While monopoly power can be abused, it can also be used beneficially. What are the major pros and cons of largeness in business?
What will be an ideal response?
The following pros of largeness are given in the text:
| 1. | A large firm is more likely to exploit economies of scale. If there are economies in production or distribution, large firms are desired for cost reasons. |
| 2. | A large firm may have the required scale to permit successful innovation. Because innovation is risky, a larger firm with substantial resources is better able to bear the risk than a small firm. If a venture requires substantial money to overcome obstacles in development, a large firm is better able to cover the cost than a small firm. |
| 1. | Monopoly profits create a flow of wealth to those with market power. This may be seen as unfair. |
| 2. | A monopoly may restrict output in pursuit of profit. This is allocatively inefficient. |
| 3. | A monopoly may restrict innovation. Although it has greater resources to conduct research, it also has a vested interest in restricting product/processes. If the monopoly chooses a quiet life, it may restrict innovation. |
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Using the information in Table 6.2, the Astro Consumer Price Index for 2015 is
A) 87. B) 99. C) 126. D) 238.
The above figure illustrates a firm's total revenue and total cost curves. Which one of the following statements is FALSE?
A) Economic profit is the vertical distance between the total revenue curve and the total cost curve. B) At output Q1 the firm makes zero economic profit. C) At an output above Q3 the firm incurs an economic loss. D) At output Q2 the firm incurs an economic loss.
In the circular-flow diagram, in the markets for
a. goods and services, households and firms are both sellers. b. goods and services, households are buyers and firms are sellers. c. the factors of production, households are buyers and firms are sellers. d. the factors of production, households and firms are both buyers.
Investment spending is insensitive to changes in the interest rate and the SRAS curve is upward sloping. According to a monetarist, an increase in the money supply will __________ Real GDP. According to a Keynesian, an increase in the money supply will __________ Real GDP
A) raise; not change B) not change; raise C) lower; lower D) raise; lower E) none of the above