A risk-neutral monopoly must set output before it knows the market price. There is a 50 percent chance the firm's demand curve will be P = 20 ? Q and a 50 percent chance it will be P = 40 ? Q. The marginal cost of the firm is MC = Q. The expected profit-maximizing quantity is:
A. 15.
B. 20.
C. 5.
D. 10.
Answer: D
You might also like to view...
The income elasticity of demand is the percentage change in ________ divided by the percentage change in ________
A) the price; income B) the quantity demanded; income C) income; the quantity demanded D) income; the price
If providing more labor and consuming less leisure would make a worker better off, then the wage rate must be greater than the worker's
a. marginal revenue product. b. marginal value of leisure. c. nonlabor income. d. human capital.
When economists disagree about whether the government should tax a household's income or its consumption, they are expressing a difference in
All else equal, the price elasticity of demand tends to be higher when:
A. a good has many substitutes. B. the time horizon is relatively short. C. supply increases. D. people spend a small fraction of their budget on the good.