When a firm produces less output, it can reduce:
A. marginal revenue.
B. its fixed costs but not its variable costs.
C. average fixed cost.
D. its variable costs but not its fixed costs.
Answer: D
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Consider the market for cable television, a natural monopoly, shown in the figure above. If the regulator imposes a marginal cost pricing rule, the firm provides service to
A) 3.5 million households. B) 6 million households. C) 10.5 million households. D) 12.5 million households.
Automatic stabilizers are
A) provisions that cause changes in government spending and taxes without new action by Congress or the President. B) policies set by certain committees in Congress. C) tools used by the President's Council of Economic Advisers. D) provisions that cause the aggregate supply curve to be upward sloping.
There are two existing firms in the market for computer chips. Firm A knows how to reduce the production costs for the chip and is considering whether to adopt the innovation or not. Innovation incurs a fixed setup cost of C, while increasing the revenue. However, once the new technology is adopted, another firm, B, can adopt it with a smaller setup cost of C/2. If A innovates and B does not, A earns $20 in revenue while B earns $0. If A innovates and B does likewise, both firms earn $15 in revenue. If neither firm innovates, both earn $5. If C = 15, which is the perfect equilibrium of the game?
A. A innovates, B innovates. B. Neither firm innovates. C. A innovates, B does not. D. None of the answers is correct.
Savings is negative below a disposable income of ____________.
