Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product.
For a monopolist facing this demand curve, the profit-maximizing quantity is ________ and the profit-maximizing price is ________.
A. 50; $3
B. 100; $1
C. 50; $2
D. 100; $2
Answer: D
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Consider the budget line in the above figure. If the consumer's income is $120, then the price of a movie is
A) $24 per movie. B) $12 per movie. C) $5 per movie. D) More information is needed to determine the price of a movie.
When the production of a good creates an external cost, by setting the tax rate equal to the ________, firms can be made to behave in the same way as they would if they bore the cost of the externality directly
A) marginal external cost B) marginal social benefit C) marginal private benefit D) marginal social cost
If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing it, the firm
A) added more to total costs than it added to total revenue. B) added more to total revenue than it added to total cost. C) has minimized its losses. D) is maximizing marginal profit.
A drought in the Midwest will raise the price of wheat because of a
A) leftward shift in the supply curve. B) rightward shift in the supply curve. C) leftward shift in the demand curve. D) rightward shift in the demand curve.