Economists object to monopolies on the grounds of efficiency. Why is this? Explain.
What will be an ideal response?
Monopolies produce an inefficiently low volume of output. The monopolist reduces output and raises price, equating the (lower) marginal revenue with marginal cost. Therefore, the marginal utility of the last unit consumed (measured by price) is above the marginal cost of production. Society’s total utility can be increased by increasing output. Ideally, price should be cut so that the price equals the marginal cost of the last unit produced. This would maximize societal utility.
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What is the difference between net exports and the current account balance?
What will be an ideal response?
Government regulations requiring firms that desire to sell securities in financial markets to disclose all available information
A) eliminate the adverse selection problem (when rigorously enforced). B) increase the difficulty that young firms may have in raising funds. C) eliminate the moral hazard problem in securities markets. D) fail to eliminate the adverse selection problem, in part because they do not greatly reduce the difficulty that young firms have in raising funds.
A tax placed on buyers of tuxedoes shifts the
a. demand curve for tuxedoes downward, decreasing the price received by sellers of tuxedoes and causing the quantity of tuxedoes to increase. b. demand curve for tuxedoes downward, decreasing the price received by sellers of tuxedoes and causing the quantity of tuxedoes to decrease. c. supply curve for tuxedoes upward, decreasing the effective price paid by buyers of tuxedoes and causing the quantity of tuxedoes to increase. d. supply curve for tuxedoes upward, increasing the effective price paid by buyers of tuxedoes and causing the quantity of tuxedoes to decrease.
Ch 1.The opportunity cost of an action is best defined as which of the following?
What will be an ideal response?