03 Jun Question 1. A profit-maximizing firm picks the quantity of output at which ———- equals —————. 2. The entry of a second firm shifts the firm-specific demand curve of the first firm to the ———(left/right) 3. A perfectly competitive firm has a ——demand curve, whereas, a monopolistic competitive firm has a —–demand curve. 4. In the long-run equilibrium ina perfectly competitive market, price is equal to both ———and ————–. 5. Although there relatively small —-in the production of berakfast cereal, the market is an oligopoly because of the substantial investment in —–required to enter the market. 6. In the figure below, rectangle 3 is not a Nash equilibrium because if ——picks a(n) — price, the best response of —–is to pick the —-price. 7. Buzz and Moe are duopolists in the lawn-care market. The following game tree shows the possible pricing outcomes and their payoffs. The outcome of the pricing game is that Buzz will pick the ———price and Moe will pick the ———- price. 8. Arrows up or down: In the kinked demand curve model, the demand for a firms product is relatively elastic when the price —- and rerelatively inelastic when the price ——–. 9. Consider a market with tow firms managed by Harry and Vera. Under a cartel (goth firms pick the high price), eanch firm earns a profit of $80.. Under a duopoly (goth firms pick the low price), each firm earns a profit of $60.. If the two firms pick different prices, the high-price firm earns a profit of $20. And the low-price firm earns a profit of $90. a. Fill in the payoff matrix. b. The outcome of the pricing game is that Harry picks the —— price and Vera picks the —–price. c. The outcome identified in part ( b ) is a Nash equilibrium because neither firm has an incentive to ————. 10. The entry of a second firm shifts the demand curve of the original firm to the ———-, so that at each price the original firm will sell a(n) quantity. 11. There are three types of antitrust polies, (1)————–, (2) ————-, and (3) ———–. 12. The deregulation of the airline industry led to ———- prices on average, but ——-prices in cities. 13. The optimal level of pollution abatement is the level at which the ——— of abatement equals the —— of abatement. 14. Arrows up or doen: A carbon tax will shift the supply curve for home heating oil ———–, causing the equilibrium price to ———- and the equilibrium quantity to —–. 15. A command-and-control policy is likely to be inefficient because it requires firms to use ———. 16. A decrease in the supply of marketavle pollution permits will shift the supply curve for permits to the —————- and ——the equilibrium price of permits. 17. A gasoline tax will be shifted forward to ——— and backward to ——-, such as the suppliers of ————-. 18. Arrows up or down: An increase in the wage ———— real income, and if leisure is a normal good this tends to ———– leisure time and ——– labor time. 19. Income and Substitution Effects. Sabrina works for a workers cooperative that initially pays her a lumpsum of $200. Per week (as long as she works at least 15 hours per week) and a wage of $20 per hour of work. She initially works 40 hours per week. Suppose the cooperative changes its pay plan by increasing the lump-sum payment to $280 and decreasing the hourls wage to $18. a. If Sabrina continues to work 40 hours per week, how does the change in the pay plan affect her total income? b. Use the concepts of the income and substitution effects to predict whether Sabrina will work more hours, fewer hours, or the same number of hours. (Is there an income effect to consider) 20. Arrows up or down: An increase in the demand for nursing services will ———-the equilibrium wage and ———– the equilibrium quantity of nursing services. 21. The wage for a particular occupation will be relatively low if labor ——– (demand/supply) is small relative to labor (demand/supply). 22. Arrows up or down: An important factor in growing inequality over the last 30 years is technological change that has ———– the demand for college graduates and ———- the demand for less educated workers.
Question
1. A profit-maximizing firm picks the quantity of output at which ———- equals —————.
2. The entry of a second firm shifts the firm-specific demand curve of the first firm to the
———(left/right)
3. A perfectly competitive firm has a ——demand curve, whereas, a monopolistic competitive
firm has a —–demand curve.
4. In the long-run equilibrium ina perfectly competitive market, price is equal to both
———and ————–.
5. Although there relatively small —-in the production of berakfast cereal, the market is an
oligopoly because of the substantial investment in —–required to enter the market.
6. In the figure below, rectangle 3 is not a Nash equilibrium because if ——picks a(n) — price,
the best response of —–is to pick the —-price.
7. Buzz and Moe are duopolists in the lawn-care market. The following game tree shows the
possible pricing outcomes and their payoffs. The outcome of the pricing game is that Buzz
will pick the ———price and Moe will pick the ———- price.
8. Arrows up or down: In the kinked demand curve model, the demand for a firms product is
relatively elastic when the price —- and rerelatively inelastic when the price ——–.
9. Consider a market with tow firms managed by Harry and Vera. Under a cartel (goth firms
pick the high price), eanch firm earns a profit of $80.. Under a duopoly (goth firms pick the low
price), each firm earns a profit of $60.. If the two firms pick different prices, the high-price firm
earns a profit of $20. And the low-price firm earns a profit of $90.
a. Fill in the payoff matrix.
b. The outcome of the pricing game is that Harry picks the —— price and Vera picks the
—–price.
c.
The outcome identified in part ( b ) is a Nash equilibrium because neither firm has an
incentive to ————.
10. The entry of a second firm shifts the demand curve of the original firm to the ———-, so
that at each price the original firm will sell a(n) quantity.
11. There are three types of antitrust polies, (1)————–, (2) ————-, and (3) ———–.
12. The deregulation of the airline industry led to ———- prices on average, but ——-prices in cities.
13. The optimal level of pollution abatement is the level at which the ——— of abatement
equals the —— of abatement.
14. Arrows up or doen: A carbon tax will shift the supply curve for home heating oil ———–,
causing the equilibrium price to ———- and the equilibrium quantity to —–.
15. A command-and-control policy is likely to be inefficient because it requires firms to use
———.
16. A decrease in the supply of marketavle pollution permits will shift the supply curve for
permits to the —————- and ——the equilibrium price of permits.
17. A gasoline tax will be shifted forward to ——— and backward to ——-, such as the
suppliers of ————-.
18. Arrows up or down: An increase in the wage ———— real income, and if leisure is a
normal good this tends to ———– leisure time and ——– labor time.
19. Income and Substitution Effects. Sabrina works for a workers cooperative that initially pays
her a lumpsum of $200. Per week (as long as she works at least 15 hours per week) and a wage
of $20 per hour of work. She initially works 40 hours per week. Suppose the cooperative changes
its pay plan by increasing the lump-sum payment to $280 and decreasing the hourls wage to $18.
a. If Sabrina continues to work 40 hours per week, how does the change in the pay plan affect
her total income?
b. Use the concepts of the income and substitution effects to predict whether Sabrina will work
more hours, fewer hours, or the same number of hours. (Is there an income effect to consider)
20. Arrows up or down: An increase in the demand for nursing services will ———-the
equilibrium wage and ———– the equilibrium quantity of nursing services.
21. The wage for a particular occupation will be relatively low if labor ——– (demand/supply)
is small relative to labor (demand/supply).
22. Arrows up or down: An important factor in growing inequality over the last 30 years is
technological change that has ———– the demand for college graduates and ———- the
demand for less educated workers.
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