For a number of years, General Motors used a pricing strategy designed to maintain at least 40 percent of the American car market. Does this strategy suggest that GM was maximizing profits or pursuing an alternative strategy?
Pursuing market share is not the same thing as profit maximization. Pricing for maximum profit might have given GM less than a 40 percent share of the market. To increase sales, GM would have had to reduce price below the profit-maximizing price. However, GM might have thought that maintaining significant market share would help preserve their profitability in the face of foreign competition in the long run
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If the minimum wage is set above the equilibrium wage, a supply and demand diagram of the low-skilled labor market will show unemployment as
A) a vertical distance. B) a horizontal distance. C) the area of a rectangle. D) the area of a triangle.
For the perfectly competitive firm, economic profit equals:
a. (price - marginal cost) x quantity. b. (price - average total cost) x quantity. c. (price - average variable cost) x quantity. d. total revenue - total fixed cost.