What is the relationship between price and marginal revenue for firms in perfect competition? Explain.
What will be an ideal response?
Ques. 2What role do firms play in output markets? What role do firms play in factor markets?
What will be an ideal response?
Ques. 3Most goods and service that we enjoy are bought and sold in the market. However, leisure is something that we value but we do not buy it explicitly.
What is the price of leisure? Explain what would happen to the amount of leisure that we would enjoy if the wage rate went up. Make sure to use the substitution and income effect to explain your answer and postulate whether leisure is a normal or inferior good. Why is the ultimate net effect not determinable by appealing to logic alone?
Ques. 4What role do households play in output markets? What role do households play in factor markets?
What will be an ideal response?
Ques. 5Suppose there is news that indicates that gasoline supplies might suddenly become disrupted by a truckers' union strike.
What would you expect would happen to the demand for gasoline in the present? How might consumers change their behavior and why? What impact would this news have on the price of gasoline immediately? Would it matter whether the news story was accurate?
Ques. 6Assume a firm is operating under conditions of pure competition and faces a marginal cost function that is everywhere below its average total cost.
If the firm is producing where marginal revenue equals marginal cost will it be possible for it to make an economic profit? Explain.
Ques. 7Price discrimination allows a monopolist to increase his or her economic profits by capturing part of the consumer surplus and turning it into economic profit.
Is the previous statement correct or incorrect? If the statement is correct, why is it important in understanding firms' behaviors? If it is incorrect, why is it incorrect?
Ques. 8A firm is employing capital and labor such that the marginal product of capital is 80 and the marginal product of labor is 20 .
If the price of a unit of capital is 30 and the price of a unit of labor is 15, is the firm minimizing its costs? If not, can you recommend a change for the firm to make in its relative amounts of labor and capital used? Explain.
Ques. 9Give an example of price discrimination.
What will be an ideal response?
Ques. 10What is meant by marginal revenue?
What will be an ideal response?
Ques. 11Price discriminators lose money by being nice to their customers. Is the previous statement correct or incorrect?
What will be an ideal response?
Ques. 12In what ways can expectations change your demand for a product today?
What will be an ideal response?
Quick Reply
