Critically evaluate the following statement. "Monopolists are able to pass on the full amount of any increase in their fixed cost to the consumer in the form of higher prices."
What will be an ideal response?
This statement is false. Monopolists, like any firm operating in any other type of industrial structure, maximizes profit where marginal revenue equals marginal cost. Increased fixed costs do not change the point where marginal revenue equals marginal cost. Therefore, the firm will not find it profitable to increase price.
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The problem of "double marginalization" is
a. The retail price being too low due to an exclusion of both manufacturer and retailer markup b. The retail price being too high due to an inclusion of manufacturer markup c. The retail price being too high due to an inclusion of both manufacturer and retailer markup d. The retail price being too high due to an exclusion of retailer markup
Some advocates of antipoverty programs claim that fighting poverty is a public good. Describe why government intervention may be necessary to reduce poverty