than marginal cost and the firm is on the downward—sloping portion of its average total cost (ATC) cm-‘e. V Where price is greater than marginal cost and the firm is on the downward-sloping portion of its average total cost (AFC) curve. Where price is less than marginal cost and the firm is on the upward— sloping portion of its average total cost (ATC) curve. '1 '1 '1 '1 '1 '1 '1 '1 '1 '1 d®@@@@@@@@@mv 1mmw Exercise Score: 1. oF 1. pt Assignment Score: 915% (19.5 of 20 p15] 20 0F 2|) complete 11160, 50111313113135 desperately, [O CI'EEIE Dig BUSHIESSES ‘ 0; out of naturally small-scale operations. It has not 3.3. worked." V0 Entrepreneurs hope to increase profitability by creating "big businesses." Unless there are significant economies of scale, they will not be successful. In the figure, firms producing at a level of output that is a small fraction of total indusfiv sales, represented by LIL-1C], have the (h D K \‘x u- 2 lowest average costs for most levels of output. If a firm tries to grow to a larger size, such as that represented by LRACJ, its average costs will rise. 1,.) 4: Source: Thomas K. McGl-aw, ed., Creating}:me Commons, Cambridge, MA: Hal'er University Press, 199?, p. 323. N 4: Price and cost [dollars per unit} A .1 1:- If an entrepreneur is planning on producing 3,000 units, should he choose the smaller or larger operation? 53000 Th 1 0 2000 4000 5000 3000 10000 E BIgBI' opera 0151 Quantity. Either the smaller or larger operation V The smaller operation '1 '1 ‘~. '1 '1 ‘~. '1 '1 ‘~. ~. 'Gfl'fl@@@@@@@@@@b 1eExercise56 Exercise Score: 1. oF 1 pt Assignment Score: 915% {1.9.5 oF 2U pfs] 2|} of 2|} complete Refer to the graph to the right. Which quantity is more 111::er to be the quantity produced by the t5..pical firm in an oligopolv'? Price v :3, Q1 The sum on1 and Q2. There is insufficient information to establish the quantity requested. Dems nd D Q] Q: Qunnfih‘ 1eExereiseSi I:J:I Exercise Score: 1. oF 1. pt Assignment Score: 915% (1.9.5 of ED p15] 20 of 20 complete Refer to the graph to the right. Fill in the blanks. When the level of output produced is Q1, economies of scale in the industry are relatively and file industry will have a number of firms. “mile; {dollars V Imimportant; large Par unit} important; large important; small unimportant; srnaIl Demand 0 G1 02 Quantity leExercisefifi {le Exercise Score: 1. oF 1. pt Assignment Score: 979.5% [19.5 oF 2|) p13] 20 of 2|} complete \Vhich of the following is not a barrier to entry? Economies of scale Patents Ownership of a key input V None of file above. All of the above are barriers to entry. 1eExerciseI31 IZJZI Exercise Score: 1. 0F 1. pt Assignment Score: 979.5% [19.5 oF 20 p15] 2|} 0F 20 complete Consider two oligopolistic industries. In the first industry= firms always match price changes by any other firm in the industry. In the second indusfi'y, firms always ignore price changes by any other firm. In which indusfiy are firms likely to charge higher pric es'? In the industry where firms ignore price changes V In the industry where firms match price changes Either; the likelihood of higher prices is the same in both industries. 1eExerciseI33 b?) EIEPCiSE SCOPE: 1 OF 1 pt Assignment Score: 915% (1.9.5 oF 20 pts] 20 of 20 complete 5 Bob serves 3 years Bob serves 15 years Bob serves 0 years 13. Does Bob have a dominant strategy? If so, what is it? Dan '1‘ confess B ob Confess No, there is no dominant strategy for Bob. V Yes, the dominant strategy for Bob is to confess. Yes, the dominant strategy for Bob is to remain sflent. (3. Does Tom have a dominant strategy? If so, what is it? No, there is no dominant strategy for Tom. V Yes, the dominant strategy for Tom is to confess. Yes, the dominant strategy for Tom is to remain silent. d. What sentences do Bob and Tom sen-e”? Tom will confess and Bob wi[l refuse to confess. Thus, Tom will go free and Bob will serve 15 years. leExerciseEJ Kg.) Exercise Score: l. of 1 pt Assignment Score: 915% (19.5 oF 20 pts] 2|} of 20 complete 5 [Related to Don 'ELBI This Happen To Youf] A student argues, "The prisoners' dilemma game is unrealistic. Each player's strategy is based on the assumption that the other player won't cooperate. But if each player assumes that the other player will cooperate, then the 'dilemma' disappears." Is this argument correct or incorrect? The argument is incorrect. The best strategy for each player is to cooperate lmowing that the other will not c ooperate. V The argument is incorrect. The best strategy for each player is to not cooperate no matter what the other player does. The argument is correct. The best strategy for each player is to cooperate. The argument is incorrect. The best strategy for each player is to not cooperate lmowmg that the other will cooperate. ‘1 ‘1 ‘1 ‘1 '~. '~. '~. '~. '~. '~. I3}; Exercise Score: 1 oF 1. pt Assignment Score: 915% (1.9.5 oF 20 pts] 2|} 0F 2|} complete 5 Under "early decision" college admission