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.
If Acme and Mega decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price, then what will be Mega's economic profit?
A. $100
B. $50
C. $150
D. $0
Answer: A
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If Tony receives a pay raise and the price effect outweighs the income effect on his labor supply decisions, he will:
A. work more hours. B. work less hours. C. work the same hours no matter what. D. quit and not work at all.
We observe a profit-maximizing firm hiring its 75th employee. It is possible to infer that, when 74 employees are hired, the
a. wage exceeds the value of the marginal product of labor. b. value of the marginal product of labor exceeds the wage. c. marginal product of labor is increasing. d. firm is attempting to increase its market share.
Refer to the above table. When the quantity of labor equals 3, what does the average product equal?
A. 63 B. 17 C. 21 D. 189
During the past twenty years, the prices of prescription drugs, relative to the prices of other goods, have risen, yet Americans buy more prescription drugs than ever. This might be because
A) with higher incomes and more older Americans, we have moved rightward along our demand curve for drugs. B) with higher incomes and more older Americans, the demand curve for prescription drugs has shifted rightward. C) more new firms entered the pharmaceutical industry each year, which caused a rightward shift in the supply curve of prescription drugs. D) Both answers A and C are correct.