The higher prices charged by monopolists:
A. are like a private tax that redistributes income from consumers to monopoly sellers.
B. are socially optimal because they better reflect how much society values the good relative
to the resources used to produce it.
C. return to consumers through the public goods provided by monopolies.
D. have no effect on the distribution of income.
Answer: A
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Perfectly competitive industry X has constant costs and its product is an inferior good. The industry is currently in long-run equilibrium. The economy now goes into a recession and average incomes decline. The new long-run equilibrium will result in a(n)
A. decrease in output, but not in the equilibrium price of the product. B. increase in output and in the equilibrium price of the product. C. increase in output, but not in the equilibrium price of the product. D. decrease in output and in the equilibrium price of the product.
Travelers driving through Gotham City can use a freeway or the Cross Town Tollway to get through the city. The tollway charges $1.00 per car during the morning rush hour (6-9 AM) and the afternoon rush hour (4-7 PM), and the toll is $0
40 per car at all other times. The weekly demand for using the tollway during rush hour is Q1 = 800 - 200P1 where quantity demanded is measured in thousands of cars, and the weekly demand for the non-rush hour period is Q2 = 2000 - 1000P2. Gotham City's marginal cost of operating the tollway is MC = 0.02 + 0.001Q per car. a. What are the marginal revenue curves associated with the two demand curves? b. Has the city set the profit maximizing tolls for the Cross Town Tollway? If not, do the current tolls generate too much or too little traffic on the tollway?
A resource owner will supply resources up to the point where marginal resource cost is equal to marginal revenue product
a. True b. False
Which of the following equations is equivalent to the equation S - NX = I?
A. S + KI = I B. S + I = NX - KI C. S ? KI = NX D. S ? I = KI