"A single-price natural monopoly that is regulated to set price equal to marginal cost incurs an economic loss." True or false? Explain
What will be an ideal response?
The statement is true. A natural monopoly's average cost is falling as its output increases. This means that marginal cost is below average cost. Because price equals marginal cost, price is less than average cost so that the firm incurs an economic loss.
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Refer to Figure 26-7. Suppose the economy is in short-run equilibrium above potential GDP, the unemployment rate is very low, and wages and prices are rising
Using the static AD-AS model in the figure above, the correct Fed policy for this situation would be depicted as a movement from A) A to B. B) B to C. C) C to D. D) C to B. E) A to E.
An efficient allocation of resources requires each product’s price equals its marginal cost.
Answer the following statement true (T) or false (F)
If the usury law set the interest rate ceiling at 12%, how much of a shortage of loanable funds would there be?
During most of the 1990s and 2000s, the trend in interest rates was:
A. just about constant. B. mildly upward. C. sharply downward. D. mildly downward.