The​ price-demand equation for a particular product is

f(p)=850−3p2.

At a price of

​$14

is this product​ elastic, inelastic, or unit​ elastic?

Governments commonly uses price floors. One of the most classic examples of a price floor is a minimum wage policy in a labor market. Minimum wages laws date from 1894 in New Zealand, 1909 in the United Kingdom, and 1912 in Massachusetts. Minimum wage policies, however, often create unintended consequences. The original 1938 U.S. minimum wage law, for example, caused massive unemployment in Puerto Rico.

Suppose the following demand and supply curves describe the labor market in Puerto Rico before 1938:

Demand: P = 20 – Q              

Supply:   P = 2 + 0.5Q

where P is the wage per hour, and Q represents the number of workers hired, in thousands

(e.g. Q = 1 means that 1,000 workers have been hired).

a) Calculate the equilibrium wage and the number of workers hired before the 1938 minimum wage laws. Illustrate on a graph.

b) The 1938 U.S. minimum wage laws artificially required that all workers earned at least $10 per hour in Puerto Rico. So, how many workers would be employed under the minimum wage policy? Illustrate on a graph.

c) Using your graphs from (a), calculate the consumer surplus and producer surplus at the

initial equilibrium price and quantity from part (a).          

d) Calculate the new consumer surplus and producer surplus with the minimum wage of

$10 (part b).

e) How does the total consumer and producer surplus in part (c) compare to the total

consumer and producer surplus in part (d)? What explains the difference in these two

figures? Please explain intuitively.

When the price and output decisions of one firm include the possible price and output reactions of the firm's rivals, the market is

   a. monopolistically competitive characterized by non-price competition.  
   b. perfectly competitive characterized by collusion.  
   c. a monopoly characterized by differentiated products.  
   d. an oligopoly characterized by mutual interdependence.  

The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically competitive firm will:

   a. operate at minimum long-run average cost.  
   b. produce the output level at which price equals long-run marginal cost.  
   c. produce the output level at which price equals long-run average cost.  
   d. overutilize its insufficient capacity.

The monopolistic competition market structure is characterized by:

   a. many firms and differentiated products.  
   b. many firms and a homogeneous product.  
   c. few firms and similar products.  
   d. few firms and a homogeneous product.

Because an oligopoly is characterized by

   a. many small sellers, each firm must differentiate its product.  
   b. a few sellers selling a differentiated product, each seller makes its price and output decisions independently.  
   c. few large sellers, each seller has some influence over the market price.  
   d. a single seller of a product that has few suitable substitutes, the seller is a price maker.  

When a perfectly competitive firm or a monopolistically competitive firm is making zero economic profit,

   a. some firms will want to enter.  
   b. market demand shifts to the left.  
   c. some firms will want to leave.  
   d. no firms will want to enter or exit.

1.

A perfectly competitive firm is a price taker because

Its products are differentiated.

The price of the product is determined by many buyers and sellers.

It has market power.

Market supply is upward-sloping.

2.

When the short-run marginal cost curve is upward-sloping,

The average total cost curve is above the marginal cost curve.

The average total cost curve is upward-sloping

Diminishing returns occurs with greater output.

3.

If a perfectly competitive firm is producing a rate of output at which MC exceeds price, then the firm

Can increase its profit by decreasing output.

Is maximizing profit.

Must have an economic loss.

Can increase its profit by increasing output.

4.

The short run is the time period

Necessary so that profits can be earned from production.

In which some costs are fixed.

In which only the amount of capital may be altered.

Over which an investment decision can be made.

6.

The perfectly competitive market structure includes all of the following except

Low entry barriers.

Identical products.

Large advertising budgets.

Many firms.

“Taxes create a wedge between price buyers pay and price sellers sell, but the incidence of a tax depends on the price elasticities of supply and demand, and NOT necessarily who the government requires to pay the tax from their pocket. Discuss this statement and provide an example that shows the tax burden is shared by both buyers and sellers “in some proportion, and not necessarily 50-50”.

A tax

Which of the following statements is (are) correct?
(x) Price ceilings and price floors usually reduce the welfare of society because quantity demanded does not equal quantity supplied if the price control is binding.
(y) The particular price that results in quantity supplied being equal to quantity demanded is the best price because it maximizes the welfare of buyers and sellers.
(z) A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it maximizes the combined welfare of buyers and sellers.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Suppose the United States changed its laws to allow for the legal sale of a kidney. According to the textbook, which of the following statements is (are) correct?
(x) If the government allowed a free market in organs for transplant then there would be an increase in the price of a kidney and a decrease in the shortage of kidneys for transplant.
(y) At present, the maximum legal price for a human kidney is $0. The price of $0 maximizes both producer surplus and consumer surplus.
(z) If the government allowed a free market for transplant organs such as kidneys to exist, critics argue that such a market would benefit the rich but not the poor.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

8. Price discrimination can occur If:
a.) producers are price takers
b.) there are many firms in the industry, all producing the same identical good.
c.) the market structure is monopolistic competition.
d.) all consumers have the same willingness to pay for the good.

10. The Go Sports Company is a profit-maximizing firm with a monopoly in the production of school team pennants. The firm sells its pennants for $10 each. We can conclude that Go Sport is producing a level of output at which:
a.) average total cost is greater than $10.
b.) average total cost equals $10.
c.) marginal revenue equals $10.
d.) marginal cost equals marginal revenue.

14. The demand curve for monopoly is:
a.) the entire MR curve.
b.) the MR curve above the AVC curve.
c.) above the MR curve.
d.) the MR curve above the horizontal axis.

15. Price discrimination leads to a __ price for consumers with a ___ demand.
a.) higher; less elastic
b.) higher; perfectly elastic
c.) higher; more elastic
d.) lower; less elastic

What is the difference between price objectives and price constraints? Can you share an example of illustrate your thoughts?

Discuss the concept of price discrimination. What are the types of price discrimination? Why do certain firms with market power use price discrimination? Any real-life example of firms practicing price discrimination.