Which of the following statements is true?
A) The marginal revenue of a monopolistically competitive firm will be positive at low prices and negative at high prices.
B) The marginal revenue of a monopolistically competitive firm will be positive at high prices and negative at low prices.
C) Because the demand curve for a monopolistically competitive firm is downward-sloping its marginal revenue will be negative.
D) The marginal revenue of a monopolistically competitive firm will be always be positive.
B
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(Last Word) Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand. The firm might charge:
A. a lower price to the group that has the less elastic demand. B. a higher price to the group that has the less elastic demand. C. the same price to both groups but include a "free" related product for the group that has an inelastic demand. D. the same price to both groups but make it difficult for the group with the more elastic demand to gain access to the product.
Suppose that the nation wide average cost of air pollution generated by a car is $1,000. Would a tax of $1,000 on every car induce people to take external costs into consideration and bring about the optimal price and output for autos? Explain
What will be an ideal response?