In perfect competition P = MR, but in monopoly P > MR. Why? Substantiate this statement with an example.
What will be an ideal response?
In perfect competition, the demand curve is horizontal. The demand curve for the monopoly firm is downward sloping. This shows that in order to sell more, the monopoly firm has to reduce the price. Therefore, marginal revenue would be less than the price.For example, if a monopoly firm sells one unit of commodity X at the price of $10, the total revenue and marginal revenue would be equal to price, which is $10, but if the firm decides to sell more units of commodity X, then it has to reduce the price to, may be, $9, which would give a marginal revenue of $8, which is less than the current price.
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Suppose the capital gains tax is 28 percent and you purchased a house ten years ago for $80,000. If you sold the house today you would get $140,000. Your tax liability would be
A) $39,200. B) $16,800. C) indeterminate without knowing the inflation rate. D) indeterminate without knowing the personal income tax rate.
The movement left from MD1 to MD3 happened because of a(n) ______ in price level and/or a(n) ______ in RGDP.
a. increase; increase
b. decrease; increase
c. increase; decrease
d. decrease; decrease
Money neutrality is violated in which model?
a. new Keynesian model. b. monetarist model. c. real business cycle model. d. classical model. e. both c and d.
When comparing perfect competition and monopoly, a major assumption made is that
A) the monopolist faces a downward sloping demand curve. B) consumers only care about the price of the good and not whether the seller is a monopoly or not. C) the costs of production are the same under monopoly as under perfect competition. D) the monopolist can make an above normal rate of return.