Long-run equilibrium under monopolistic competition requires that
A. the demand curve intersects the average cost curve.
B. the demand curve be tangent to the average cost curve.
C. price be equal to marginal cost.
D. quantity produced be at the point where average cost is at a minimum.
Answer: B
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Dan is the owner of a price-taking company that manufactures sporting goods. One particular facility Dan owns produces baseball bats and baseball gloves. His cost function for baseball bats is CB(QB, QG) = 100QB + QB2 + QBQG and the marginal cost is MCB = 100 + 2QB + QG, where QB is the output level for bats and QG is the output level for gloves. Dan's cost function for baseball gloves is CG(QB, QG) = 50QG + QG2 + QGQB, and the marginal cost is MCG = 50 + 2QG + QB. The price of a baseball bat is $240 and the price of a baseball glove is $150. What is the profit-maximizing sales quantity for baseball bats?
A. 10 B. 20 C. 30 D. 60
The above figure shows the demand and cost curves facing a monopoly. At the profit-maximizing price, the elasticity of demand equals
A) -1. B) zero. C) infinity. D) -3.
A market with a single seller is called
A) perfectly competitive. B) monopolistically competitive. C) a monopoly. D) an oligopoly.
Many people leave their servers tips in restaurants, even when they are not likely to visit the restaurant again. This is evidence that
A) people would rather pay for good service at an inexpensive restaurant than pay higher prices and receive poor service at an expensive restaurant. B) people enjoy eating at restaurants more than eating at home. C) people treat others fairly even if doing so makes them worse off financially. D) there has been an improvement in the service people receive in restaurants over time, partly because the restaurant industry has become more competitive.