A monopolist sets prices above the competitive price and output below the competitive output level. Some customers are willing to pay more than marginal cost, yet do not receive the product. Thus:
A. it is clear that monopolists experience decreasing returns to scale.
B. not all gains from trade are exhausted.
C. all gains from trade are exhausted.
D. it is clear that monopolists do not maximize profits.
Answer: B
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In price-taker markets, individual firms have no control over price. Therefore, the firm's marginal revenue curve is
a. a downward-sloping curve. b. indeterminate. c. constant at the market price of the product. d. precisely the same as the firm's total revenue curve.
A competitive market is one in which
a. there is only one seller, but there are many buyers.
b. there are many sellers and each seller has the ability to set the price of his product.
c. there are many sellers and they compete with one another in such a way that some sellers are always being forced out of the market.
d. there are so many buyers and so many sellers that each has a negligible impact on the price of the product.
If short-run economic profits are greater than zero for firms in a monopolistically competitive market, in the long run we expect:
A. entry barriers to prevent competing firms from entering this market. B. the demand curve for firms in the market to shift to the right. C. competing firms to enter the market and sell similar products. D. profits to increase.
Some environmental groups are on record suggesting that the price of gasoline should be much higher than it was in the early 1990s. Why might they say this?
A) They own stock in oil companies. B) They anticipate that the longer the price is high, the more elastic the response by consumers will be. C) They anticipate that the longer the price is high, the less elastic the response by consumers will be. D) They anticipate that higher prices will reduce the price elasticity of supply of oil.