Explain why a monopolist does not have a supply curve.
What will be an ideal response?
Any firm, including a monopolist, has cost curves. For competitive firms, marginal cost dictates supply, since the firm produces where P = MC. But the marginal cost curve does not dictate monopoly supply. The monopolist produces at MR = MC, where MR depends on the position of demand. Hence, two monopolists with similar costs could charge completely different prices, depending on the demand for their products. A monopolist chooses a profit-maximizing level of output, but it does not really have a supply curve, which indicates a collection of price-quantity combinations that it is willing to supply.
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Which of the following models view changes in real supply-side factors as determinants of short-run fluctuations in output and employment?
a. New classical models b. Political business cycle models c. Keynesian models d. Real business cycle models e. none of the above
In the basic Keynesian model, an increase in government purchases:
A. reduces potential output. B. increases short-run equilibrium output. C. increases potential output. D. reduces short-run equilibrium output.