What is a natural monopoly? Why is government justified in regulating a natural monopoly?
What will be an ideal response?
A natural monopoly is a monopoly that results from very extensive economies of scale. Government is justified in regulating a natural monopoly to ensure that the monopoly does not gouge consumers with "unnecessarily" high prices.
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Gary consumes 10,000 units of electricity when his income is $500. When his income increases to $1,000, his consumption of electricity increases to 18,000 units. What is Gary's income elasticity of demand for electricity?
A) 0.5 B) 0.8 C) 1.8 D) 2
The cost of inflation to society includes
A) unpredictable changes in the value of money. B) higher interest rates paid by borrowers. C) higher interest rates paid by the government on its debt. D) the lost spending when people do not have enough money.
Which oligopoly model(s) have the same results as the competitive model?
A) Cournot B) Bertrand C) Stackelberg D) Both Cournot and Stackelberg
The consumption function has a slope less than one because:
a. as disposable income increases, the real rate of interest will decline. b. saving and consumption are equal at all levels of income. c. as disposable income increases, consumption expenditures increase by an amount less than the increase in income. d. as disposable income increases, consumption expenditures increase by an amount greater than the increase in income.