For the monopolist, marginal revenue is
A) equal to price.
B) less than average revenue since price must be lowered to sell additional units.
C) greater than price.
D) not a consideration in the firm's pricing.
B
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Which of the following is an application of the adverse-selection problem?
a. a customer driving more recklessly after buying car insurance. b. a teenager "hanging out" with friends his or her parents do not approve of. c. shareholders offering a high-powered incentive contract to a manager. d. an auto repairman claiming that the repairs are more extensive than they actually are.
Suppose that flu shots create a positive externality equal to $20 per shot. What is the relationship between the market equilibrium output level and the efficient equilibrium output produced? a. They are equal
b. The market equilibrium output level is greater than the efficient equilibrium output level. c. The market equilibrium output level is less than the efficient equilibrium output level. d. None of the above.
Recall this discussion from the text. The supply of 20-year-old French wine has a price elasticity of supply of
a. 1.00 b. -1.0 c. 0 d. infinity e. 20
An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease