A risk-neutral monopoly must set output before it knows the market price. There is a 50 percent chance the firm's demand curve will be P = 20 ? Q and a 50 percent chance it will be P = 40 ? Q. The marginal cost of the firm is MC = Q. The profits are maximized in the expected sense when:
A. MC < E(MR).
B. MC = E(MR).
C. Expected value of price = E(MR).
D. MC = Expected value of price.
Answer: B
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Which of the following is an example of a "metering" strategy
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In some years government receives less in Social Security taxes than it pays out in Social Security benefits, in which case it makes up the difference by drawing from its trust fund
Indicate whether the statement is true or false
Recent data has shown that income and volunteer time are positively related. Assuming that volunteer time is included in leisure time, what could explain this observation?
A) Higher income individuals view leisure as a normal good such that the income effect dominates the substitution effect. B) Higher income individuals view leisure as a normal good such that the substitution effect dominates the income effect. C) Higher income individuals view leisure as an inferior good such that the income and substitution effects both increase leisure time. D) Both A and C.