A proposed steel mill will be powered by coal. The country has one company that mines a limited amount of inferior coal, which may not be suitable. In evaluating the potential profit of this mill, how should we determine the price of coal?
What will be an ideal response?
Students should understand that the local price of coal is affected not only by its inferior quality but also by the limited, monopolistic market. A shadow price should be used, probably derived from the price of importing suitable coal.
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Limit pricing is a strategy used by a firm to
A) deter entry. B) enhance short run profits. C) raise its prices. D) lower its costs.
Sweet Husks is a perfectly competitive corn farm. Currently, the expected price of an ear of corn is $0.40 and, at its current production level, Sweet Husks has a marginal cost of $.30 per ear. The expected profit from producing an additional ear of corn is ________.
A) $0.10 B) $0.70 C) $0.20 D) $0.40
During the early years of the Great Depression, a study of the money aggregates reveals that the money multiplier:
A. was at an all-time high. B. decreased. C. was constant from 1929 through 1936. D. increased from 1929 right through 1936.
A very high fixed cost and a relatively low marginal cost is associated with
A) every type of good or product. B) an information product. C) a persuasive good. D) an experience good.