In a perfectly competitive market, technological advances bring ________ economic profits for producers and ________ lower prices for consumers.
A) permanent; permanently
B) permanent; temporarily
C) temporary; permanently
D) temporary; temporarily
Ques. 2The above figure shows the market for labor. The employer is a monopsony. The firm maximizes its profit by hiring
A) 800 hours of labor at a wage of 5 per hour.
B) 600 hours of labor at a wage of 10 per hour.
C) 400 hours of labor at a wage of 5 per hour.
D) 200 hours of labor at a wage of 5 per hour.
Ques. 3Why does gold, which is a relatively nonessential item, have a higher price than water, which is essential to life?
What will be an ideal response?
Ques. 4If a monopolist can perfectly price discriminate, it will
A) charge the same price for each unit sold.
B) produce until price elasticity of demand equals one.
C) not be concerned with the market demand.
D) charge a different price for every unit sold.
Ques. 5Dan, age 19, may have trouble buying insurance at a low price because
A) the insurance company has private information that he is a risky driver.
B) the insurance company has private information that his signals are valid.
C) insurance companies fear that he has private information that his deductible is too high.
D) insurance companies fear that he has private information that he is a risky driver.
Ques. 6The price elasticity of demand equals the slope of the demand curve.
Indicate whether the statement is true or false
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