Describe the output and price effects that influence the profit-maximizing decision faced by a firm in an oligopoly market. How does this differ from output and price effects in a monopoly market?
Output effect: Price > Marginal cost => increased output will add to profit
Price effect: increased quantity is sold at a lower price => lower revenue (profit?)
An oligopolist must take into account how the output and price effects will be influenced by competitors' production decisions, or it must assume competitors' production will not change in response to its own actions.
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For which of the following products is demand likely to be least elastic with respect to price?
A. Green beans B. Food C. Vegetables D. Green vegetables
Table 1.2 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.Table 1.2Production Possibilities for BombersCombinationNumber of B-1 BombersOpportunity cost(Foregone Stealth)Number of Stealth BombersOpportunity cost (Foregone B-1)A20NA195 B35 180 C45 150 D50 100NAThe lowest opportunity cost in Table 1.2 for Stealth Bombers is
A. 2 B-1 bombers B. 3 B-1 bombers C. 4 B-1 bombers D. 10 B-1 bombers
Public schools
A) allow students to get an education without incurring any opportunity cost. B) provide education at a price below the market price. C) provide education at a price above the market price. D) have done a better job of educating their students in science, math, reading, and writing as the subsidies they receive have increased over the years.
A monopolist can earn economic profits in the long run because
A. a monopoly makes the good or service better than anyone else. B. monopolies can legally force people to buy their products and to pay more for them than they are worth. C. barriers to entry prevent new firms from entering the industry. D. a monopoly is by definition large, and this gives it the ability to make large profits.