Exam 9: Applying the Competitive Model

If a city decides to restrict the number of pizza parlors,

Sarah's demand curve for shoes has the same slope as Pete's; however, it lies to the right of Pete's. An increase in the price of shoes will cause

-The above figure shows supply and demand curves for milk. Suppose that the government passes a $2 per gallon subsidy. The deadweight loss resulting from this policy will be

If in a market the last unit of output was sold at a price higher than marginal cost,

The deadweight loss associated with output less than the competitive level can be determined by

Assume the price of tomatoes increases. Which of the following causes would correspond to greater producer surplus?

Without restrictions, the market supply curve is horizontal at P = 5, and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market. Subsequently, only 10 taxi cabs are allowed in the market. After the market adjusts to the restricted supply,

If a firm is in a perfectly competitive world but decides to charge a higher price than its competitors,

Producer surplus is the sum of the profits earned by all firms in a market.

-The above figure shows supply and demand curves for apartment units in a large city. The area "c" represents

In the long run, competitive firms MUST be profit maximizers because if they do not maximize profits,

If entry is limited due to a limited input, firms in that market earn long run economic profit.

What is one reason it might be difficult to dissuade people from pirating music off the Internet?

A firm that generates zero economic profit usually has

The owners of sports franchises often complain that free-agency (open bidding for player services)threatens their profitability and thus their long-run viability. Given your knowledge of perfect competition, which of the following is correct?

Consumers who are more sensitive to changes in price suffer a greater loss of consumer surplus from any given price increase.

Producer surplus is equal to

An individual's ________ surplus is the area ________ the ________ curve and above the ________ up to the quantity ________.

While producing less than the competitive output decreases social welfare, the same cannot be said about producing more than the competitive output.

Suppose when a market has four firms, average economic profit is $1,000 per month. When the market has five firms, the average economic profit is -$50 per month. This suggests that