Life%20in%20Isla%20Vista?

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Life in Isla Vista?
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(No Transcript)
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Are you thinking of going to graduate school some
day?

1. No
2. Yes, to an MBA program.
3. Yes, to some kind of masters program other than
   MBA.
4. Yes, to a Ph. D. program.
5. Undecided among options B,C and D.

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A competitive firm can sell its output at 10 per
unit. The firms total costs are shown below. To
maximize its profits how many units should it
produce?
Output Total cost
1 5
2 14
3 27
4 36
5 48

• A) 2
• B) 3
• C) 4
• D) 5
• E) More than 5

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Why is that ?

• For a competitive firm, producing an extra unit
  will increase profit if marginal cost is smaller
  than price and decrease profit if marginal cost
  is larger than price.
• Marginal cost of first unit 5, second unit 9,
  third unit 13, etc..
• Price of output is 10.

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For a monopoly that faces a downward sloping
demand curve, marginal revenue from selling an
extra unit is equal to the price at which it can
sell that unit.

• A) True
• B) False

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Why is that?

• Listen to todays lecture go find out.

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If a monopolist faces a downward sloping demand
curve, then its marginal revenue from selling an
extra unit is less than the price at which it
sells that unit.

• A) True
• B) False

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A profit-maximizing monopolist will not choose to
sell at a price where demand is inelastic.

• True
• False

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If a monopolist faces an inelastic demand curve,
then its marginal revenue is negative.

1. True
2. False