In theory, in the long run, monopolistically competitive firms earns zero profits. However, in reality there are some ways by which a firm can avoid losing profits. Which of the following is one such way?
A) find a market niche and keep it as narrow as possible so as to prevent other producers from entering this market segment
B) gradually increase the mark-up on the goods produced
C) identify new markets and develop products precisely for those markets
D) lower the price of its products to expand its market share
C
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If the Herfindahl-Hirschman Index (HHI) among the firms in the long distance telecommunications market is equal to 855, when would the Federal Trade Commission probably challenge a proposed merger between any two of the firms?
A) It would challenge if the HHI would increase by more than 50 points. B) It would challenge if the HHI would increase by more than 100 points. C) It would challenge no matter what happened to the HHI because the market has so few firms. D) It would not challenge because the HHI is less than 1500.
Quantity discrimination makes sense if
A) buyers of smaller quantities are more price sensitive than buyers of larger quantities. B) buyers of smaller quantities are less price sensitive than buyers of larger quantities. C) demand for the good is perfectly elastic. D) the lower price for larger quantities encourages all consumers to purchase the larger quantity.
Explain the following: Risk results from the fact that more outcomes could happen than will happen.
What will be an ideal response?
If the production of a good generates external benefits, the government could increase efficiency by
A. regulating production of the good to reduce the amount produced. B. requiring all producers of the product to be licensed to produce the product. C. subsidizing production of the good to increase the amount produced. D. taxing the production of the good to reduce the amount produced.