Drew Wagner, Nick Baher, Mike Withers, Kevin Pierron

Ms. Ockert
EC 102-17
November 18, 2013
Econ Chapter 10 Assignment

1. Textbook pg. 206, # 16

a. The level of output that will maximize the firms profit level is an output of
30 units.
b. The firm will charge a price of $24 at the cost of outputting 30 units.
c. The firm will generate a revenue of $720. The total cost is $10, resulting in
a profit of $410.
d. Over time the situation will get worse as the Marginal Cost increases as
the demand for the product is decreasing eventually resulting in a loss of
profit.
2.

3.
A.Local corn farmers- this example would not be a monopolistic competitor
because it cannot be differentiated from other corn farmers. No single corn
farmer has power over the market. Because of this it is perfectly competitive.
B. The Tennessee Valley Authority, a large electricity producer- This would not
be a monopolistic competitor because it is in control of electricity in Tennessee
and there are little to no power companies to compete with them.
C. Pizza delivery- this would be a monopolistically competitive because
while there are many different pizza places they all advertise their pizza to taste
and be made different.

D. Grocery stores- this is monopolistically competitive because they sell all

the same products but the advertise different deal and prices. They also claim
their food is more fresh. This is simply a play on words to try and sell more.
E. Kate Spade, fashion designer- This is a form of larger monopolistic
competition. Although there may not be as many fashion designers as pizza
places they are still very competitive and the products are differentiated.
4.
A. He likes! Hey Mikey! (life cereal)- this shows that everyone will like it, even
a kid that doesnt like anything.
B. Nothing runs like a Deere (John Deere)- No other tractor or equipment will
run like a quality built john Deere much like an actual wild deer.
C. Betcha cant eat just one (Lays chips)- This shows that Lays chips are so
good that you have to keep eating them and will buy more.
D. He keeps going and going and going. (Energizer batteries)- This attempts to
show that much like the energizer bunny the batteries will keep running and
running so more people will us their product.
E. When it absolutely, positively has to be there overnight(FEDEX)- This slogan
gives you confidence that your product will always arrive on time making more
people want to use it.
F. Its everywhere you want to be.(Visa cards)- This add shows the
convenience and availability of visa cards. They can be their to help pay for
whatever you want to do. This convenience makes people want to buy them.
G. Were number two; we try harder(Avis)-This makes people want to use avis
because this slogan makes it seem like they will work hard and provide better
service until they are number one.

5.

Rory Sutherland is the Vice Chairman of the Ogilvy Group, one of the largest
communication groups in the UK. He is also the founder of OglivyChange, a new
division of the company that combines the behavioral academic research with the
communications expertise of the Oglivy group. Sutherlands new focus is Behavioral
Economics, which is the study of psychology as it relates to the economic decision
making processes of individuals and institutions. He explores why people sometimes
make irrational decisions, and why and how their behavior does not follow the
predictions of economic models. Sutherland is relevant to this chapter, because of his

ideas on price discrimination, which is when price-searchers identify and separate at

least two groups with differing elasticities of demand and prevent those who buy at
the low price from reselling to the costumers charged higher prices. Sutherland uses
air travel as an example, having a mix of classes allows price-sensitive people to pay
low fares, while the rich have a large number of flights to choose from. Airlines are
also extremely good at exercising price discrimination within classes, so that two
people receiving identical service might be thousands of dollars apart in the amount
they paid for their tickets. Sutherlands job is to find ways to manipulate different
costumers into buying these products at different price, by using advertising methods,
such as behavioral economics and lyrics. An Intangible value is the incapability of
being perceived by the senses, incapable of being realized or defined.

6. I disagree with this theory. Most of the time the most basic consumer products are
generally produced by perfectly competitive firms because the barrier to entry is small.
This competition is good for the consumer because the firms have to compete for the
best product at the lowest price. Also perfectly competitive markets operate at
equilibrium where producer surplus equals consumer surplus.