How does a monopoly decide the optimal amount of a good that it should produce? How does it set the price for its product?
What will be an ideal response?
A monopoly determines the optimal output at the point where its marginal revenue equals its marginal cost. Once the optimal output is determined, it traces the output to the demand curve that it faces to determine the maximum price that consumers are willing to pay for the product. This price is the highest price that a monopoly can charge for the quantity of output it produces.
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Refer to Figure 15-7. Suppose the Fed lowers its target for the federal funds rate. Using the static AD-AS model in the figure above, this situation would be depicted as a movement from
A) B to A. B) A to B. C) C to D. D) E to A. E) C to B.
Remembering that demand elasticity is defined as the percentage change in quantity divided by the percentage change in price, if price decreases and, in percentage terms, quantity rises more than price has dropped, total revenue will
A) increase. B) decrease. C) remain the same. D) either increase or decrease.
The key difference between the primary and secondary bond markets is that __________ bonds are traded on the primary market, while __________ bonds are traded on the secondary market
a. newly issued; previously issued b. government; corporate c. more valuable; less valuable d. low risk; high risk e. high yield; low yield
Dividing the change in quantity on the Y-axis by the change in quantity on the X-axis calculates the slope of a line.
Answer the following statement true (T) or false (F)