"Other things being equal, the monopolist hires fewer workers than would be hired than a perfectly competitive industry." Do you agree or disagree? Why?
What will be an ideal response?
Agree. For competitive firms, marginal revenue product equals marginal physical product multiplied by product price. For a monopoly, marginal revenue product equals marginal physical product multiplied by marginal revenue. Since marginal revenue falls faster than price, MRP of a monopolist falls faster than the price in a competitive industry. Marginal factor cost is the same for both, so the equilibrium quantity of labor is less for monopoly than for perfect competition.
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Barriers to entry might include all but which of the following?
a. Huge capital expenditures required to get started in production b. Patents c. Sole ownership of a strategic resource d. Exclusive government franchise e. Positive economic profit
In a nation with a market economy, the consumer decides which products will be successful.
a. true b. false
Suppose your state government could undertake some measures that would improve the safety of highways within the state. If the goal is to use resources efficiently, how many of the measures should be undertaken?
a. all of them b. all measures up to the point at which the marginal social benefit from safety improvements equals the marginal social cost c. all measures for which the marginal social benefits from safety improvements are greater than zero d. all measures for which the marginal social benefit from safety improvements is at least as great as what motorists have reported they would be willing to pay
An economic model is a detailed version of an economic environment.
Answer the following statement true (T) or false (F)