At a price of $20, the marginal revenue of a monopolist is $12. If the marginal cost of production is $10, what should the monopolist do in order to maximize profits?
A. Increase its price.
B. Decrease its price.
C. Keep its price at the same level.
D. There is not enough information to solve.
Answer: B
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Suppose that the CPI basket contains only 40 heads of cauliflower and 60 bunches of broccoli. If the price of cauliflower goes down by $1 per head and the price of broccoli goes up by $1 per bunch, then
A) the CPI decreases. B) the CPI does not change. C) the CPI increases. D) the CPI might increase or decrease depending how the quantities are affected by the price changes. E) There is not enough information to answer this question.
Suppose that a dollar buys 120 yen. If a VCR sells for 18,600 yen in Japan, the price of the VCR in dollars is ________
A) $186.00 B) $223.20 C) $120.00 D) $155.00
Suppose that nominal aggregate demand falls by 4 percent, and at the same time every marginal cost also falls by 4 percent. The importance of menu cost theory is that in this situation the price level ________, meaning that a recession ________
A) must fall by 4 percent as well, does not occur B) must fall by 4 percent as well, must occur C) still might not fall, may not occur D) still might not fall, may occur
Which of the following would best describe the demand curve faced by a monopoly firm?
A) horizontal line at the market price B) vertical line at the output level C) same as the market demand curve D) same as the perfect competitor's demand curve