How does price elasticity affect the price-quantity combination and segment of the demand curve that the monopolist would prefer for price and output?
What will be an ideal response?
The profit-maximizing monopolist will avoid price-quantity combinations in the inelastic portion of the demand curve and prefer some price-quantity combination in the elastic portion. In the inelastic range of the demand curve, marginal revenue is negative. In this range, a drop in price will result in a drop in total revenue. It will also increase total costs, and thus decrease profits. The opposite results in the case of the elastic portion of the demand curve.
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The figure above shows a production possibilities frontier. In the figure, when the economy moves from point C to point B, what is the opportunity cost of a DVD?
A) 0.5 cell phones B) 2 cell phones C) 0.5 million cell phones D) 2 million cell phones E) zero
Which of the following is not an automatic stabilizer?
a. Personal income tax revenue. b. Corporate income tax revenue. c. Unemployment compensation benefits. d. Property tax revenue.
Which of the following will be an efficient payment scheme for a defendant's attorney, who is experienced in handling similar cases in the past?
a. Contingency fees b. Capitation fees c. Hourly billing d. Quality based billing
Government imposed price controls often lead to
A) illegal trades of the good. B) the most efficient use of resources. C) the equilibrium solution in terms of price and quantity. D) maximization of profits.