Do you agree or disagree with the statement that: “A monopolist always charges the highest possible price.” Explain
What will be an ideal response?
Disagree. The pure monopolist has a down sloping demand curve for the product. If the monopolist charged the highest price, the monopolist would only sell one unit or no units of the product. The monopolist, however, is concerned with maximizing profits, not with charging the highest price. A lower price would produce more revenue relative to cost. The monopolist will charge the price where the additional revenue from the sale of another unit just equals the additional cost of the additional units, or where MR = MC. The monopolist will set price somewhere in the elastic portion of the demand curve where marginal revenue is positive but less than price.
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Suppose a player has a dominant strategy. Would she choose to play a mixed strategy (such as playing two strategies with probability 50-50)? Why or why not?
What will be an ideal response?
Historically, why did the import-substitution strategy become popular among developing nations?
What will be an ideal response?
Although firms earn zero profits in the long run, why is the outcome from monopolistic competition considered to be inefficient?
A) Price exceeds marginal cost. B) Quantity is lower than the perfectly competitive outcome. C) Goods are not identical. D) A and B are correct. E) B and C are correct.
One year a country has positive net exports. The next year it still has positive but larger net exports
a. its trade surplus fell. b. its trade surplus rose. c. its trade deficit fell. d. its trade deficit rose