The authors claim that monopolists will tend to practice stronger conservation of depletable resources than would occur under a perfectly competitive market structure. Why is this true?
A) Monopolists are typically taxed at higher rates than competitive firms, so they will tend to reduce output and revenues in order to minimize their tax expenditures.
B) The profit-maximizing decisions of a monopolist tend to generate lower output levels than under perfect competition, so the resource is depleted at a slower rate by the monopolist.
C) Common property resource problems do not arise when there is only one seller.
D) The lower depletion rate used by monopolists serves as a barrier to entry.
B
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Consider someone who borrows $10,000 to buy a car at a fixed interest rate of 4.5%. If inflation is 3% at the time the loan is made, then the loan must be repaid at a real interest rate of ______. But if inflation rises to ______, then the real interest rate on the loan is zero.
a. 1.5%; 7.5% b. 1.5%; 4.5% c. 3%; 7.5% d. 4.5%; 7.5%
When production increases, the average variable cost and average total cost curves:
A. cross. B. move closer together. C. become horizontal. D. spread farther apart.
Bank panics have largely disappeared in the United States because
A) banks are now required to hold a larger fraction of deposits as reserves. B) bank loans are more closely monitored by the Federal Reserve. C) of low interest rates. D) of deposit insurance.
Which two factors make regulating mergers complicated?
A) First, firms may lobby government officials to influence their decision to approve the merger. Second, by the time the government officials reach a decision regarding the merger, the firms often decide not to merge. B) First, the time it takes to reach a decision to approve a merger is so long that the firms often have new owners and mangers. Second, by law, government officials are not allowed to consider the impact of foreign trade (exports and imports) on the degree of competition in the markets of the merged firms. C) First, the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice must both approve mergers. Second, the concentration ratios that are used to evaluate the degree of competition the merged firms face are flawed. D) First, it is not always clear what market firms are in. Second, the newly merged firm might be more efficient than the merging firms were individually.