One reason that monopolies often earn zero economic profits is that
a. many monopolies are regulated by the government
b. competitors cut prices
c. barriers to entry are low
d. collusion prevents profits
e. costly concessions to labor suppliers reduce economic profit
A
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When leisure is an inferior good, the wage elasticity of labor supply is always positive.
Answer the following statement true (T) or false (F)
Ethan enjoys buying books and going to the movies. He has income of $150 to spend on these two goods each month. The price of a book is $15 and the price of going to the movies is also $15. He currently consumes four books and six movies a month. If the price of a book increases to $20, then:
A. the substitution and income effects would both predict Ethan would consume more of both goods. B. the substitution and income effects would both predict Ethan would consume less of both goods. C. the substitution effect would predict Ethan would consume more books and less movies, and the income effect would predict he would consume less of both. D. the substitution effect would predict Ethan would consume less books and more movies and the income effect would predict he would consume less of both.
A price-taking firm and a monopoly firm are alike in that: a. price equals marginal revenue for both
b. both maximize profits by choosing an output where marginal revenue equals marginal cost. c. price exceeds marginal cost at the profit-maximizing level of output for both. d. in the long run, both earn zero economic profits.
Figure 33-6
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If the economy in 34-6 (b) is experiencing an inflationary gap (point g), the economy’s self-correcting process will move unemployment to ____ and inflation to ____.
A. 4 percent; 6 percent B. 5.5 percent; 5 percent C. 5.5 percent; 7 percent D. 5.5 percent; 2 percent