In a recent court case, an expert witness defined a monopoly as a firm that can "raise price without reducing its total revenue." What does this imply about the elasticity of demand? Would this definition hold for a profit-maximizing monopoly? Explain
What will be an ideal response?
If the firm raises price, the quantity sold will decrease. If total revenue is not reduced by this, then marginal revenue is not positive. This implies demand either is price inelastic or has unitary elasticity. This would not hold for a profit-maximizing monopoly. A profit maximizer sets MR = MC. This definition implies that MR is zero or negative, and MC cannot be negative.
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Total revenue is
A) price × quantity. B) change in price × change in quantity. C) change in price × quantity. D) price × change in quantity.
The entrance of the U.S. into the Korean War in June of 1950 led to:
a. deflation. b. an increase in the unemployment rate. c. a long and deep recession. d. a surge in consumer demand. e. All of the above.
Suppose Al, Betty, and Carl own the only fishing companies in your village. Suppose the market price today is $10 per fish. Suppose Al catches 4,000 fish with an average total cost of $7.50, Betty catches 6,000 fish with an average total cost of $6, and Carl catches 10,000 fish with an average total cost of $5 . If everyone is a profit maximizer, what is Betty's marginal cost?
a. $6 b. $7 c. $8 d. $9 e. $10
Which of the following will not produce an outward shift of the production possibilities curve?
A. An upgrading of the quality of a nation's human resources. B. The reduction of unemployment. C. An increase in the quantity of a society's labor force. D. The improvement of a society's technological knowledge.