A monopolist who owned the entire supply of a scarce resource would set a price
a. at about the competitive level.
b. lower than the competitive level.
c. higher than the competitive level but lower than what a monopoly producer of a non-scarce good would.
d. above that which would be chosen by a monopoly producer of a nonscarce good.
QUESTION 2If real extraction costs do not change, the relative price of a finite resource would be expected to
a. fall over time.
b. remain constant over time.
c. rise at a rate given by the nominal rate of interest.
d. rise at a rate given by the real rate of interest.
QUESTION 3Accelerated depreciation laws may increase firms' investment in equipment because
a. machines will wear out more rapidly.
b. profits will be increased.
c. the rental rate on capital will be lowered.
d. the price of machines will fall.
QUESTION 4In a perfectly competitive market a firm's rental rate for a machine (v) will be given by: v = P(r + d) where r is the prevailing rate of interest and d is the depreciation rate. In this formula P represents
a. the present market price of the machine.
b. the initial purchase price of the machine (assuming this differs from its present market price.
c. the price of the firm's product.
d. the depreciated value of the machine.
QUESTION 5The present value of 1 payable in the future decreases
a. the higher r is and the sooner it is to be paid.
b. the lower r is and the sooner it is to be paid.
c. the higher r is and the longer time until it is paid.
d. the lower r is and the longer time until it is paid.
Quick Reply
