What are a marginal cost pricing rule and an average cost pricing rule? What are the disadvantages and advantages of each?
What will be an ideal response?
Natural monopolies can be regulated using a marginal cost pricing rule, so that the firm must set its price equal to its marginal cost, or by using an average cost pricing rule, so that the firm must set its price equal to its average total cost. The advantage of the marginal cost pricing rule is that the resulting output is efficient; the disadvantage is that the firm suffers an economic loss. The advantage of the average cost pricing rule is the firm earns zero economic profit; the disadvantage is that it produces an inefficient quantity of output.
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In one possible scenario for the future, the United States would continue to decline in power, but China would not rise up enough to dominate. This would likely lead to
a. bipolarity. b. anarchy. c. multipolarity. d. theocracy.
If government spending increased by $50 billion and the MPC within the economy was 0.8, what would be the total impact on real GDP?
a. $62.5 billion decrease b. $62.5 billion increase c. $250 billion decrease d. $250 billion increase