The cost-plus-markup theory is an inadequate explanation of relative prices because
A) it does not explain why there is a standard percentage markup in most industries.
B) it is too simple, and simple theories are rarely as useful as more complex theories.
C) the theory is inconsistent with observable relationships between marginal costs and prices.
D) people who actually set prices do not describe the process as cost-plus.
C
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In the Monetarist model, the long-run holds when
a. the money supply is constant. b. real wages are constant. c. output is constant. d. the expected price level equals the actual price level. e. none of the above.
Suppose roses are currently selling for $20 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a
a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to increase. d. surplus to exist and the market price of roses to decrease.
A monopolist is willing to lose some customers by charging higher prices, since this results in higher profits.
Answer the following statement true (T) or false (F)
Suppose that a firm produces both steel and electricity. It is cheaper for this firm to produce both goods than it would be if they were produced by two separate firms. Further, as this firm increases its production levels of both products, the average cost of producing steel rises, while the average cost of producing electricity remains constant. This firm experiences:
A. economies of scope, diseconomies of scale in the production of steel and constant returns to scale in the production of electricity. B. economies of scope, economies of scale in the production of steel and constant returns to scale in the production of electricity. C. diseconomies of scope, economies of scale in the production of steel and constant returns to scale in the production of electricity. D. diseconomies of scope, diseconomies of scale in the production of steel and increasing returns to scale in the production of electricity.