3 page essay questions
1. Is Jill Johnson correct or incorrect when she says the following: “When I am producing
20,000 pizzas per month , my total cost is $75,000. If I produce 20,001 pizzas, my total cost
will rise to $75,003. When I produce 20,002 pizzas, my total cost rises to $75,005 pizzas.”
Therefore, my marginal cost of producing pizzas must be increasing.” Illustrate your answer
with a marginal cost graph.
2. Determine which market the following industries fit in. Choose from perfectly
competitive, monopoly, oligopoly or monopolistic competition. Explain your choice.
a. Corn farming
b. Grocery stores
c. Electric companies
d. Automobile manufacturing
3. In 2006, Wal-Mart closed its stores in South Korea and Germany. Wal-Mart’s most
successful markets, like Mexico, are those in which it started big. There, the
company bought the country’s largest and best-run retail chain, Cifra, and has never
looked back. This year, Wal-Mart is spending more than $1 billion in Mexico to open
120 new stores. What advantages does Wal-Mart gain from buying large retail
chains, as it did in Mexico, rather than small chains, as it did in it unsuccessful
attempts to enter the South Korean and German markets? (Hint: consider
economies of scale).
4. In 2007, Nick Saban agreed to leave his job as head coach of the Miami Dolphins to
take a job as head football coach at the University of Alabama at a salary of $4
million per year for eight years. Boise State paid their coach Chris Petersen
$500,000 in 2007 and they went undefeated that season. Might Saban still be
worth a salary of $4 million per year to Alabama even if he is not “eight times
better” than a coach being paid $500,000 at another school? In your answer, be
sure to refer to the marginal product of labor and the marginal revenue product of
5. A student in an Econ 200 class makes the following remark: “the economic model of
perfectly competitive markets is fine in theory but not very realistic. It predicts that in the
long run, a firm in a perfectly competitive market will earn no profits. No firm in the real
world would stay in business if it earned zero profits.” Do you agree or disagree with this
statement. Is there a difference between short run and long run losses? Explain. Also
discuss short term and long terms costs.