Economists object to monopolies on the grounds of efficiency. Why is this? Explain
Monopolies produce an inefficiently low volume of output. The monopolist reduces output and raises price, equating the (lower) marginal revenue with marginal cost. Therefore, the marginal utility of the last unit consumed (measured by price) is above the marginal cost of production. Society's total utility can be increased by increasing output. Ideally, price should be cut so that the price equals the marginal cost of the last unit produced. This would maximize societal utility.
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The volatility of stock prices, particularly in the short-run, may, according to Professor S. Grossman, be due to
a. large numbers of stockholders fearful of losing wealth who sell at some predetermined level. b. some traders being better informed than others about real financial conditions. c. either or both of the above. d. the increasing use of stock options as compensation for corporate executives.
If Project A has a cost of $5 and provides a benefit of $10, and Project B has a cost of $2 and provides a benefit of $4, then switching from Project A to Project B:
A) increases the net benefit by $3. B) increases the net benefit by $6. C) decreases the net benefit by $6. D) decreases the net benefit by $3.
Research seems to suggest that corporate culture
A) is unrelated to stock performance. B) is closely related to stock performance. C) helps determine the cost of capital. D) is easily transferable across organizations.
In 2008-2009 the U.S. economy provided a
a. healthy climate for investment spending. b. change in aggregate demand that fostered more capital formation. c. sluggish climate for investment spending. d. booming economy that spurred investment spending.