Rational production decisions require an understanding of
a. trade-offs.
b. opportunity costs.
c. scarcity of resources.
d. All of the above are correct.
Answer: d. All of the above are correct.
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Suppose the cost of a CD is $20. As online retailers enter the market with new technology, the price of CDs ________, and traditional music stores find that ________
A) decreases; their AVC exceeds the new lower price and they exit the industry B) decreases; their ATC curve shifts lower and their profit increases C) increases; they compete with online retailers at the new higher price D) increases; their costs have risen due to the new technology E) decreases; they compete with online retailers with higher profits
Which of the following regarding a monopolist is INCORRECT?
A) The monopolist is a single supplier of a good or service. B) The monopolist constitutes the entire industry. C) Only expensive products are produced by monopolies. D) There are barriers to entry that allow monopoly.