Both monopolies and monopolistically competitive firms set marginal revenue equal to marginal cost to maximize profit. Given the same cost curves, would you expect prices to be higher in a monopoly or a monopolistically competitive market?
What will be an ideal response?
Prices are likely to be higher in a monopoly than in a monopolistically competitive market. Both monopolies and monopolistically competitive firms set marginal revenue equal to marginal cost and read price off the demand curve. The demand curve facing a firm in a monopolistically competitive market is fairly elastic (that is, it is fairly flat) because other firms' goods are close (but not perfect) substitutes. Since monopolies face steeper demand curves, prices are likely to be higher in a monopoly.
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The table above shows a nation's production possibilities frontier. If the nation wants to produce 4 robots and 34 pizzas,
A) the nation will be producing inefficiently. B) the opportunity cost is 9 pizzas. C) it will shift the production possibilities frontier. D) it will be unable to do so because the production point is unattainable. E) the nation will then be producing at a production efficient point.
If the marginal propensity to consume is 0.75 and the desired amount of increase in real GDP is $240 billion, then by how much would government spending have to increase?
a. $240 billion b. $80 billion c. $60 billion d. $30 billion
If the demand for a product decreases, but the supply for the product stays the same, which of the following would happen?
a. There will be a scarcity of the product. b. There will be an equilibrium of the product. c. There will be a shortage of the product. d. There will be a surplus of the product.
Which of the following is most closely related to recessions?
A. Positive long-run economic growth. B. Rapid growth in the price level. C. Falling rates of unemployment. D. Negative real growth in output.