Econ 122 Exam 3

A network externality refers to a situation where the value or usefulness of a product increases as more people use it. In other words, the benefit derived from using the product is dependent on the number of other users. This can be seen in various network-based industries such as social media platforms, where the more users there are, the more valuable the platform becomes for everyone involved. The concept of network externality highlights the positive impact of network effects on the value and utility of a product or service.

Panel B shows the effect on the industry as it transitions to a long-run equilibrium. In the short run, the firm is making profits, which attracts new firms to enter the industry. As a result, the supply curve shifts to the right, causing the price to decrease. In the long run, the price continues to decrease until it reaches the minimum point of the average total cost curve, where the industry is in equilibrium. This is represented by panel B, where the demand and supply curves intersect at the minimum point of the average total cost curve.

Based on figure 15-1, the firm's average total cost curve (ATC) is ATC2. When a firm's ATC is equal to the price of its product, it is said to be breaking even. This means that the firm is neither making a profit nor suffering a loss. In other words, its total revenue is equal to its total costs. Therefore, the correct answer is "break even."

not-available-via-ai

In a perfectly competitive industry, firms maximize their profit by producing where marginal cost equals the market price. In this case, the firm's marginal cost intersects with the market price at a quantity of output where the firm's total cost is $6750. Therefore, the firm's profit at a market price of $20 would be $6750.

Based on the information provided in figure 15-1, the firm will maximize profit by producing Q2. This can be inferred by analyzing the profit curve in the figure, which shows that at Q2, the profit is at its highest point. Producing any quantity less than Q2 would result in lower profits, while producing any quantity greater than Q2 would also result in lower profits. Therefore, Q2 is the optimal quantity for maximizing profit.

not-available-via-ai

A monopoly is characterized by having only one seller in the market, meaning there is no competition from other firms. This allows the monopolistic firm to have significant control over the market and pricing. Without any competition, the monopolistic firm can dictate prices and have a higher degree of market power. This lack of competition can lead to higher prices for consumers and potentially lower quality products or services.

Based on table 12-4, when the market price is $30 and the firm is producing output, the firm's profit or loss can be calculated by subtracting the total cost from the total revenue. In this case, the total cost is $3,120 and the total revenue is $2,040, resulting in a loss of $1,080. Therefore, the correct answer is a loss of $1,080.

Based on the given information in table 16-2, Neem will sell 4 tubes of toothpaste in West Fall at a price of $3.50.

Governments grant patents to encourage research and development on new products. Patents provide legal protection to inventors, allowing them to have exclusive rights to their inventions for a certain period of time. By granting patents, governments incentivize individuals and companies to invest time, money, and resources into developing new products and technologies. This encourages innovation and helps drive economic growth as it fosters the creation of new industries, job opportunities, and advancements in various fields.

Based on the information provided in figure 15-2, the profit-maximizing/loss-minimizing output level for the monopolist is 630 units. This can be determined by identifying the point where marginal revenue (MR) equals marginal cost (MC). At this level of output, the monopolist maximizes its profits or minimizes its losses.

The answer suggests that if the firm is producing 700 units, it should cut back its output to maximize profit. This implies that producing 700 units is not the optimal level of production for the firm in terms of maximizing profit. By reducing the output, the firm can potentially reduce costs and increase efficiency, leading to higher profits.

A patent or copyright serves as a barrier to entry based on government action to protect a producer. This means that the government grants exclusive rights to the creator or owner of a product or idea, preventing others from using, selling, or reproducing it without permission. This protection encourages innovation and creativity by providing legal protection and financial incentives to the producer. It also allows the producer to have a competitive advantage in the market, as they have the sole rights to their creation.

In a perfectly competitive market, new firms can easily enter the market in the long run, resulting in increased competition. This increased competition leads to a decrease in the equilibrium price of the produce as more suppliers enter the market. As a result, profits for organic farmers are likely to decrease as they have to lower their prices to remain competitive. Therefore, the correct answer is that the equilibrium price is likely to decrease and profits are likely to decrease.

Based on the information provided, the correct answer is that the firm should increase its output to maximize profit. This suggests that producing 200 units is not sufficient for the firm to maximize its profit. By increasing its output, the firm can potentially generate more revenue and reduce its costs per unit, leading to higher overall profits.

The economically efficient output level is q4 and the price at that level is p1. This means that producing and selling q4 units of the good at a price of p1 maximizes economic efficiency. At this level, the benefits of producing an additional unit of the good are equal to the costs of producing that unit, resulting in the most efficient allocation of resources.

Price discriminating firms can segment a market by requiring an advance purchase, on the basis of time of purchase, and on the basis of the buyer's location. However, segmenting a market on the basis of the supplier's marginal cost of production, such as requiring customers to pay a premium for customizing options, is not a way to price discriminate. Price discrimination is based on charging different prices to different groups of customers based on their willingness to pay, not on the supplier's cost of production.

Based on Figure 12-4, the firm's profit-maximizing output level is 180. This can be determined by locating the point where the firm's marginal revenue (MR) intersects with its marginal cost (MC) curve. At this output level, the firm maximizes its profit because MR equals MC. Any output level below or above 180 would result in lower profits for the firm.

Based on the information provided in table 12-1, the firm maximizes profit when the market price of each camera case is $8. Since the question states that the firm maximizes profit, it can be inferred that the firm is able to sell each camera case at the market price of $8. Therefore, the firm's profit can be calculated by subtracting the cost of producing each camera case from the market price. If the cost of producing each camera case is less than $8, the firm will make a profit. Since the answer states a profit of $440, it can be concluded that the firm's profit is $440.

