Pure economic rent is a payment to a resource that
A) has a high opportunity cost.
B) has a perfectly inelastic supply.
C) has a negative opportunity cost.
D) has a perfectly elastic demand.
Answer: B
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If the marginal revenue product of an input exceeds the marginal factor cost of the input, the firm
A) should hire less of the input. B) is maximizing profit. C) is not on its marginal cost curve. D) should increase its use of the input.
Theoretically, profit maximization occurs at P* and q* in the short run. However, empirical work suggests that oligopolists often actually charge P1. What would be the motivation for this action?
a. to increase P 1 above the profit maximization price over the short run
b. to reduce the entry initiative for new firms attracted by long-run economic profit
c. to increase the profit maximization price over the short run
d. to reduce the entry initiative for new firms attracted by zero long-run economic profit