Under fair-returns price regulation:
A) deadweight loss is likely to be maximized.
B) deadweight loss is likely to be minimized.
C) firms are less likely to innovate because they earn zero profits.
D) firms are more likely to innovate because they earn positive profits.
C
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The cranberry market is perfectly competitive. Reports that consuming cranberries can lead to improved health result in a permanent increase in the demand for cranberries and an immediate upward jump in the price of cranberries
As time passes, the price of cranberries ________ and the initial firms' economic ________. A) falls; profit will be eliminated B) rises still higher; loss will be eliminated C) rises still higher; profit will not change D) falls; loss will be increased E) falls; profit will not change
If a firm that uses a production process that yields economies of scale charges a price equal to ________, then profit will be ________
A) marginal cost; negative B) marginal revenue; maximized C) marginal cost; maximized D) marginal revenue; positive E) marginal cost; positive