Exam 8: Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

You are the manager of a firm that sells its product in a competitive market at a price of $60.Your firm's cost function is C = 50 + 3Q².Your firm's maximum profits are

U.S.Airways experienced huge losses for several years in the 1990s, yet it continued to operate its fleets.Why didn't U.S.Airways shut down its operations to avoid the losses?

Beta Industries manufactures floppy disks that consumers perceive as identical to those produced by numerous other manufacturers.Recently, Beta hired an econometrician to estimate its cost function for producing boxes of one dozen floppy disks.The estimated cost function is

You are the manager of a monopoly that faces a demand curve described by P = 85 - 5Q.Your costs are C = 20 + 5Q.The revenue maximizing output is

Manufacturers of laundry detergent and dishwashing soap reinvest a relatively large percentage of their sales revenues on advertising campaigns.Most of these advertisements that appear on television stress the fact that their product is "New and Improved." Why?

There is no market supply curve in a

You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q.Your costs are C = 10 + 3Q.The profit-maximizing output for your firm is

You are the manager of a firm that produces output in two plants.The demand for your firm's product is P = 78- 15Q, where Q = Q₁ + Q₂.The marginal cost associated with producing in the two plants are MC₁ = 3Q₁ and MC₂ = 2Q₂.What price should be charged in order to maximize revenues?

Which of the following formulas correctly measures the profit of a monopoly?

Monsanto, the maker of Nutrasweet, owned the patent to aspartame, the official name of the sweetener.In 1987 Monsanto's patent expired in Europe, allowing other firms to produce aspartame under other brand names.What impact do you think this had on the market for aspartame and Monsanto's profits?

You are the manager of a firm that sells its product in a monopolistically competitive with (inverse) demand given by P = 50 - 0.5Q.Your firm's cost function is C = 40 + 5Q².Your firm's marginal revenue is

Genentech owns a patent on tissue plasminogen activator (TPA), which is an enzyme that helps the body break down blood clots.TPA is particularly valuable to cardiac patients, since it often allows heart problems to be treated with medication rather than surgery.Recently, however, firms in the medical industry have come under fire by some members of Congress and the press for charging high prices and earning monopoly profits.Do you think cardiac patients would benefit if the government stripped Genentech and other pharmaceutical firms of their patents? Explain.

What market can you think of, besides that for VCRs, that has shown short-run profits but, over time, has seen profits disappear due to entry?

Let the demand function for a product be Q = 100 - 2P.The inverse demand function of this demand function is:

Pic Industries produces plastic toothpicks that it sells to distributors in the Southwest.During the early 1990s, the price of the plastic it uses to produce toothpicks fell by 46 percent, due to a local glut of recycled plastic containers.Assuming that the market for plastic toothpicks most closely resembles that of perfect competition and that other firms in the industry do not experience similar cost savings in the short run, what impact would this have on the profit-maximizing output, price, and profits of Pic Industries?

You are the manager of a monopoly that faces a demand curve described by P = 63 - 5Q.Your costs are C = 10 + 3Q.The profit-maximizing price is

Which of the following is true under monopoly?

Which of the following is true under perfect competition?

Which of the following conditions must hold to ensure that profits are, in fact, at a maximum?

The XYZ company produces output using labor (which it purchases on an as-needed basis in the market for unskilled workers at a wage of $5 per hour) and one machine (which it is obligated to lease at a rental rate of $300 per hour).The planning horizon precludes XYZ from renting or purchasing any additional machines, as the current machine has a capacity of 80 units of output per hour, which exceeds the projected demand for the firm's product.The firm has no alternative use for the machine it leases, and the contract precludes it from subleasing it to another party.The company currently employs one worker who produces 10 units of output per hour.A recent report from the engineering department reveals that, given the plant's current capacity, two workers could produce 20 units of output per hour, three workers could produce 30 units of output per hour, and four workers could produce a total of 40 units of output per hour. a.Complete the following table: