Explain why a perfectly competitive firm can sell as much as it wants at the market price but a monopolist must lower its price to sell more.
What will be an ideal response?
A perfectly competitive firm is so small compared to the total market that any changes in output by the firm will have no perceivable impact on the market price. It follows that the firm can sell as much, or as little, as it wants at the market price. However, the demand for a monopolist's product is the same as the downward-sloping market demand, so the monopolist will have to lower its price to increase quantity demanded.
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Easy entry and exit cause oligopoly profits to be zero in the long run
a. True b. False Indicate whether the statement is true or false
Suppose Jack and Kate are at the town fair and are choosing which game to play. The first game has a bag with four marbles in it-1 red marble and 3 blue ones. The player draws one marble from the bag; if it is red, they win $20 and if it is blue, they win $1. The second game has a bag with 10 marbles in it-1 red, 4 blue, and 5 green. The player draws one marble from the bag; if it is red, they win $20; if it is blue, they win $5; and if it is green, they win $1. Both games cost $5 to play. If Jack only cares about expected value, and not risk, he should decide to play a game if:
A. the expected value of the payoff is higher than the expected value of the payoff in the other game. B. the expected value of the payoff is lower than the price to play the game. C. the expected value of the payoff is higher than the price to play the game. D. the expected value of the payoff is double the price to play the game.
The Fed tried to reduce unemployment in the years following the recession of 2001 by:
A. reducing the growth rate of the money supply. B. increasing government spending on construction projects. C. keeping the Federal funds rate very low. D. raising the reserve requirement for banks.
Which of the following statements is true for a command economy?
A. Manufacturers decide what is produced. B. The state decides how to distribute what is produced. C. Consumers have no choice concerning what they buy. D. The amount of a good supplied always equals the amount of the good demanded.