5. Suppose also we are in our simple two-input model with la…

5. Suppose also we are in our simple two-input model with labor being the variable input and capital being the fixed input. Suppose a firm has diminishing returns.  Then we can say that on a graph with “$” on the vertical axis and quantity, Q, on the horizontal axis, this firm

22. Consider the Best Response graph for price competition d…

22. Consider the Best Response graph for price competition duopoly with differentiated, substitute products. Which of the following changes could account for what is happening on this graph when Pepsi’s Best Response shifts downward and the new Nash Equilibrium prices for both are lower than before?

13. Consider our standard monopoly framework (linear Demand;…

13. Consider our standard monopoly framework (linear Demand; either constant MC or rising MC).  Suppose the monopolist is a profit maximizer.  Then a decrease in its marginal cost of any given unit of output (due to a decrease in the price of a variable input to production) will lead the monopolist to

16. A toy company finds that it must pay a higher rent on it…

16. A toy company finds that it must pay a higher rent on its business space (a fixed cost here). The company has been charging a profit-maximizing price for the product it sells. One manager suggests that they increase the price to “cover the higher costs.”  With respect to profit maximization, this is

11. About 15-20 years ago, increases in the requirements of…

11. About 15-20 years ago, increases in the requirements of corn-based ethanol (to be mixed in with gasoline) basically created an increase in the demand for corn (indirectly).  This would tend to cause the economic profit of corn farmers to initially be greater than zero (i.e., corn farmers would tend to earn higher accounting profits than wheat farmers) because the price of corn would tend to increase.  In the long run (i.e., when farmers have time to switch what crops they plant), then we would expect to see