Why is bundling of unrelated products, one of which is available in the competitive market, a losing strategy?
Bundling of unrelated products is likely to reduce a monopolist's profit. If a monopolist bundles two goods, one of which is available in the free market, the bundled product will not appeal to many people in the market. The monopolist loses those customers who have such low valuations of the competitive product that they are unwilling to buy the bundled version, while they would have purchased the monopolized product had it been offered unbundled.Offering only the bundle deprives the monopolist of potential profits.
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Why has the cartel in diary farming not been broken up?
a. Organized crime is used to enforce a dairy compact. b. The dairy industry is exempt from anti-trust laws. c. Consumers do not mind paying higher prices for milk. d. Economic studies indicate that to do so would decrease efficiency.
According to the menu cost theory, firms will be slow in changing their prices because
A) if prices changed frequently, individuals would reduce their demand for that good because of uncertainty. B) frequent price changes would be a sign of monopolistic behavior. C) the cost of changing the price might exceed the additional revenue the price change would generate. D) demand for their product would fall because consumers would purchase goods from firms that had not raised their prices.
If the government wishes to increase GDP by $1,000b, and the MPC is 0.6, it should increase its spending by:
A. $400b. B. $1,000b. C. $600b. D. $250b.
Falling output, in the short run, could be due to:
A. an increase in short-run aggregate supply. B. a reduction in aggregate demand. C. an increase in long-run aggregate supply. D. an increase in aggregate demand.