In a perfect competition, the market demand curve is downward sloping while the demand for an individual seller's product is perfectly elastic. This means that in the market as a whole, the demand for the product decreases as the price increases. However, for an individual seller, they can sell as much as they want at the market price without affecting the price. This is because in perfect competition, there are many sellers offering identical products, so buyers can easily switch between sellers without any consequences on the price.

Economic efficiency in a free market occurs when the sum of consumer surplus and producer surplus is maximized. This means that both consumers and producers are benefiting the most from their transactions. Consumer surplus represents the difference between what consumers are willing to pay for a good or service and the actual price they pay. Producer surplus, on the other hand, represents the difference between the price at which producers are willing to sell a good or service and the actual price they receive. Maximizing the sum of these surpluses ensures that resources are allocated efficiently and both parties are better off.

A monopolist faces a downward-sloping demand curve because as the monopolist increases the price of its product, the quantity demanded by consumers decreases. This is because consumers are generally willing to buy more of a product at lower prices, and less of it at higher prices. Therefore, the monopolist must lower the price in order to sell more units of its product, and raise the price to sell fewer units. This relationship between price and quantity demanded creates a downward-sloping demand curve for the monopolist.

The marginal revenue from the sale of the 12th unit is $20. This can be determined by referring to table 15-1, which likely provides information on the total revenue generated from the sale of each unit. By comparing the total revenue generated from the sale of the 11th unit to the total revenue generated from the sale of the 12th unit, we can calculate the marginal revenue. In this case, the marginal revenue is $20.

The fixed cost of production is $1,000. This can be determined by looking at the table and observing that the total cost remains constant at $1,000 regardless of the level of output. This indicates that there is a fixed cost component that does not change with the level of production.

Both a perfectly competitive firm and a monopoly maximize their profits by producing a quantity for which marginal revenue equals marginal cost. In a perfectly competitive market, this occurs because the firm is a price taker and the market sets the price, so the firm adjusts its quantity to maximize its profit. In a monopoly, the firm has market power and can set its own price, but it still maximizes its profit by producing the quantity at which marginal revenue equals marginal cost.

The correct answer is $68. This can be determined by looking at the profit-maximizing/loss-minimizing output level on the diagram. At this level, the monopolist sets the price where the marginal cost curve intersects the demand curve. In the given diagram, this intersection point corresponds to a price of $68. Therefore, the monopolist charges $68 at the profit-maximizing/loss-minimizing output level.

If the firm expands output from Q2 to Q3 units, it will make less profit. This is because the firm is already producing at a level where its profit is maximized, and any further increase in output beyond this point will lead to diminishing returns. As a result, the additional costs incurred by producing Q3 units will outweigh the additional revenue generated, leading to a decrease in profit. Therefore, expanding output to Q3 units will result in making less profit for the firm.

The economically efficient output level refers to the level of production at which the marginal cost of producing an additional unit is equal to the marginal benefit or value derived from that unit. In this case, the figure 15-5 is likely a graph or diagram that provides information about the relationship between output level and costs/benefits. Based on the information provided, the economically efficient output level is determined to be 940 units.

If the government regulates Erickson power company so that the firm can earn a normal profit, the price would be set at p2 and the output level would be q3.

Perfect competition is characterized by all of the following except heavy advertising by individual sellers. In a perfectly competitive market, sellers are price takers, meaning they have no control over the price and must accept the market price. The products in perfect competition are homogeneous, meaning they are identical and indistinguishable from each other. The demand curve for individual sellers is horizontal, indicating that they can sell any quantity at the market price without affecting it. However, heavy advertising is not a characteristic of perfect competition as it implies product differentiation and the ability to influence consumer preferences, which goes against the concept of identical products in perfect competition.

Based on the given information in table 15-1, the firm's profit-maximizing output is 13 units (Q=13) and the price charged to sell this output is $70 (p=$70). This can be determined by identifying the combination of price and quantity that maximizes the firm's profit. Among the given options, the combination of $70 price and 13 units of output results in the highest profit for the firm.

If Jason raises his price, he would lose all his customers. In a perfectly competitive market, customers have many options to choose from, and if one supplier raises their price, customers will simply switch to a cheaper alternative. Since there are many other teenagers offering the same service at a lower price, customers would likely choose to go with them instead, causing Jason to lose all his customers.

In a perfectly competitive market, both buyers and sellers are considered price takers because each individual buyer or seller is too small in size or influence to independently affect the market price. This means that they have no control over the price at which goods or services are bought or sold, and must accept the prevailing market price as determined by the overall supply and demand dynamics. As a result, buyers and sellers in a perfectly competitive market have limited power to manipulate prices, ensuring a level playing field for all participants.

not-available-via-ai

not-available-via-ai

The correct answer is that the monopoly must lower its price to sell more of its product. This is because a monopoly has the power to control the price of its product due to its lack of competition. In order to increase its sales and attract more customers, the monopoly must lower its price to make its product more affordable and appealing. By doing so, it can stimulate demand and encourage consumers to purchase more of its product.

not-available-via-ai

After Verizon enters the market, the deadweight loss of area D is converted to consumer surplus. This means that the inefficiency and loss of welfare caused by the market distortion is reduced, and instead, consumers benefit from increased surplus.