fixed and variable costs in the short run
1. Do you think the overall level of R&D would increase
or decrease over the next 20 to 30 years if the lengths of new patents were
extended from 20 years to, say “forever”? What if the duration was
reduced from 20 years, to say, 3 years? Which situation would create more
monopoly power in the market?
2. How does monopolistic competition differ from a) pure
competition; b) pure monopoly; c) oligopoly? Explain fully what product
differentiation entails.
3. Which following antipollution programs should be
undertaken by the government? Explain your answer?
The following table shows the total costs and total benefits
in billions for four different antipollution programs of increasing scope:
Program Total Cost (in Billions Total Benefit (in Billions)
A————————— $3
————————————— $7
B—————————- 7
————————————— 12
C—————————12
————————————— 16
D—————————18
————————————— 19
4. Distinguish between fixed and variable costs in the short
run.
Classify the following as fixed or variable costs:
a. Advertising expenditures
b. Fuel
c. Raw material cost
d. Real estate taxes
5. What effect would a rule stating that university students
must live in university dormitories have on the price elasticity of demand for
dormitory space? What impact might this in turn have on room rates?
