... 4) Which of the following describes a barrier to entry?
A) something that establishes a barrier to expanding output
B) anything that protects a firm from the arrival of new competitors
C) a government regulation that bars a monopoly from earning an economic profit
D) firms already in the market incu ...
Lecture 04: Risk Preferences and Risk Preferences and Expected
... everything you own and
more to purchase the right
to take this gamble!
Yet, in practice, no one is
prepared to pay such a
high price. Why?
payoff is infinite, the
distribution of payoffs is
... Compared to perfect competition, a single-price monopoly produces a smaller output and charges a
higher price. A monopoly is inefficient because it creates a deadweight loss. A monopoly redistributes
consumer surplus so that the producer gains and the consumers lose. Rent seeking is the act of obtai ...
... To sell a larger quantity, the monopolist must set a lower
There are two price-setting possibilities that create
• Single price
• Price discrimination
Practice Problem Answers
... will be negative.
14. The difference between an interior action and a boundary action is that in a boundary
action the level of activity can only be changed in one direction. An interior action’s
activity level may be increased or decreased. It is important to eliminate boundary
choices because it i ...
In economics, the marginal utility of a good or service is the gain from an increase, or loss from a decrease, in the consumption of that good or service. Economists sometimes speak of a law of diminishing marginal utility, meaning that the first unit of consumption of a good or service yields more utility than the second and subsequent units, with a continuing reduction for greater amounts. The marginal decision rule states that a good or service should be consumed at a quantity at which the marginal utility is equal to the marginal cost.