Given the supply curve of butter, a reduction in the price of margarine will tend to:
a. Increase the demand for margarine
b. Increase the demand for butter
c. Lower the price of butter
d. Raise the price of butter
c. Lower the price of butter
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The greater the price elasticity of market demand, the less will be the reduction in market output from a price floor.
Answer the following statement true (T) or false (F)
Voluntary trade promotes economic progress because
What will be an ideal response?
If the price of a resource reaches the choke price, that means that
a. The physical reserves are zero b. The economic reserves are zero c. The environmental costs have been fully internalized d. Environmental costs need to be internalized e. Prices will continue to fall
Smyth Industries operated as a monopolist for the past several years, earning annual profits amounting to $50 million, which it could have maintained if Jones Incorporated did not enter the market. The result of this increased competition is lower prices and lower profits; Smyth Industries now earns $10 million annually. The managers of Smyth Industries are trying to devise a plan to drive Jones Incorporated out of the market so Smyth can regain its monopoly position (and profit). One of Smyth's managers suggests pricing its product 50 percent below marginal cost for exactly one year. The estimated impact of such a move is a loss of $1 billion. Ignoring antitrust concerns, is it in Smyth Industries' interest to remain as a duopolist or engage in predatory pricing?
A. Remain as a duopolist since $210 million is greater than $0. B. Remain as a duopolist since $210 million is greater than $100 million. C. Engage in predatory pricing since $210 million is greater than $200 million. D. Engage in predatory pricing since $1.05 billion is greater than $1 billion.