The figure above shows the demand and cost curves for a single-price monopoly. Which of the following statements is FALSE?
A) To maximize its profit, the firm will set marginal revenue equal to zero by producing 12.5 units.
B) The firm will make an economic profit.
C) The firm is a not a natural monopoly.
D) The firm will set price where demand is elastic.
A
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If Jet Cruises chooses to No Ad and Easy Sail then chooses to Ad, Jet Cruises earns ________ million in net profit and Easy Sail earns ________ million.
Jet Cruises wants to prevent Easy Sail from entering the sailboat market. The above game tree illustrates the different strategies and corresponding payoffs for the two firms. Both Jet Cruises and Easy Sail have the same strategies of advertising (Ad) or not advertising (No Ad). The payoffs represent net profit in millions.
A) $4; $3 B) $2; $4 C) $5; $2 D) $10; $2
The negative effect of a tax on the economic surplus of participants in a market should:
A. be weighed against the potential benefits of the public goods financed by the tax. B. insure that the tax will never be approved by voters. C. be enough to convince the government that the tax is a bad idea. D. be ignored if the government needs to generate tax revenue.
A basic assumption used in many economic models is:
A) as price goes up, the amount purchased will go up too. B) as price goes up, less will be offered for sale on the market. C) if the underlying theory doesn't represent reality, it is not useful. D) ceteris paribus, which means all other things remain unchanged.
Using Figure 1 above, if the aggregate demand curve shifts from AD2 to AD3 the result in the short run would be:
A. P1 and Y2. B. P2 and Y3. C. P3 and Y1. D. P2 and Y2.