Why does a single-price monopoly produce a smaller output and charge more than the price that would prevail if the market were perfectly competitive?
What will be an ideal response?
The market supply curve for a competitive market is the horizontal sum of the individual firm's marginal cost curves. Equilibrium output in this competitive market is determined where the market supply curve intersects the market demand curve, and at this point price equals marginal cost, that is P = MC. Equilibrium output for a single-price monopoly is determined at the intersection of its marginal cost curve and its marginal revenue curve. Marginal revenue is less than price, which means that MR = MC at less output than that for which P=MC, so the monopoly produces less than a perfectly completive market. For a monopoly price exceeds marginal revenue which, in turn, equals marginal cost. Therefore for a monopoly, P > MC which means the monopoly price exceeds the price in a perfectly competitive market.
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Suppose the price of an ounce of silver is 100 nuevos soles in Peru and $400 in the United States. This implies:
a. the Peruvian nuevo sol is worth four times the value of a U.S. dollar. b. the Peruvian nuevo sol is worth one-fourth the value of a U.S. dollar. c. Peru's economy must be four times larger than the U.S. economy. d. the U.S. economy must be four times larger than that of Peru. e. the U.S. dollar is worth four times the value of a Peruvian nuevo sol.
Refer to the above table. The price of a hamburger is $2, the price of a movie is $5, and the consumer's income is $29. What is the marginal utility per last dollar spent on movies equal to if the consumer is at an optimum?
A. 20 B. 10 C. 50 D. 40
The IS curve is Y = 20 - 1.5r, and the aggregate demand curve is Y = 15.5 - 0.3?. When the inflation rate is 3 percent, output is ________
A) 20 B) 14.6 C) 9.5 D) 3.6 E) none of the above
Which of the following terms describes a restrictive practice that involves forcing the purchase of a second good when purchasing another good?
a. Exclusive dealing b. Predatory pricing c. Tying d. Bundling