Explain the reasons firms might follow the Baumol model of maximizing revenue subject to achieving a minimum level of profits
What will be an ideal response?
Firms might wish to increase their market shares within the industry, managers' power and prestige tend to grow with an increase in the size of a business' level of operations, eschewing profit maximization might avoid new firms entering the industry and/or pressure for government regulation, and increases in the scale of a firm's level of operation might permit capturing cost economies of scale through greater market power to extract lower prices from the firm's suppliers of inputs.
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Q: How many economists does it take to screw in a light bulb?
A: None. If the light bulb really needed changing, market forces would have already caused it to happen. This joke represents the view of A) Keynesian economists. B) classical economists. C) economists who conclude that wages and prices are inflexible. D) economists who conclude that money illusion is widespread.
In a Dutch auction, ________ with each bid
A) the price of the good increases B) the price of the good decreases C) the quantity of the good being offered increases D) the quantity of the good being offered decreases