Answer the following statements true (T) or false (F)
1. Predatory pricing, such as the high price of pharmaceuticals, is legally protected under patent law.
2. If a monopolist chooses a low level of output, it can charge only a relatively low price.
3. In the real world, a monopolist can use marginal revenue and cost information to determine the profit-making combination of quantity and price because information on total revenues and costs is often not available.
4. Allocative efficiency refers to producing the optimal quantity of some output, the quantity where the marginal benefit to society of one more unit just equals the marginal cost.
5. One type of an imperfectly competitive market is called monopolistic competition. Monopolistically competitive markets feature a large number of competing firms, but the products that they sell are not identical.
1. False
This statement is false. Predatory pricing is when a firm uses the threat of sharp price cuts to discourage competition; it is a violation of U.S. antitrust law, but it is difficult to prove.
2. False
This statement is false. The challenge for the monopolist is to choose the combination of price and quantity that maximizes profits. If it chooses a high level of output, it can charge only a relatively low price; conversely, if the monopolist chooses a low level of output, it can then charge a higher price.
3. True
This statement is true. In the real world, a monopolist often does not have enough information to analyze its entire total revenues or total costs curves. A monopolist can use information on marginal revenue and marginal cost to seek out the profit-maximizing combination of quantity and price.
4. True
This statement is true. Allocative efficiency refers to producing the optimal quantity of some output, the quantity where the marginal benefit to society of one more unit just equals the marginal cost.
5. True
This statement is true. One type of an imperfectly competitive market is called monopolistic competition. Monopolistically competitive markets feature a large number of competing firms, but the products that they sell are not identical.
You might also like to view...
Refer to the Article Summary. The unexpected increase in the supply of oil mentioned in the article summary resulted in a decrease in the price of oil
After an unexpected decrease in the price of oil, the long-run adjustment ________ the price level and ________ the unemployment rate as they return to their original levels. A) increases; increases B) decreases; increases C) increases; decreases D) decreases; decreases
When a firm has a monopoly in a market and also perfectly price discriminates, total welfare
A) is maximized. B) is lower than in a perfectly competitive market. C) is higher than in a perfectly competitive market. D) is minimized.
If the United States could produce 4 tons of potatoes or 2 tons of wheat per worker per year, while Ireland could produce 2 tons of potatoes or 3 tons of wheat per worker per year, the country with the comparative advantage in producing potatoes is ____ and the country with the absolute advantage in producing potatoes is ____
a. the United States; the United States b. the United States; Ireland c. Ireland; the United States d. Ireland; Ireland
Which of the following is not a consequence of deflation?
A. Deflation causes uncertainty about the future. B. The threat of deflation can make people reluctant to borrow for long periods. C. Deflation causes the real value of money to fall. D. Firms may be reluctant to undertake investments for fear that the prices at which they can sell their output will drop.