ECO 1104 Lecture Notes - Lecture 9: High Tech

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18 Oct 2017

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When price goes up, suppliers produce more and when the price falls, they cut back. In the same way that higher wages give people an incentive to work more, higher prices give suppliers an incentive to produce more, because they expect higher profits with a higher price. The theo(cid:396)(cid:455) of (cid:862)ma(cid:396)gi(cid:374)al p(cid:396)odu(cid:272)ti(cid:448)it(cid:455)(cid:863) (cid:271)est e(cid:454)plai(cid:374)s (cid:449)hat is (cid:396)eall(cid:455) goi(cid:374)g o(cid:374). In this story, the factory becomes more congested and less efficient: since a supplier will only produce more if the costs are covered, they require a higher price to produce larger amounts. P up, qs i(cid:374)(cid:272)(cid:396)eases: (cid:862)i(cid:374)(cid:272)(cid:396)ease i(cid:374) (cid:395)ua(cid:374)tit(cid:455) supplied(cid:863) P do(cid:449)(cid:374), qs falls: (cid:862)de(cid:272)(cid:396)ease i(cid:374) (cid:395)ua(cid:374)tit(cid:455) supplied. (cid:863) You move along the supply curve in both cases. If a factory is damaged by an earthquake, or a citrus grove is destroyed by a hurricane, less is produced regardless of the price. (cid:862)de(cid:272)(cid:396)ease i(cid:374) uppl(cid:455)(cid:863) If the cost of a factor of production changes, the supply curve will shift.

Related Questions

17. Which of the following is a determinant of supply?

A. Tastes and preferences

B. Price of a complementary good

C. Consumer income

D. Technology

18. A market is in equilibrium:

A. provided there is no surplus of the product

B. at all prices above that shown by the intersection of the supply and demand curves

C. if the amount producers want to sell is equal to the amount consumers want to buy

D. whenever the demand curve is downsloping and the supply curve is upsloping.

19. If the market price is above the equilibrium price:

A. A shortage will occur and producers will produce more and lower prices

B. A surplus will occur and producers will produce less and lower prices

C. A surplus will result and consumers will bid prices up

D. Producers will make extremely high profits

20. The market system automatically corrects a surplus condition in a competitive market by:

A. Raising the price of the commodity in question while increasing the quantity demanded

B. Raising the price of the commodity in question while decreasing the quantity demanded

C. Reducing the price of the commodity in question while increasing the quantity demanded

D. Reducing the price of the commodity in question while decreasing the quantity demanded

21. The price elasticity of demand measures:

A. buyer responsiveness to price changes.

B. the extent to which demand curve shifts as incomes change.

C. the slope of the demand curve.

D. how far business executives can stretch their fixed costs

22. The elasticity of demand for a product is likely to be greater:

A. if the product is a necessity, rather than a luxury good.

B. the greater the amount of time over which buyers adjust to a price change

C. the smaller the proportion of one's income spent on the product.

D. the smaller the number of substitute products available.

23. Market failure is said to occur whenever:

A. private markets do not allocate resources in the most economically desirable way

B. prices rise

C. some consumers who want a good do not obtain it because the price is higher than they are willing to pay

D. government intervenes in the functioning of private markets.

24. A negative externality or spillover cost occurs when:

A. firms fail to achieve allocative efficiency.

B. firms fail to achieve productive efficiency.

C. the price of the good exceeds the marginal cost of producing it.

D. the total cost of producing a good exceeds the costs borne by the producer

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1. To maximize profits, a firm should produce output up to the point where

A. marginal revenue equals marginal cost

B. price equals marginal cost

C. the gap between the demand curve and the ATC is the greatest

D. all of the above

E. answers a and b, but not c

2. Which statement is false?

A. a profit maximizing firm will increase production when price exceeds marginal cost

B. the lowest point on a firm's short-run supply curve is at the shut-down point

C. A firm will operate at that ouput where MC equals MR only when it is maximizing profits

D. A profit-maximizing firm will decrease production when marginal cost exceeds price.

3. which statement is true?

