Duke is a highly skilled negotiator who could work for many law firms. The law firm that hires Duke is able to collect twice as much revenue per hour of Duke's time than it can for any other negotiator in town. The increased revenue will:
A. be evenly split between Duke and the law firm to maximize surplus.
B. all go to Duke because, if it didn't, another firm could hire Duke away.
C. all go to the law firm because the firm bears the risk of running the business.
D. be split between Duke and the law firm, but how it will be split cannot be determined without more information.
Answer: B
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Book publishers often use a cost-plus pricing strategy. One reason for this is
A) bookstores, not publishers, ultimately determine how many books will be produced. B) much of the cost of publishing textbooks is difficult to assign to any particular book. C) publishers do not want to incur the expense of determining the profit-maximizing strategy. They prefer cost-plus pricing because of its lower cost. D) most publishers do not hire economists who can determine the number of books they must sell to equate marginal cost and marginal revenue.
Consider a market served by a monopolist, Firm A. A new firm, Firm B, enters the market and, as a result, Firm A lowers its price to try to drive Firm B out of the market. This practice is known as
a. resale price maintenance. b. predatory tying. c. tying. d. predatory pricing.
A manufacturing company designs and produces an incredibly efficient solar heating system for large buildings and earns very large profits on it. Which of the following is true?
A. The profits this firm earns aren't deserved, as the firm did not take any risks. B. This firm must not be in a competitive market if it was able to earn a profit. C. The profits this firm earns are a return for an innovation. D. both A and C
Both increases in the price level and increases in real GDP will decrease the demand for money
Indicate whether the statement is true or false