The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC). Indicate whether the statement is true or false ANSWER False. Although the firm is a price setter entry in the long run will drive price down until no economic profit exists.
Date: September 9th, 2020
Asymmetric information represents a market situation in which A) all parties to a transaction possess less than full information. B) one party in a transaction has more information than the other party. C) some information possessed by the parties in a transaction may be false. D) a zero-sum game exists. ANSWER B
Date: September 9th, 2020
Which of the following is an alternative to patents that still encourages research? A) the government funding research by firms B) offering a prize for discovery C) government grants to universities D) All of the above. ANSWER D
Date: September 9th, 2020
What are the prerequisites of a good forecast? What will be an ideal response? ANSWER A forecast must be consistent with all aspects (parts) of a business. A forecast should be based on knowledge of the relevant past, unless underlying conditions change or there is no past to consider. A forecast must consider the […]
Date: September 9th, 2020
Based on annual data from 2000-2010, the Gadget Company estimates that sales are growing according to a linear trend: Q = 50,000 + 200t where t is time and t = 0 in 2000. a. Forecast sales for 2013. b. Do you see any problems with this forecasting method? ANSWER a. 52,600 b. The […]
Date: September 9th, 2020
Under monopsony, the wage rate A) equals the marginal product of labor. B) equals the marginal revenue product of labor. C) is less than the marginal revenue product of labor. D) is greater than it would be under perfect competition. ANSWER C
Date: September 9th, 2020
A firm in an oligopolistic industry has the following demand and total cost equations: P = 600 – 20Q and TC = 700 + 160Q + 15Q2 Calculate: a. quantity at which profit is maximized b. maximum profit c. quantity at which revenue is maximized d. maximum revenue e. maximum quantity at which profit will […]
Date: September 9th, 2020
The domestic demand curve, domestic supply curve, and world supply curves for a good are given in the above figure. All the curves are linear. Initially, the country allows imports. Then imports are banned. Calculate how consumer and producer surplus change because of the ban. Is the country better off with the ban on imports? […]
Date: September 9th, 2020
If $1,000 is placed in an account earning 8% annually on January 1, 1999, how much would be in this account on January 1, 2013? What will be an ideal response? ANSWER $2,937
Date: September 9th, 2020
A monopoly might produce less than the socially optimal amount of pollution because A) it likes to be a good citizen. B) it sets price above marginal cost. C) it earns economic profit. D) it internalizes the external costs. ANSWER B
Date: September 9th, 2020
