Angelo is a wholesale meatball distributor. He sells his meatballs to all the finest Italian restaurants in town. Nobody can make meatballs like Angelo. As a result, his is the only business in town that sells meatballs to restaurants. Assuming that Angelo is maximizing his profit, which of the following statements is true?
a. Meatball prices will be less than marginal cost.
b. Meatball prices will equal marginal cost.
c. Meatball prices will exceed marginal cost.
d. Meatball prices will be a function of supply and demand and will therefore oscillate around marginal costs.
Answer: c. Meatball prices will exceed marginal cost.
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The "lemons problem" is overcome in the used car market by
A) strict government regulation of private deals between individual buyers and sellers of used cars. B) most used cars selling for well below their true values. C) "lemon insurance" policies being offered by insurance companies. D) the existence of used car dealers who are concerned about maintaining their reputations.
The demand curve facing a perfectly competitive firm is
A) the same as the market demand curve. B) downward-sloping and less flat than the market demand curve. C) downward-sloping and more flat than the market demand curve. D) perfectly horizontal. E) perfectly vertical.
Let supply be given by P = 5Q and demand by P = 19 - 2Q. Suppose we now place a tax of 5 per unit of output on the seller. The new supply curve is:
A. P = 5 + 5Q B. P = 5Q C. P = 5Qt5 D. P = 5Q - 5
Ms. Krupsky has shorthand and typing skills and still finds herself unemployed. In today's economy, Ms. Krupsky is an example of what type of unemployment?
A) cyclical unemployment B) frictional unemployment C) structural unemployment D) None of the above answers is correct.