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Mizzou Econ 3251 Exam 1 Questions And 100% Correct Answers Latest Update
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Mizzou Econ 3251 Exam 1 Questions And 100%Correct Answers Latest Update
How to determine the value of a firm equation - ANSWER PV = cash flows/ rate
How to determine the value of a growing firm equations - ANSWER PV = cash flows /
(rate * growth)
Objective of the manager - ANSWER gain and exploit market power
market power - ANSWER percent of market share
to charge above marginal cost, you must have market power
how to get market power - ANS absolute cost advantage
- supreme scale economies
- product differentiation
-high switching costs
-government regulations
supreme scale economies [natural monopolies] - ANS high fixed costs, low variable
costs, as you get bigger, the average cost goes down
porters five forces - ANS- rivalry among existing competitors
- threat of new entrants
- bargaining power of buyers
, - bargaining power of suppliers
- threat of substitute products or services
Supply and Demand Shifts If supply and demand curve shift by equal amount and in the
same direction, what happen to price? - ANSWER Price stays the same
If both the supply and demand shift in the same direction, what happen? - ANSWER
quantity increased, but you cannot tell the price
when the % change in demand is inelastic, the additional revenue from selling at a
higher price is. - ANSWER greater than the lost revenue from selling fewer units
Midpoint of demand curve - ANSWER the midpoint of the slope of a demand curve
always = -1
above the midpoint, elasticity is greater than 1
below the midpoint, elasticity is less than 1
If demand is elastic and price rises, what happens to total revenue? - ANSWER: A rise in
price will decrease total revenue.
If demand is inelastic and price rises, what happens to revenue? - ANSWER: A rise in
price will increase total revenue.
when demand is unitary elastic and there is a price increase, what happens to revenue?
- ANSWER total revenue is maximized
income elasticity - ANSWER measures responsiveness of a % change in demand for
good due to a % change in income
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