A monopoly firm is charging the price the market will bear at a level of output where MC equals $6 and is increasing, MR equals $9, and average variable cost equals $5 . To maximize profits, the firm should:
a. increase both output and price
b. increase output but decrease the price.
c. decrease output and increase the price.
d. decrease both output and price.
b
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If fewer cigarettes are consumed with symmetric information than asymmetric information, it follows that
A. with asymmetric information the demand for cigarettes is lower than with symmetric information. B. with symmetric information the demand for cigarettes is lower than with asymmetric information. C. the demand for cigarettes is the same with or without asymmetric information. D. there are more free riders with asymmetric information than symmetric information. E. There is not enough information to answer the question.
If only two identical firms operate in a market, consumers prefer
A) a Cournot equilibrium. B) a Stackelberg equilibrium. C) a collusive equilibrium. D) any equilibrium since they all result in the same consumer surplus.
Which of the following is definitely true if the economy is in macro equilibrium?
A. The price level is optimal, but the output level may not be B. The output level is optimal, but the price level may not be C. The price level and the output level are both optimal D. The price level and the output level may or may not be optimal.
Refer to the diagram. The production of Q 1 units of output at an average cost of a:
A. is not possible, given present technology and resource prices.
B. can be achieved if the firm would hire the optimal mix of resources.
C. would entail X-inefficiency.
D. can be realized if the last dollar spent on each input were equal to its marginal product.