When would a government support through subsidies one of its domestic firms into becoming a worldwide monopoly in a market?
A. When the industry has extremely large economies of scale.
B. When the world market will support only one firm.
C. When the world market has diseconomies of scale.
D. When the industry has extremely large economies of scale and When the world market will support only one firm are correct.
Answer: D
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"My son is a smart entrepreneur. Rather than borrow money from others, he used his own savings to start his music business, and thereby avoided paying interest on loans." An economist would respond by saying
A) "both you and your son are complete idiots." B) "it's always good to avoid borrowing and paying interest." C) "nobody can avoid paying interest, not even your clever son." D) "your son might have avoided paying interest, but he also avoided earning interest."
Which of the following would have the lowest switching costs?
a. a customer ordering from Papa John's instead Pizza Hut b. an individual getting rid of a PS3 game system and beginning to use a Wii game system c. a company changing from a QWERTY keyboard to a keyboard with a different format d. a customer moving a bank account from one bank to another
Suppose that the market price for pizzas increases. The increase in producer surplus comes from the benefit of the higher prices to
a. only existing sellers who now receive higher prices on the pizzas they were already selling. b. only new sellers who enter the market because of the higher prices. c. both existing sellers who now receive higher prices on the pizzas they were already selling and new sellers who enter the market because of the higher prices. d. Producer surplus does not increase; it decreases.
Briefly discuss how firms’ investment makes the economy grow.
What will be an ideal response?