Which of the following is a possible explanation for the fall in prices after an industry is monopolized by combining a group of competitors?
a. A monopolist faces a downward sloping demand curve. Hence, output expansion leads to lower prices.
b. A reduction in price increases producer surplus. Hence a monopolist may reduce the price of his product.
c. A monopolist may reduce prices to make it difficult for other firms to compete.
d. A monopolist can increase profits by reducing price when its cost of production declines due to increased size of the new firm. The fall in price is less than the decline in cost.
D
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Critics of the government's fiscal policies argued that government deficits
A) prevented capital from flowing into the United States. B) were linked to the excess of imports over exports that occurred in the 1980s. C) caused the level of unemployment in the United States to increase during the 1980s. D) had directly contributed to a decline in the level of demand in the American economy.
Since air pollution creates a negative externality,
a. social welfare will be enhanced when some, but not all air pollution is eliminated. b. social welfare is optimal when all air pollution is eliminated. c. governments should encourage private firms to consider only private costs. d. the free market result maximizes social welfare.