Discuss and explain the relationships between the monopolist's demand curve, average revenue curve, and marginal revenue curve
What will be an ideal response?
The monopolist's demand curve is the industry demand curve, and it is downward sloping. Total revenue is PQ, so average revenue is PQ/Q = P. Thus, the average revenue curve is the demand curve. The marginal revenue curve lies below the demand curve. If a firm sells another unit, it receives the price for the unit. But, it must reduce price to make the sale, and hence must lower price on other units it could have sold at a higher price. Consequently, the extra revenue earned from selling an extra unit is less than the price.
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This year Pizza Hut makes a total investment of $1.3 billion in new stores. Its depreciation in this year is $300 million. Pizza Hut's gross investment is ________ and its net investment is ________
A) $1.3 billion; $1.6 billion B) $1.0 billion; $1.3 billion C) $1.3 billion; $1.0 billion D) $1.0 billion; $0.7 billion
Opportunism may occur when
A) both parties have limited information. B) both parties have full information. C) one party has information the other does not. D) All of the above.