Explain why marginal revenue is less than price for a monopolist.
What will be an ideal response?
To sell additional units, a monopoly must reduce its price. Its marginal revenue is price minus the reduced revenue from customers who would have paid a higher price. Unlike competitive firms, able to sell as many units as they wish without reducing price, monopoly MR is below price.
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Import tariffs generally result in
A) higher domestic prices. B) less consumer surplus. C) more producer surplus for domestic producers. D) a deadweight loss. E) all of the above
Diminishing marginal productivity implies
a. decreasing marginal costs b. increasing marginal costs c. decreasing average costs d. decreasing total costs
A business cycle is the:
a. period of time in which expansion and contraction of economic activity are equal. b. period of time in which there are three phases: peak, depression, and recovery. c. recurring growth and decline in real GDP. d. period of time in which a business is established and ceases operations.
If an economy is experiencing both full employment and price stability, within the Keynesian model, a major tax reduction probably would cause
a. an increase in unemployment in the near future. b. an increase in the general level of prices unless government expenditures are also reduced. c. an increase in the interest rate since individuals will reduce their savings in response to the tax cut. d. a decrease in consumption unless the expected budget deficit is financed by selling bonds to foreigners.