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Describe the difference between Marginal cost and average total cost. Why are both of these costs important to a profit-maximizing firm?
Assume that a local bank sells two services-checking accounts and ATM card services.mr. smith is willing to pay $8 a month for the bank to service his checking account, and $10 a month for unlimited use of his ATM card. Ms. Jackie wants to pay only $5 for a checking account, but will pay $15 for unlimited use of her ATM card. To keep this example simple, assume that the bank can provide each of these services to at zero marginal cost.
If the bank is unable to use tying, what is the profit-maximizing price to charge for a checking account?
If the bank is unable to use tying, what is the profit-maximizing price to charge for unlimited use of an ATM card?
If the bank is able to use tying to price checking account and ATM services, what is the profit-maximizing price to charge for the “tied” good?
How much additional profit does the bank make when it switches to use of a tying strategy to price checking account and ATM services?
How much total surplus is generated from using tying to price the checking account and ATM service? How does that compare to the nontied pricing strategy? Which strategy has the largest deadweight loss?
Describe a government-created monopoly. Why might one be created? Give an example.
The consumption of alcohol is often cited as an example of negative externality. Explain a situation in which the consumption of alcohol would be considered to be a negative externality.
Identify each of the following goods as a private good a common resource, a natural monopoly, or a public good, according to the classifications presented.
A. A shared apartment. B. A national monument. C. Cable TV
6 A - Explain the role of opportunity costs in differentiating between economic profits and accounting
B- Let’s assume that a monopolist decides to maximize revenue rather than profit. How does this operating objective change the size of deadweight loss? If you’re a “benevolent” manager of a monopoly firm and are interested in reducing the dead-weight loss of monopoly, should you maximize profits or maximize revenue? Carefully explain you answer.
Professional organizations have actively advocated regulation to restrict the right of professionals to advertise. Describe the economic incentives that might exist for incumbent professionals to restrict advertising.
John owns a commercial fishing fleet, and hires a captain for each boat in his fleet. These workers are considered to be part of the crew. In the market for fresh pacific salmon, John is one of thousands of fishermen. Although John usually catches a significant number of fish each year, his contribution to the entire salmon harvest is negligible relative to the size of the market. John is considered to be a perfect competitor in the output market. If so, explain why his demand curve for labor (crew Workers)is downward-sloping, and his supply curve for labor is perfectly elastic at the market wage.
Describe the role that diminishing marginal utility plays in utilitarian argument for redistribution of income.
Describe the purpose of antitrust laws. What do they accomplish?
What is the effective marginal tax rate of a government antipoverty program that guarantees every family a minimum income? Explain. Why might tying several antipoverty benefits to income level lead to an effective marginal tax rate of greater than 100 percent?
Explain the difference between inferior goods and normal goods. As a developing economy experiences increases in income (measured by GDP), what would you predict to happen to demand for inferior goods?