Many people believe that a monopolist can set his own price which consumers have little recourse but to pay, and thereby reap enormous profits. Is this true?
A monopolist can set his own price for a good or service in the marketplace. However, a firm cannot make consumers purchase any particular quantity of a good. The monopolist is bound by the market demand curve. In order to sell more of output and increase total revenue, he will have to lower his price not only on the marginal units he wishes to sell, but also on all of the units. As a result, there is no guarantee that the best a monopolist could do, at the quantity where MR = MC, allows it to earn any economic profits.
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The fact that consumers often react more to changes in the posted price of a good as compared to changes in the sales tax that is not posted is an example of
A) salience. B) salinity. C) stupidity. D) rational ignorance.
Negative cross-price elasticity of demand indicates that
a. the product is an inferior good b. the product is a necessity c. the product is a luxury d. the two products are substitutes e. the two products are complements
If the government owns a nationalized firm, the prices are
a. set by an administrative agency of the government b. set by the free market c. high enough to make economic profits for the government d. determined by competition e. set to encourage efficiency and reduce waste
Marketable debt from the U.S. government in the form of bonds, notes, and bills is known as
a. monetized debt b. crowding out c. derivatives d. Treasury securities e. external debt