Which of the following is a TRUE statement about monopoly and perfect competition?
A) Price is always higher and output higher under monopoly than under perfect competition.
B) Because costs do not depend on market structure, price is usually higher and output is always lower under monopoly than perfect competition.
C) If there are substantial economies of scale, price may be lower and output greater under monopoly than under perfect competition.
D) If there are substantial economies of scale, price may be lower and output greater under monopoly than under perfect competition, and price may be below marginal cost instead of equal to marginal cost.
Answer: C
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A theory
A. is usually based on a set of value judgments. B. cannot be tested. C. is a possible explanation for a natural phenomenon. D. always fits with real-world data.
A ________ is a simplified representation of a problem that captures the essential issues.
A. hypothesis B. precept C. model D. theorem
Which of the following situations could generate a shortage?
A) Demand for a good increases, resulting in a new higher market clearing price. B) Demand for a good decreases, resulting in a new lower market clearing price. C) Demand for a good increases, but the price is not permitted to rise. D) Demand for a good decreases, but the price is not permitted to fall.
Use the information provided in Table 7.4 below to answer the question(s) that follow. Table 7.4Inputs Required to Produce a Product Using Alternative TechnologiesTechnologyUnits of CapitalNumber of EmployeesA 836B 1224C 1616D 24 12Refer to Table 7.4. If the hourly price of capital is $20 and the hourly wage rate is $14, which production technology should be selected?
A. A B. B C. C D. D