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

You are the manager of a monopoly that faces an inverse demand curve described by P = 200 - 15Q. Your costs are C = 15 + 20Q. The profit-maximizing price is:

In a monopoly where the marginal revenue and price are, respectively, given by $3 and $6, the price elasticity of demand is:

The first-order condition for a monopoly maximizing its profit is:

In 1994 Pentium users around the world learned that their $4.00 pocket calculators could perform some operations more accurately than their $5,000 desktop computers. It took several months before Intel-the maker of the chip-agreed to offer its customers replacement chips. In contrast, Walmart guarantees satisfaction to all customers, with a "no questions asked" return policy on nearly all of the products it sells. Why do you think these firms employ such different consumer relations policies?

Which of the following is a strategy(ies) used by firms in monopolistically competitive industries to convince consumers that their product is better than their rivals' products?

What contributes to the existence of multiproduct firms?

Which of the following is true about where a profit-maximizing monopoly will produce on a linear demand curve when it has positive marginal costs?

Which of the following is true under perfect competition?

In the long run, monopolistically competitive firms:

You are the manager of a monopolistically competitive firm. The inverse demand for your product is given by P = 200 - 10Q and your marginal cost is MC = 5 + Q. a. What is the profit-maximizing level of output? b. What is the profit-maximizing price? c. What are the maximum profits? d. What do you expect to happen to the demand for your product in the long run? Explain.

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

A monopoly has produced a product with a patent for the last few years. The patent is going to expire. What will happen after the patent expires?

Suppose that initially the price is $50 in a perfectly competitive market. Firms are making zero economic profits. Then the market demand shrinks permanently, some firms leave the industry, and the industry returns to a long-run equilibrium. What will be the new equilibrium price, assuming cost conditions in the industry remain constant?

Economies of scale exist whenever:

Consider a monopoly where the inverse demand for its product is given by P = 50 - 2Q. Total costs for this monopolist are estimated to be C(Q) = 100 + 2Q + Q². At the profit-maximizing combination of output and price, deadweight loss is:

You are a manager in a perfectly competitive market. The price in your market is $35. Your total cost curve is C(Q) = 10 + 2Q + .5Q². A) What level of output should you produce in the short run? B) What price should you charge in the short run? C) Will you make any profits in the short run? D) What will happen in the long run? E) How would your answer change if your costs were C(Q) = 80 + 5Q + 30Q²?

A monopoly has two production plants with cost functions C₁ = 50 + 0.1Q₁² and C₂ = 30 + 0.05Q₂². The demand it faces is Q = 500 - 10P. What is the condition for profit maximization?

Keds-the traditional maker of white canvas tennis shoes-was near oblivion in the early 1980s because competitors like Nike, Reebok, Adidas, and Brooks took away many of its customers. If you were at the helm of Keds, what would you have done to turn the company around?

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?

Eric provides cheese (H) and milk (M) to the market with the following total cost function: C(H, M) = 10 + 0.4H² + 0.2M². The prices of cheese and milk in the market are $2 and $5 respectively. Assume that the cheese and milk markets are perfectly competitive. What output of cheese maximizes profits?