Use the following graph showing the demand and marginal revenue curves faced by a pure monopoly to answer the next question.
What price should the pure monopoly charge to maximize total revenue?
A. P1
B. P2
C. P3
D. P4
Answer: C
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American automobile manufacturers and dealers appear to adjust the price (sticker prices plus financing charges) by periodically changing interest rates and by using rebates and surcharges as opposed to directly changing sticker prices
Assuming that they maximize their profits, this pricing approach may reflect A) a relatively low cost to adjust sticker prices. B) a relatively low cost to adjust advertising. C) a relatively high cost to adjust sticker prices. D) a relatively high cost of advertising.
An oligopoly using a maximin strategy must believe that the losses from underestimating a competitor’s skill are worse than those from overestimating it.
Answer the following statement true (T) or false (F)
Studies have shown that in the 1980s the wage gap between college-educated workers and those with high school education or less
A. decreased dramatically. B. decreased slightly. C. remained unchanged. D. widened dramatically.
Merger guidelines developed by the U.S. Department of Justice and the Federal Trade Commission use the Herfindahl-Hirschman Index as a measure of concentration. This index measures concentration in an industry by
A) adding up the market shares of all firms in the industry, squaring this number and then dividing by the number of firms in the industry. B) squaring the market shares of each firm in an industry and then adding up the values of the squares. C) squaring the four-firm concentration ratio of the industry and dividing this number by the total number of firms in the industry. D) determining the market shares of the four largest firms in the industry, but unlike the concentration ratio, the Index includes sales in the United States by foreign firms.