Question

unit 4 review: firms and labor
economics
market types:

• perfect competition
• monopolistic competition
• oligopoly
• monopoly

market characteristics:

• number of firms
• ability to set prices
• product differentiation
• ease of entry

costs and revenues

• be able to identify and differentiate between fixed and variable costs
• be able to calculate and identify an economic profit, normal profit and loss

labor supply and demand

• determine how changes in determinants will shift the supply of or demand for labor, as well as the equilibrium wage and quantity of labor
• graphically illustrate the effects of a higher - than - equilibrium minimum wage

identify each market as perfect competition, monopolistic competition, oligopoly, or monopoly.

1. the italian firm luxotica produces over 70% of prescription eyeglasses sold in the united states, and operates retail locations that include lenscrafters, sunglass hut, and target optical.
2. oak creek is home to six different veterinary clinics, including the brentwood animal hospital and oak creek veterinary care. each has considerable power over the price of the medical procedures it performs.
3. for a student in search of renaissance card at oak creek high school, there are over 90 staff members – teachers and principals – who can give out the commendations, each of which can be used to enter a weekly raffle for prizes.
4. oak creek has more than 60 different bars and restaurants that serve alcoholic beverages. some offer a full menu of food choices and feature hard - to - find craft beers, while others offer standard rail drinks and domestic brews.
5. a teenager living in oak creek can get his or her driver’s license at one of several different dmv locations, including the college ave. and grange ave. sites.
6. for those looking to work on strength and flexibility, oak creek has only one gymnastics studio: midwest twisters on rawson ave.

identify each of the following as either a fixed or variable cost of donut production.

1. sugar and flour used to make the donuts.
2. annual food preparation permit from the city.
3. signage for the front of the store.
4. boxes that hold 1 dozen donuts each.

Explanation:

Question 1

Luxotica produces over 70% of prescription eyeglasses in the US, meaning it has a large market share and significant control over the market, which is characteristic of a monopoly (single firm dominating the market).

There are six veterinary clinics, a small number of firms, and each has considerable price - setting power. Oligopoly is a market structure with a few large firms that have market power.

There are over 90 staff members (sellers) and each can give out commendations (the product). With many sellers and the product (commendations) being somewhat differentiated (each staff member's commendation is similar but from a different person), this fits monopolistic competition where there are many firms with differentiated products.

Answer:

Monopoly

Question 2