A group of firms, operating in collusion, incur costs of production of $15 per unit. The price that currently maximizes their profit is $19 . Knowing that potential competitors could enter the market with production costs of $17 per unit, what price are the colluders likely to charge? Why?
The firms are likely to charge a price just less than $17, the cost of production of new entrants. Established firms may deliberately hold prices low, and below the short-run profit maximizing point, in order to discourage any newcomers from entering the market.
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Refer to Figure 16-5. Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price. What is the per-unit price?
A) $28 B) $24 C) $12 D) $8
A tax that is imposed as a specific amount per unit of a good is a(n)
A) excise or specific tax. B) sales or ad valorem tax. C) compound duty. D) income tax.
A market is said to achieve allocative efficiency when producer surplus is at its maximum level
a. True b. False Indicate whether the statement is true or false
In order to conclude that markets are efficient, we assume that they are perfectly competitive
a. True b. False Indicate whether the statement is true or false