Arguments by regulators are often made that predatory pricing, with its attendant temporary price-cutting below costs, is an attempt to eliminate rivals with the intent of raising prices after the competition has left
Critically evaluate this argument.
First of all price cutting below costs will not only exact losses on the competition but also on the firm that practices this strategy. Second, even if the firm is successful in eliminating its rivals and raises prices after their departure that is no guarantee that new arrivals will be kept at bay especially when the remaining firms in the industry resume earning economic profit.
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In the long run, firms in monopolistic competition produce at a level that is ________ the efficient scale of output
A) less than B) equal to C) more than D) All of the above are possible depending on market conditions.
Suppose the value of the price elasticity of demand is -3. What does this mean?
A) A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. B) A $1 increase in price causes quantity demanded to fall by 3 units. C) A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. D) A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent.