Which of the following pricing strategies allows a firm to earn economic profit?
A) charging a price equal to the average variable cost of production
B) charging a price equal to marginal cost
C) price discrimination
D) charging a price equal to the average total cost of production
C
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Suppose a business offers a 10% discount on the good x1 that it sells.
a. Illustrate a consumer's before and after-discount budget constraint by modeling x2 as a composite good. b. Suppose you observe only the after-discount consumption decision of the consumer. Can you tell from this information how much revenue the firm is giving up (from this consumer) by offering the discount? If so, illustrate this in your graph. c. Suppose that, instead of the firm offering the 10% discount, the government subsidized consumption of x1 sufficiently to reduce p1 by 10%. Suppose again that you only observe the after-subsidy decision of the consumer. Can you tell how much of a subsidy payment is made to this consumer by the government? If so, illustrate it in your graph. d. Why are your answers to (b) and (c) different? What will be an ideal response?
Regardless of whether a negative externality is emitted by consumers or by producers, a Pigouvian tax can be imposed on consumers only.
Answer the following statement true (T) or false (F)
Which of the following would increase the unemployment rate?
A) an increase in unemployment insurance payments B) a law making it illegal to work more than 35 hours per week C) a cut in unemployment compensation D) a decrease in the minimum wage
In which case(s) does(do) a country's supply of loanable funds shift left?
a. both an increase in the budget deficit and capital flight b. an increase in the budget deficit, but not capital flight c. capital flight, but not an increase in the budget deficit d. neither an increase in the budget deficit nor capital flight