Consider a monopolist attempting to engage in limit pricing with total costs C(Q) = 100 + 2Q. The market (inverse) demand for its product is P = 100 ? 2Q. Currently, the monopolist produces 30 units of output. Assuming the potential entrant has the same cost structure as the incumbent monopolist, is it profitable for the entrant to produce 10 units of output?
A. No, since the market price of $20 is less than the average total cost of producing 10 units.
B. No, since the market price of $50 is less than the average total cost of producing 10 units.
C. Yes, since the market price of $50 is greater than the average total cost of producing 10 units.
D. Yes, since the market price of $20 is greater than the average total cost of producing 10 units.
Answer: D
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A firm that is the only seller of a good or service that does not have a close substitute is called
A) a monopoly. B) a market maker. C) a price maker. D) an oligopolist.
At the international level, the division of labor increases output through
a. tariffs. b. economies of scale. c. standardization. d. exchange rates.
The aggregate supply curve shows the relationship between the:
A. unemployment rate and total production by firms. B. overall price level in the economy and the unemployment rate. C. inflation rate and the overall price level in the economy. D. overall price level in the economy and total production by firms.
If Ben values good X more than good Y, and Catherine values good Y more than good X, a firm can increase its profits by
A) charging the same price for both goods. B) bundling the goods. C) selling the goods in a competitive market. D) charging one price per good.