P = MC is a recipe for financial loss in an innovative firm established by an innovative entrepreneur. Explain
Invention cannot be successful financially if the price is set equal to marginal cost, as must happen in a perfectly competitive market. Such a price would not cover any of the R&D cost and the related outlays, which are entirely absent from the marginal cost of an innovation. So for innovative products, P = MC is a recipe for financial loss and disaster in an innovative firm established by an innovative entrepreneur.
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The principal reason we no longer see huge herds of bison (popularly known as "buffalo") on the American prairies is because
A) the bison has been declared an endangered species. B) the bison have not been declared an endangered species. C) the bison were slaughtered in the 19th century in a wasteful manner. D) the bison were slaughtered in the 19th century in response to financial incentives. E) the people who own prairie land usually don't want bison on their property.
Regulation is guaranteed to be more efficient than a monopoly
A) True, the government is able to internalize the dead weight loss of the monopoly. B) True, the consumers are better off if government provides the product rather than a private firm. C) False, the government does not always have sufficient information to provide a more efficient market outcome. D) False, the consumers are worse off under government regulation.
Forecasts are
A) generally incorrect. B) predictions about the future. C) explanations of past occurrences. D) limited to short time periods.
Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and the nominal value of the domestic currency in the context of the Three-Sector-Model? a. The real risk-free interest rate rises and nominal
value of the domestic currency falls. b. The real risk-free interest rate falls and nominal value of the domestic currency remains the same. c. The real risk-free interest rate rises and nominal value of the domestic currency remains the same. d. The real risk-free interest rate rises and nominal value of the domestic currency rises. e. There is not enough information to determine what happens to these two macroeconomic variables.