Explain the reasons firms might follow the Baumol model of maximizing revenue subject to achieving a minimum level of profits
What will be an ideal response?
Firms might wish to increase their market shares within the industry, managers' power and prestige tend to grow with an increase in the size of a business' level of operations, eschewing profit maximization might avoid new firms entering the industry and/or pressure for government regulation, and increases in the scale of a firm's level of operation might permit capturing cost economies of scale through greater market power to extract lower prices from the firm's suppliers of inputs.
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Consider the following economic agents:
a. the government b. consumers c. producers Who, in a modern mixed economy, decides what goods and services will be produced with the scarce resources available in that economy? A) consumers B) consumers and producers C) producers D) the government E) the government, consumers, and producers
"Tips" published in leading commercial or financial publications are unlikely to lead to profitable trades because
A) only wealthy individuals can buy stocks in the volume necessary to take advantage of tips. B) whatever is gained by trading on the basis of tips will be taxed away by the government. C) the news will already be reflected in the market prices of the assets. D) the news contained in the tips is usually inaccurate.
When a negative externality is present in a market, when a quota is imposed, it is:
A. efficient, because the market consumes the efficient level. B. efficient, because the net benefit of everyone at the amount set by the quota is equal. C. not efficient, because individuals' net benefits from the amount set by the quota are different. D. not efficient, because the marginal cost outweighs the marginal benefit for too many consumers at the amount set by the quota.
Inflation that is caused solely by an increase in aggregate demand is called
A. demand-push inflation. B. cost-pull inflation. C. cost-push inflation. D. demand-pull inflation.