Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 7, Problem 8PA
To determine
The equilibrium price and the quantity of haircuts and total surplus.
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Ilsia is driving home from work. She needs to buy gas and notices an Exxon-Mobil station on one side of the street and a Shell station on the other side of the street. Although run by different companies, the two stations sell gasoline at the same price.
a. The most likely reason that the price is the same is that
drivers need gas and are willing to pay whatever price a gas station charges.
consumers view gasoline from different gas stations as perfect substitutes.
government regulation requires both gas stations to charge the same price.
gas stations always make a profit, so they can charge any price they want.
b. If one station increases its price,
it will make a higher profit.
it will lose customers to the cheaper station across the street.
it will be fined by the government.
it will sell more gasoline.
Would you rather have efficiency or variety? That is, one opportunity cost of the variety of products we have is that each product costs more per unit than if there were only one kind of product of a given type, like shoes. Perhaps a better question is, “What is the right amount of variety? Can there be too many varieties of shoes, for example?”
A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you:
SELECT THE CORRECT ANSWER
a.find the average quantity produced by the ten suppliers.
b.take one-tenth of the individual supply of each supplier and add it up.
c.take the individual supply of one supplier.
d.multiply the individual supply of one of the suppliers by ten.
Chapter 7 Solutions
Principles of Microeconomics
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