Under which circumstances does vertical integration become useful?
In situations where contracts are too costly to form or enforce, vertical integration that puts all of the relevant assets under the same control can be an efficient mode of governance.
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Figure 11-2
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Using the information in Figure 11-2, which point or points represents an inefficient allocation of resources?
A. A B. B C. A and D D. D
The price charged by a monopoly firm is the market price (demand curve) at which:
a. MR = MC, and usually P > MR and P > MC. b. the firm is just breaking even. c. the firm makes a normal profit. d. the firm can export its products.
If a perfectly competitive firm is a price taker, then which of the following is true?
a. Pressure from competing firms will force acceptance of the prevailing market price. b. The firm must be a relatively small player compared to its competitors in the overall market. c. The firm can increase or decrease its output without affecting the overall quantity supplied in the market. d. Quality differences will be very perceptible and will play a major role in purchasers' decisions.
Which of the following best characterizes the tradeoff faced by a monopolist when deciding what quantity to produce?
A. The firm can increase its output, but needs to lower its price for only the marginal unit of output. B. The firm can increase its output, but to do so it must charge a higher price to all customers. C. The firm gets more revenue from new customers by increasing output, but gets less revenue from existing customers given that it lowered its price. D. The firm gets less revenue from new customers by increasing output, but gets more revenue from existing customers given that it lowered its price.