Suppose There Is Only One Producer of Frames, a Necessary

question 96

Multiple Choice

Suppose there is only one producer of frames, a necessary component in manufacturing computer monitors.Because of the threat of entry, this firm charges its customers a price equal to average cost.One reason that a producer of computer monitors may make rather than buy frames is

• A)the frame supplier may be unreliable
• B)the total cost of the components of frames is the same as the price of frames purchased in the market
• C)the frame manufacturer has no incentive to make high-quality frames
• D)managers at the computer monitor firm place a high value on their time
• E)the frame manufacturer will soon go out of business because firms do not produce goods for the market that can be made in-house

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Definitions:

Wisconsin Milk Market

Refers specifically to the dairy industry and marketplace within the state of Wisconsin, known for its significant contribution to the United States' milk production.

Total Producer Surplus

The total benefit that producers receive from selling a good or service, measured as the difference between the market price and the minimum price producers are willing to accept.

Caitlin's Producer Surplus

The difference between what a producer (in this case, Caitlin) actually receives for selling a good and the minimum they would be willing to accept.

Producer Surplus

The difference between what producers are willing to accept for a good or service and what they actually receive, measured by the area above the supply curve and below the market price.