A price-taking firm and a monopolist are alike in that ______.
a. price equals marginal revenue for both
b. both maximize profits by choosing an output where marginal revenue equals marginal cost, provided that price exceeds average variable cost
c. price exceeds marginal cost at the profit-maximizing level of output for both
d. in the long run, both earn zero economic profits
Answer: b. both maximize profits by choosing an output where marginal revenue equals marginal cost, provided that price exceeds average variable cost
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One of the methods of reducing the geographical disadvantage faced by poorer countries is:
A) by moving to a socialist economic system. B) by undertaking large-scale disease eradication programs. C) by borrowing financial resources at market interest rates. D) by reducing participation in international trade.
Consider a market in which there is an external benefit. A private subsidy paid to producers can be used to arrive at the efficient market equilibrium because the subsidy will
A) increase the quantity produced. B) decrease the supply of the good. C) increase the price demanders pay. D) decrease demand.