The Exclusive Gift Company has a monopoly over the sale of gold hula hoops. This company is currently pricing and producing where marginal revenue is equal to marginal cost. It is selling 50 gold hula hoops at a price of $5,000 each. Total costs for the company are $300,000 of which fixed costs are $100,000. You are hired as an economic consultant to this company. You should advise this monopolist to
A. shut down in the short run and exit the industry in the long run.
B. produce in the short run but exit the industry in the long run if conditions do not change.
C. shut down in the short run but expand capacity in the long run if conditions do not change.
D. produce in the short run and expand capacity in the long run.
Answer: B
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The manager of an ice-cream parlor decides to introduce a new ice-cream flavor in his Dallas, TX based restaurants to compare the sales of these restaurants to the ones with no new flavors. She decides to run a difference in difference approach. Which of the following is true?
a. The first difference would be the difference in the sales of the Dallas stores before and after the introduction b. The second difference would be the difference in the sales in other stores before and after the Dallas stores introduced the new flavor c. The second difference would be the difference between the post introduction sales in the Dallas stores and the control group d. Only A&B
Anna's Antiques expects to get two bidders for the unique china teacup it sells. Each of the bidders can either have a high-value of $100 or a low-value of $70 with equal probability. If Anna receives $70 from the auction, she can infer that
a. Both the bidders were high value bidders b. Both the bidders were low value bidders c. One of the bidders was high value, while the other was low value d. All of the above
The use of a price system eliminates: a. scarcity
b. equilibrium. c. shortages and surpluses. d. changes in supply and demand.
Libertarians believe that
a. policy should aim for an income distribution that maximizes total happiness of all members of society. b. large income disparities are likely to become a threat to political liberty. c. the government should aim to improve the well-being of the worst off person in society. d. people should be free to engage in voluntary transactions, even if large income disparities result.