plans, students apply to a college in the fall and, if they are accepted, they must enroll in that college. According to an article in Business Week, Yale president Richard Levin argues that early decision plans put too much pressure on students to decide early in their senior years which college they wish to attend. Levin has proposed abolishing early decision plans. But the author of the article is doubtful this will succeed because " as long as some big-name schools offer early admissions, the others feel they must, too, or lose out on the best talent." Game theory can help us analyze this situation as an example of what? A c artel C oll'usion A cooperative eqlnlnhrfinn V The prisoner's dilemma 'i. "i “x “i 'i. "i “x “i 'i. "i Gdfl@@@[email protected]@’@@@[email protected]@b 1eExerciseEI Exercise Score: 1. of 1. pt Assignment Score: 9155-1: (1.9.5 of 20 pts] 20 of 20 complete increase the risk of developing cancer and other medical problems. A a. in these circumstances, are baseball players in a prisoners' dilemma? Yes, because the players that take the illegal drugs are better offthan the ones that don't. V Yes, because the large number of players taking illegal drugs means their performance does not improve relative to most players while they are worse of because of die side effects of die drugs. No, as the players are better off because of the higher pay the receive. No, because the players are pursuing cooperative strategies. b. Suppose that Major League Baseball begins testing players for steroids and firing players who are caught using them (or other illegal muscle-building drugs}. Will this testing make baseball players as a group better off or worse off? Testing would make baseball players as a group worse off, as their pay would decrease and their performance would decrease without the use of the drugs. ' l esting would make baseball players as a group better off, because their average pay should increase and their long-term health will improve becaue they won't be using steroids anymore. ' l esting would make baseball players as a group worse off as their performance would decrease without the use of the drugs. V Testing would make baseball players as a group better off, because their average pay should be unchanged and ‘l'l'lF'll'f' lM'IU—TPVTT'I l'lPfil'i'lfl 11W.“ imr'n'n‘ise 1‘1F-l" 31h:- ‘l'l‘1P'L’ 11"01’1'1' l'llF- “flint! QTF'rfl‘llf'l: fif‘l'ifl’T'll'WP fl 1eEKerciseEB Exercise Score: 1. 0F 1. pt Assignment Score: 915% (1.9.5 0F 20 pts) 20 of 20 complete the BIIIOUIII U15 EOVEIIJIHCIH “'lJl have to pay to have the work done.) Each firm will have costs of $2 billion to do the work. If they both make the same bid, d1ey will both be 3 hired and will split the work and the profits. if one makes a low bid and one makes a high bid, only the low bidder Will be hired and it Will receive all the profits. The result is the payoff matrix above. A a. When does the Nash eqliilibrium in dis game occur? When both companies bid $'i‘ billion and each earns profits of $2.50 billion. . When Bechtel bids $6 billion and Hallibiirton bids $'i‘ billion. V When both companies bid $6 billion and each earns profits of $2.00 billion. When Bechtel bids $? billion and Halliburton bids $6 billion. b. How might the situation be changed if me two companies expect to be bidding on many similar projects in future years? Both companies will bid $6 billion. V Both companies will bid $? billion. Bechtel will bid $? billion and Halliburton will bid $6 billion. Bechtel will bid $6 billion and Halliburton will bid $? billion. 1eExereiseB Exercise Score: 1. of 1. pt Assignment Score: 915% (1.9.5 of 20 pts) 20 of 20 complete w xii—tum L rill-u J. mchL utiliiuLu 11:51:: Ltirlsuy LUl sufipfilu s " -' "--' ' will I I 5 will I I 5 - to 1153 one system 01' E 0 er, ra er an to USE 0 _ “hm-{on $3 billion The payoff matrix shows the profits per year for each RED tags company resulting from the interaction oftheir strategies. T3331 m5 Talget ms 31 billion 34 billion a. Does 'Wal—Mart have a dominant strategy? If so, what is it? Yes, the dominant strategy for Wal—Mait is to use bar codes. Yes, the dominant strategy for \VaJ—E-Iart is to use RFID tags. V No, there is not a dominant strategy for Wal—Mart. 13. Does Target have a dominant strategy”? If so, what is it? Yes, the dominant so'ategy for Target is to use REID tags. Yes, the dominant strategy for Target is to use bar codes. V No, there is not a dominant strategy for Target. (3. How many Nash ethhria are there in this game? Zero eqmlibria One eqmlibrimn V Two equflibria Three equflibria Four eqmlibria ...
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This note was uploaded on 03/30/2012 for the course ECON 201 taught by Professor Bonistis during the Spring '11 term at NJIT.

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hw 10 (extra credit) - leEKEI’ClSEll(J Exercise Score 1...

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