The DeBeers Company is a profit-maximizing monopolist that exercises monopoly power in the distribution of diamonds. If the company earns positive economic profits this year, the price of diamonds will:
A. exceed both the marginal cost and the average total cost of diamonds.
B. be equal to the average total cost of diamonds.
C. be equal to the marginal cost of diamonds.
D. exceed the marginal cost of diamonds but be equal to the average total cost of diamonds.
Answer: A
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Indicate whether the statement is true or false
Which is not counted in GDP?
A. A Social Security check sent to a retiree B. Government spending on highway building C. Money spent on an airline ticket D. Money spent by a company to build a new office park
In 2002, the Federal Reserve changed its discount lending procedures. Which of the following statements is correct?
A. The Fed now controls the quantity of credit extended as well as its price. B. For most of its history the Federal Reserve has lent reserve to banks at a rate equal to the target federal funds rate; after 2002 the rate would be below the target federal funds rate. C. The changes made in 2002 have made it more difficult for the Fed to meet its interest-rate stability objective. D. Before 2002 the Fed discouraged banks from borrowing and actually created volatility in the market for reserves.
Consider Figure 8.9. If David's payoff in the bottom rectangle were 40 instead of 70, the outcome of the game would be that:
A. both choose a high price. B. both choose a low price. C. Becky chooses a high price and David chooses a low price. D. David chooses a high price and Becky chooses a low price.