How does a monopolist choose the profit maximizing output-price combination?
If marginal cost of production is assumed to be zero, the monopolist produces at the point where marginal revenue becomes zero. In case of positive marginal cost, the monopolist's profit maximizing output is obtained at the point where marginal revenue is equal to marginal cost. In either case, the corresponding price obtained from the demand curve becomes the market price.
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To make child daycare more affordable, government advisors are debating two possible options. Plan A is to give daycare centers a $100 subsidy per month per child. Plan B is to give the parents $100 reduction in taxes per month per child in daycare. Which plan benefits parents more?
a. Plan A because it will increase the supply of childcare and decrease the price. b. Plan B because the $100 goes directly to the parents. c. The plans are equivalent in terms of their impact on the price minus subsidy paid by parents. d. Plan A because the price will fall, while under Plan B the price will rise.
When one firm sells a good or service that has no close substitutes and a barrier blocks the entry of new firms, what type of market is this?
A) perfect competition B) only monopoly C) oligopoly D) only monopolistic competition E) either monopoly or monopolistic competition
Suppose the quantity of oranges demanded is less than the quantity supplied. Then
A) the market still clears, because consumers can buy all the oranges they wish at the prevailing market price. B) the market still clears, because producers can sell all the oranges they wish at the prevailing market price. C) the market clears, but is not fully coordinated. D) oranges are no longer scarce goods. E) none of the above is true.
If, in a perfectly competitive industry, the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost, then
A) new firms are attracted to the industry. B) existing firms will exit the industry. C) market supply will remain constant. D) firms are breaking even.