What relationship exists between marginal revenue and the elasticity of demand? Use this relationship to explain how a monopoly can increase its profit if demand is inelastic.
What will be an ideal response?
The formula MR = P • (1 - 1/|n|) shows that marginal revenue is positive when demand is elastic (i.e., |n| > 1) and that marginal revenue is negative when demand is inelastic (i.e., |n|< 1). If demand is inelastic, then marginal revenue is negative and thus the last unit produced lowers the monopoly's total revenue. Moreover, marginal cost is positive, so the last unit produced also adds to the monopoly's total cost. By cutting back production, total revenue will rise and total cost will fall, increasing the monopoly's profit.
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The resource-based view indicates that firms exhibit different performances within the same industry because
a. there is less buyer power b. there are economies of scale present c. some firms have superior resources d. there is less competition
Al B. Core works at a Fresh Fish Market. The market sells fresh fish from 9 a.m. until 7 p.m. every day. The store does not sell day-old fish, so all unsold fish are thrown away at 7 p.m. each day. If Al has lots of fresh fish left at the end of the day that cost him $300 to acquire, what should Al do? a. Lower the price of the remaining fish, even if he can't recover his $300
b. Lower the price of the remaining fish, but under no circumstances should the price fall below $300 for the remaining fish. c. Throw the fish away even if he could sell some of them at a discounted price. d. Starting tomorrow, lower the price on all fish so they will all be sold by mid-day.
When a tax is imposed on a good for which both demand and supply are very elastic,
a. sellers effectively pay the majority of the tax. b. buyers effectively pay the majority of the tax. c. the tax burden is equally divided between buyers and sellers. d. None of the above is correct; further information would be required to determine how the burden of the tax is distributed between buyers and sellers.
Since 1929, total government taxes as a percentage of GDP:
A. climbed from 10 percent to about 30 percent. B. remained close to 30 percent. C. climbed from 30 percent to about 50 percent. D. climbed from 15 percent to about 50 percent.