What is the social cost of a monopoly? Explain.
What will be an ideal response?
The social cost of a monopoly comes from the fact that, in order to maximize profits, the monopolist in the market charges a higher price and produces a lower output rate as compared to a perfectly competitive situation. As a result, consumers pay a price that exceeds the marginal cost of production, and the lower production rate represents a resource misallocation.
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The high-school dropout rate usually declines in an economic recession because
A) a decline in job opportunities lowers the opportunity cost of remaining in high school. B) high schools begin to offer more practical and relevant courses. C) laws are passed to prevent teenagers from entering the labor market. D) recessions increase the demand for education. E) tuition and book prices usually fall in a recession.
Which of the following is NOT a possible cause of structural unemployment?
A) individuals take the time to search for the best job opportunities B) a mismatch of worker training and skills with requirements of employers C) government-imposed minimum wage laws D) union activity that sets wages above the equilibrium level
To stimulate the economy, the government is likely to
A. increase spending. B. restrict trade. C. raise prices. D. decrease expenses
A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:
A. the demand curve is horizontal, reflecting infinite price elasticity. B. if the price is lowered further total revenue will increase. C. the demand curve for bus tickets must have shifted to the right. D. the firm is operating in a range of the demand curve that is unit elastic.