A. all monopolies are good

B. All monopolies are bad

C. Most natural monopolies are government regulated or government owned

D. None of these statements is true

4. There are _____ limits to monopoly power

A. no

B. some

C. many

5. Which statement is true?

A. the monopolist's most efficient output is her most profitable output as well

B. the monopolist charges a higher price than the perfect competitor in the long run.

C. all monopolists have control over an essential resource.

D. none is true

6. As a firm grows larger

A. economies of scale set in, then diseconomies of scale.

B. diseconomies of scale set in, then economies of scale.

C. economies of scale and diseconomies of scale set in at the same time.

D. neither economies of scale nor diseconomies of scale set in.

7. A monopolist operates at the minimum point of her ATC curve

A. only in the short run

B. only in the long run

C. in both the short run and the long run

D. in neither the short run nor the long run

8. A natural monopoly

A. has an average cost curve that reaches minimum possible average cost at a low level of output.

B. has a marginal cost curve that is steeply upward slopoing.

C. is usually subject to antitrust suits

D is usually allowed to choose its price so as to maximize profits in the United States.

E. occurs when a single firm can supply the entire market demand for a product at a lower average cost than would be possible if two or more firms supplied the market.

9. For a monopolist, the price of the product

A. always equals the marginal revenue

B. is always less than the marginal revenue

C. exceeds the marginal revenue

D. always equals the marginal cost of the product

10. Monopolies are usually viewed with concern from an economic standpoint since

A. size is ingerently dangerous; the larger ther firm, the more likely it is to squeeze out the "little producer"

B. resources may be allocated in an efficient manner.

C. the government may be put at the mercy of several large producers

D. always equals the marginal cost of the product

Question 1

A firm should hire workers up to the point where

Question 1 options:

	MP = P.
	MFC = P.
	MFC = MRP.
	MP = MRP.

Question 2

If the additional revenue from hiring an additional worker equals the additional costs from hiring the extra worker, then we know that

Question 2 options:

	MFC/MPP_L = wage.
	MFC/MRP_L = 1.
	MFC = MPP_L.
	MRP_L/P = MFC.

Question 3

A firm that maximizes profits also

Question 3 options:

	pays input prices lower than other firms do.
	cuts corners in production processes so that its products are made too cheaply.
	is inefficient.
	uses the least-cost combination of resources.

Question 4

The demand curve for labor slopes down because

Question 4 options:

	firms value less efficient workers less than they value more efficient workers.
	firms must lower prices to sell the additional units of its product that the extra workers produce.
	of profit maximizing behavior.
	of the law of diminishing marginal product.

Question 5

If MFC > MRP_L, the firm should

Question 5 options:

	get rid of some capital.
	reduce the number of workers.
	lower wages.
	hire more workers.

Question 6

Which of the following will not lead to an increase in the demand for labor for a firm producing automobiles?

Question 6 options:

	A decrease in labor productivity.
	A decrease in the price of automobiles.
	A decrease in the price of robots that are used to solder parts of the car together.
	An increase in the demand for automobiles.

Question 7

The marginal revenue product gives

Question 7 options:

	the additions to total cost when an additional unit of a variable input is hired.
	the additional revenue obtained when an additional unit of a variable input is hired.
	the change in total product for an additional unit of a variable input.
	the amount that other inputs must increase by when labor increase by one unit.

Question 8

The monopolist's input demand curve is the

Question 8 options:

	marginal physical product curve.
	marginal revenue product curve.
	marginal revenue curve.
	marginal factor cost.

Question 9

An increase in product price implies that

Question 9 options:

	the firm's demand for labor increases.
	the firm's demand for labor decreases.
	the wage rate the firm pays will increase.
	the firm's marginal factor cost will increase.

Question 10

Which of the following will not lead to a change in the demand for labor?

Question 10 options:

	A change in the supply of labor.
	A change in demand for the final good.
	A change in the price of a substitute input.
	A change in labor productivity.

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ECO 1104 Lecture Notes - Lecture 9: High Tech

ECO 1104 Full Course Notes

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