What are the reasons for preferring competition to monopoly?
What will be an ideal response?
Monopolists sell at too high a price and provide too small a quantity to be efficient, whereas competitive firms operate efficiently in the long run. Efficiency requires MU = MC. For monopoly, MU = P, as with perfect competition, but P is greater than MC, meaning that MU is greater than marginal cost. This means that an expansion of output will yield utility to consumers that is greater than the cost.
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The market for lawn services is perfectly competitive. Larry's Lawn Service cannot increase its total revenue by raising its price because ________
A) Larry's supply of lawn services is perfectly inelastic B) the demand for Larry's services is perfectly inelastic C) Larry's supply of lawn services is inelastic D) the demand for Larry's services is perfectly elastic
Which of these describes the real gross domestic product?
a. Gross domestic product from which depreciation costs have been deducted b. Gross domestic product that has been adjusted for changes in the price level c. Gross domestic product from which taxes have been deducted d. Gross domestic product that has been adjusted for changes in exchange rate e. Gross domestic product that has been adjusted for changes in interest rates
In the classical model, we assume there is no ongoing inflation, so there is no need to distinguish between the nominal interest rate and the real interest rate
a. True b. False
Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases
a. the inflation rate and the nominal interest rate by the same number of percentage points. b. nominal interest rates but by less than the percentage point increase in the inflation rate. c. the inflation rate but not the nominal interest. d. neither the inflation rate nor the nominal interest rate.