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ECON 1312 Homework Assignment # 3h
Chapter 12
1. Why is a firm in perfect competition a price taker?
2. In perfect competition, what is the relationship between the demand for the firm’s output and the market demand?
3. In perfect competition, why is a firm’s marginal revenue curve also the demand curve for the firm’s output?
4. What decisions must a firm make to maximize profit?
5. Why does a firm in perfect competition produce the quantity at which marginal cost equals price?
6. What is the lowest price at which a firm produces an output?
7. What is the relationship between a firm’s supply curve, its marginal cost curve, and its average variable cost curve?
8. How do we derive the short-run market supply curve in perfect competition?
9. In perfect competition, when market demand increases, explain how the price of the good and the output and profit of each firm changes in the short-run.
10. In perfect competition, when the market demand decreases, explain how the price of the good and the output and profit of each firm changes in the short-run.
11. What triggers entry in a competitive market? Describe the process that ends further entry.
12. What triggers exit in a competitive market? Describe the process that ends further exit.
13. Describe the course of events ina competitive market following a permanent decrease in demand. What happens to output, price, and economic profit in the short-run and in the long-run?
14. Describe the course of events in a competitive market following a permanent decrease in demand. What happens to output, price, and economic profit in the short-run and in the long-run?
15. How does the time frame over which a supply decision is made influence the elasticity of supply? Explain your answer.
Chapter 13
1. How does monopoly arise?
2. How does a natural monopoly differ from a legal monopoly?
3. Distinguish between a price-discriminating monopoly and a single-price monopoly.
4. What is the relationship between marginal cost and marginal revenue when a single-price monopoly maximizes profit?
5. How does a single-price monopoly determine the price it will charge its customers?
6. What is the relationship between price, marginal revenue, and marginal cost when a single-price monopoly is maximizing profit?
7. Why can a monopoly make a positive economic profit even in the long-run?
8.Why does a single-price monopoly produce a smaller output and charge more than the price that would prevail if the market were perfectly competitive?
9. How does a monopoly transfer consumer surplus to itself?
10. Why is a single-price monopoly inefficient?
11. What is price discrimination and how is it used to increase a monopoly’s profit?
12. Explain how consumer surplus changes when a monopoly price discriminates.
13. Explain how consumer surplus, economic profit, and output change when a monopoly perfectly discriminates.
14. What are some of the ways that real-world airlines price discriminate?
Chapter 14
1. What are the distinguishing characteristics of monopolistic competition?
2. How do firms in monopolistic competition compete?
3. How does a firm in monopolistic competition decide how much to produce and at what price to offer its product for sale?
4. Why can a firm in monopolistic competition make an economic profit only in the short run?
5. Why do firms in monopolistic competition operate with excess capacity?
6. Why is there a price markup over marginal cost in monopolistic competition?
7. Is monopolistic competition efficient?
8. How, other than by adjusting price, do firms in monopolistic competition compete?
9. Why might product innovation and development be efficient and why might be inefficient?
10. How do selling costs influence a firm’s cost curves and its average total cost?
11. How does advertising influence demand?
