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Question
The Tire Shed is a regional chain that sells tires and other automobile parts. The company sells its own brand of tires under a block pricing scheme that charges $100 per tire if the customer buys one or two tires and $75 per tire if the customer buys three or four tires. The monthly demand curve facing the typical store is Q = 1000 - 4P, and the marginal cost of the tires is constant at $40 per tire.a. What are the monthly profits for the typical store under the block pricing scheme? What is the consumer surplus enjoyed by customers of the typical store?
b. Suppose the firm is considering a uniform pricing scheme with P = $90 per tire. How does the firm profit and consumer surplus under uniform pricing compare to the profit and consumer surplus outcomes under block pricing?
Answer
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Related questions
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B) NPV is understated
C) NPV is unaffected
D) NPV changes from positive to negative
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For net present value calculations, the rate of return that one could earn by investing in another project with similar risk is known as the:
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B) nominal interest rate.
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Q:
If the inflation rate falls and nominal interest rates are unchanged,
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If an individual has $10,000 in a savings account paying 3% and the inflation rate is 2%, the nominal interest rate is
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Q:
The real interest rate is
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Q:
The first term in an NPV calculation is usually
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Q:
The "NPV Criterion" is that a firm should invest in a new capital project if
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Q:
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D) Both decline.
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Suppose a labor market has perfectly inelastic supply that is composed of union and non-union workers, and both groups of workers initially earn the perfectly competitive wage. What happens to the equilibrium employment level and wage for union workers if the union exercises its bargaining power?
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D) Both decline.
Q:
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Q:
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Q:
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B) the United Auto Workers union in the market for auto worker services.
C) OPEC in the market for crude oil.
D) all of the above
Q:
Who does NOT earn economic rent in a competitive factor market?
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B) Everyone
C) The last factor of production hired
D) The inframarginal workers
E) Only owners of physical properties earn economic rents
Q:
Scenario 14.4:
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TP = 100L - 0.125L2 MP = 100 - 0.25L
where L is the amount of labor employed. The supply curve for labor and the marginal expenditure curve for labor are given as follows:
L = PL -5 MEL = 2L + 5
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A) Marginal product of labor
B) Marginal revenue product of labor
C) The supply of labor
D) All of the above will shift due to the tax on output.
Q:
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Q:
Suppose the supply and demand of land for natural gas extraction are imperfectly elastic. Given that coal is a potential substitute for natural gas in energy applications, a change in the price of coal may shift the demand curve for natural gas. What happens to the economic rents assigned to land on which natural gas is extracted if the price of coal declines?
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Under an upward sloping supply curve for land, the economic rents to land ________ as the demand for land shifts rightward.
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D) We do not have enough information to answer this question.
Q:
Which of the following is NOT true about the supply of labor to the firm in a competitive labor market?
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B) It is perfectly elastic.
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Q:
Use the following statements to answer this question:
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D) I and II are false.
Q:
Scenario 14.3:Suppose that a firm's demand curve for its product is as follows: Output Price of the Good 25 9 40 8 54 7 67 6 79 5 90 4Also suppose that labor is the only variable input of production, and that the total product of labor is: Amount of Total Output Labor 2 25 3 40 4 54 5 67 6 79 7 90Refer to Scenario 14.3. What is the marginal profit from hiring the third unit of labor?A) 30B) 65C) 85D) 225E) none of the above
Q:
Scenario 14.3:Suppose that a firm's demand curve for its product is as follows: Output Price of the Good 25 9 40 8 54 7 67 6 79 5 90 4Also suppose that labor is the only variable input of production, and that the total product of labor is: Amount of Total Output Labor 2 25 3 40 4 54 5 67 6 79 7 90Given the data in Scenario 14.3, how much labor should the firm employ if labor costs $30 a unit?A) 3 units of laborB) 4 units of laborC) 5 units of laborD) 6 units of laborE) 7 units of labor
Q:
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Q:
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B) is now maximizing profit.
C) should not use this factor of production because it has no potential in generating a profit.
D) can increase profit by expanding the employment of the factor of production.
Q:
An increase in technology that enhances labor productivity will likely result in:
A) a decrease in labor employment and an increase in the wage rate.
B) an increase in labor employment and an increase in the wage rate.
C) a decrease in labor employment and a decrease in the wage rate.
D) an increase in labor employment and a decrease in the wage rate.
E) employers using less labor and more capital while the wage effect is unknown.
Q:
Scenario 14.2:A firm can hire labor at the minimum wage of $4.25 per hour. Assume that labor works 8 hours a day. The firm's production function is as follows:Number of Days Number of Units of Labor of Output 0 0 1 8 2 15 3 21 4 26 5 30Refer to Scenario 14.2. What is the average product of the 4th worker?A) 4B) 5C) 6D) 6.5E) 7
Q:
If leisure is a normal good, then the income effect of a decrease in wage will
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B) increase the number of hours worked.
C) decrease the number of leisure hours.
D) increase the sum of leisure plus hours worked.
Q:
The marginal revenue product can be expressed as the
A) additional revenue received from selling one more unit of product.
B) increment to revenue received from one additional unit of input hired.
C) marginal physical product of an input times the average revenue received from the sale of the product.
D) average physical product of the input times the marginal revenue received from the sale of the final product.