The profit-maximizing level of output for a perfectly competitive firm is socially efficient, while the profit-maximizing level of output for a monopolist is not because under perfect competition ________, while under monopoly ________.
A. P = MR; P < MR
B. P = MC; P < MC
C. P < MR; P = MR
D. P = MC; P > MC
Answer: D
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The demand for a product produced in a perfectly competitive market permanently increases. In the short run, the price
A) rises and each firm produces less output. B) rises and each firm produces more output. C) does not change as new firms enter the industry. D) does not change because each firm produces more output.
Suppose the inverse supply curve in a market is Q = 6p2. If price decreases from 5 to 4, the change in producer surplus is
A) 150. B) -54. C) -6. D) -122.
According to the bounded rationality hypothesis, an individual confronting a large number of complicated choices is most likely to respond by
A) using a simple rule of thumb to choose among a subset of easiest-to-evaluate options. B) using the ceteris paribus assumption to assist in simplifying and examining each of the possible options. C) utilizing readily available empirical evidence to assist in evaluating every option. D) assessing every available choice by developing sophisticated theories regarding each option.
Which of the following is true of net taxes? a. The level of net taxes varies directly with the level of transfer payments. b. The level of net taxes varies inversely with the level of transfer payments. c. Net taxes must always be less than zero
d. Net taxes increase when income tax rates are reduced. e. Net taxes increase when income decreases.