What are the reasons for preferring competition to monopoly?
Monopolists sell at too high a price and provide too small a quantity to be efficient, whereas competitive firms operate efficiently in the long run. Efficiency requires MU = MC. For any industry, MU = P, but in a monopoly P is greater than MC, meaning that MU is greater than marginal cost. This means that an expansion of output would yield utility to consumers that is greater than the cost.
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Which of the followings does NOT shift the short-run aggregate supply curve?
A) supply shocks. B) persistent positive output gap. C) changes in expected inflation. D) an increase in output gap.
Refer to Figure 9.8. If free trade in sugar is replaced by a $50 tariff in sugar, government revenue from the tariff will be
A) $50. B) $5000. C) $15,000. D) $17,500. E) $25,000.