Explain why a monopolist does not have a supply curve.
What will be an ideal response?
Any firm, including a monopolist, has cost curves. For competitive firms, marginal cost dictates supply, since the firm produces where P = MC. But the marginal cost curve does not dictate monopoly supply. The monopolist produces at MR = MC, where MR depends on the position of demand. Hence, two monopolists with similar costs could charge completely different prices, depending on the demand for their products. A monopolist chooses a profit-maximizing level of output, but it does not really have a supply curve, which indicates a collection of price-quantity combinations that it is willing to supply.
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Give examples of factors that decrease short-run aggregate supply. Which way does the SAS curve shift?
What will be an ideal response?
Does voluntary exchange create wealth?
What will be an ideal response?
Suppose a bank will pay you a 10% interest rate on your deposits for 1 period. In this case you must sacrifice $10 of current consumption to finance
A. $1 of future consumption. B. $11 of future consumption. C. $10 of future consumption. D. $9 of future consumption.
A budget line describes:
a. the alternative combinations of two goods that a buyer can purchase with a given money income b. the alternative combinations of two goods that will yield the same level of total satisfaction to a consumer c. the quantities of a particular good that a consumer will purchase at various prices