Which of the following conditions is TRUE for both the perfectly competitive firm and the monopoly at the profit-maximizing output level?
A. MC = P
B. MR = P
C. MR = MC
D. MC = ATC
Answer: C
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The profit maximizing rule MR = MC applies to:
A. imperfectly competitive firms only. B. monopolists only. C. all firms. D. perfectly competitive firms only.
The crowding out of private spending by government spending will be greater the
A) less sensitive consumption, investment, and net exports are to changes in the price level. B) less sensitive consumption, investment, and net exports are to changes in interest rates. C) more sensitive consumption, investment, and net exports are to changes in interest rates. D) more sensitive consumption, investment, and net exports are to changes in the price level.
Unconventional policy tools are useful when:
A. conventional policy tools result in shifts in the economy that are too large. B. restrictive monetary policy is necessary. C. lowering the target interest rate to zero is not sufficient to stimulate the economy. D. conventional policy tools support only growth in the economy.
If the absolute price elasticity of demand is 2.0, a 10 percent decrease in price will increase quantity demanded by
A) 10 percent. B) 20 percent. C) 5 percent. D) 12 percent.