What is the disadvantage of average-cost pricing?
What will be an ideal response?
By allowing the firm to charge a price equal to its average cost, the government removes the incentive for the firm to keep costs down. This eventually results in higher prices to consumers than would be charged if the firm was diligent about keeping costs down.
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In the long run, if the prices of goods and services are higher than before the aggregate quantity:
A. supplied will be higher. B. demanded will be lower. C. supplied will not change. D. demanded will be higher.
Figure 4-4
In Figure 4-4, an increase in population will change demand from
A. D1to D2. B. D2to D1. C. D3to D2. D. D3to D1.
An advertising race among oligopolists may be rational if it
A. is defense advertising. B. raises entry barriers. C. increases cost per unit of sales. D. encourages new entrants.
Federal Reserve Notes held by the Fed are considered part of the
A) money supply. B) bank reserves. C) both of the above D) none of the above