Explain whether a monopoly that maximizes profit will also be maximizing revenue and production
What will be an ideal response?
Profit maximization is not the same thing as revenue maximization. To maximize revenue the firm would produce up to the point where marginal revenue is zero. Unless marginal cost is zero, this is a larger quantity than the quantity where marginal revenue equals marginal cost. Maximizing production could mean producing the physical maximum possible. This is likely to be far beyond the profit-maximizing level of output.
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As output increases, the AVC
a. increases. b. decreases. c. remains the same. d. falls and then rises.
The long run success of a collusion a. Is limited by ease of entry into the industry
b. Is enhanced by ease of entry into the industry. c. Is unaffected by the ease of entry into the industry. d. Could be either limited by or enhanced by ease of entry into the industry.
Exhibit 14A-6 Aggregate demand and supply model
?
Given the shift of the aggregate demand curve from AD1 to AD2 in Exhibit 14A-6, the real GDP and price level (CPI) in long-run equilibrium will be:
A. $10 billion and 200. B. $4 billion and 150. C. $10 billion and 150. D. $10 billion and 100.
Why, in the labor market, are contracts often designed to include a variable salary component that is tied to some measure of performance?
A. Firms use such contracts to differentiate between high- and low-quality workers. B. Such contracts are considered the fairest to employees under fair labor standard laws. C. Most people are risk-averse and thus variability in their compensation leads to higher total utility. D. These contracts tend to attract employees with the lowest probability of switching jobs.